Title
Adoption of Resolution Approving and Adopting the Budget for Fiscal Year 2022-23 [City Council]; and
Adoption of Resolution Approving and Adopting the Budget for Fiscal Year 2022-23; [SACIC]; and
Adoption of Resolution Approving Workforce Changes and Amending the Salary Schedules for the Alameda City Employees Association (ACEA) and Management and Confidential Employees Association (MCEA) in Fiscal Year 2022-23, Effective July 3, 2022. [City Council] (Finance 10024054)
Body
To: Honorable Mayor and Members of the City Council
EXECUTIVE SUMMARY
The citywide budget outlines the City of Alameda’s (City’s) fiscal plan for the upcoming fiscal year, as well as the level and type of services to be provided. On June 15, 2021, the City Council adopted the Biennial Budget for Fiscal Years (FY) 2021-22 and 2022-23. After the first year of the budget cycle, staff has typically brought to the City Council for approval an update to the second budget year (Mid-Cycle Update). As part of the Mid-Cycle Update, the City Council held a Budget Workshop on May 10, 2022, during which departmental requests and funding updates previously not included in the Biennial Budget were discussed and direction was given by the City Council for inclusion in the FY 2022-23 Mid-Cycle Update. This budget presented to the City Council for adoption incorporates direction provided during the May budget workshop.
The FY 2022-23 Mid-Cycle Budget Update for the City is attached as Exhibit 1. An interactive version of the FY 2022-23 Mid-Cycle Budget Update is also available at: <https://stories.opengov.com/alamedaca/published/9YES4_byI>
Staff recommends the City Council adopt the changes to the budget for FY 2022-23.
BACKGROUND
On May 10, 2022, the City Council held a budget workshop on the Interim City Manager’s proposed budget for FY 2022-23. The workshop was intended to give the City Council and community an opportunity to review the factors that make up the overall City budget. During the workshop the Interim City Manager, Department Heads, and staff provided information and answered questions about departmental funding requests that varied from the baseline budget estimates. The City Council and community provided input to staff on the allocation of funding beyond the baseline budget.
DISCUSSION
The proposed budget intends to meet the City’s mission and the City Council’s stated goals for the upcoming fiscal year. At the May budget workshop, City Council indicated support for the proposed budget as recommended by the Interim City Manager and provided direction for staff to identify $7.5 million in potential funding sources for a City match for the replacement of the Emma Hood Swim Center operated by Alameda Unified School District. Staff propose to earmark $7.5 million from the General Fund’s unassigned residual fund balance until appropriations are needed. This proposed earmark would reduce the General Fund’s projected available balance at the end of FY 2022-23 from $63.6 million to $56.1 million, or by 11.8%. The General Fund’s available balance would remain above the City’s operating reserve target of 25% of annual operating expenditures.
The discussion below provides a brief overview of the proposed FY 2022-23 Mid-Cycle Budget. More information about the General Fund, citywide expenditures and revenue budgets, as well as each department’s budget, including departmental updates for the Mid-Cycle Budget, is provided in Exhibit 1. Other budget updates included in the Mid-Cycle Budget that were not previously presented to the City Council at the May budget workshop are shown in Exhibit 2.
FY 2022-23 General Fund Revenues
General Fund revenues, including transfers-in, are estimated to increase by approximately $8.5 million, from the previous projection of $114 million, to $122.8 million in FY 2022-23. The City’s largest source of General Fund revenue, Property Tax, continued to perform well and 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 their nature, revenues derived from the Property Transfer Tax are volatile and cannot in totality be considered ongoing revenues, and thus must be forecasted and budgeted prudently.
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 pandemic’s impact 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 assessed 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 impact 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 recreational programs.
FY 2022-23 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 the City Council has the most discretion.
The City’s total proposed expenditure budget for all funds, including transfers out, is $285.1 million in FY 2022-23, exclusive of Alameda Municipal Power (AMP). The General Fund represents approximately $124.4 million or 44% of the total in the FY 2022-23 budget.
Staff are not proposing any cost adjustments for services or supplies unless specifically provided for in existing contracts with vendors.
Increases in personnel costs are due to normal salary increases, cost of living adjustments of 3% set to take effect in July 2022 depending on bargaining unit, and workforce changes.
The budget also incorporates adjustments for transitioning the Rent Program from the Alameda Housing Authority to the City Attorney’s Office, as approved by City Council on June 7, 2022 (File 2022-2041).
Five-Year General Fund Forecast
In the five-year forecast, projected General Fund shortfalls range from approximately $1.5 to $6.8 million annually, primarily due to advance pay-down of pension obligations, as well as assumptions about increasing costs of doing business, such as cost escalation for salaries and health benefits, contractual services and capital outlay. Absent balancing measures such as securing additional locally-controlled funding sources and/or cutting expenditures, the City’s available reserves will decline. Available fund balance is projected to remain above the City’s 25% operating reserve target through the end of FY 2025-26, as shown below:
Five-Year Forecast for FY 2021-22 through FY 2025-26
(in millions)
|
|
FY21-22 |
FY22-23 |
FY23-24 |
FY24-25 |
FY25-26 |
|
|
Projected |
Mid-Cycle |
Forecast |
Forecast |
Forecast |
|
Beginning Fund Balance |
$71.9 |
$65.1 |
$56.1 |
$54.2 |
$52.2 |
|
Revenues |
$117.6 |
$122.8 |
$126.8 |
$131.1 |
$135.5 |
|
Expenses |
($124.8) |
($124.4) |
($128.7) |
($133.1) |
($137.7) |
|
Net Annual Activity |
($6.8) |
($1.5) |
($1.8) |
($2.0) |
($2.2) |
|
Emma Hood Swim Center Earmark |
|
($7.5) |
|
|
|
|
Ending Fund Balance |
$65.1 |
$56.1 |
$54.2 |
$52.2 |
$50.0 |
|
Ending Fund Balance % of Annual Expenses |
52% |
45% |
42% |
39% |
36% |
Note: May not add due to rounding
Workforce Changes
Departments requested a total of 21 new positions, the deletion of three positions, the upgrade of four positions, and the conversion and upgrade of one limited-term position. Staff are 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.
Staff are also recommending the upgrade of four positions: a Paralegal to Administrative Services Coordinator in the City Attorney’s Office, a Transportation Engineer to a Senior Engineer in the Public Works Department, and a Supervising Planner to Planning Manager and a Permit Technician II to Permit Technician III in Planning, Building and Transportation. Staff will also complete a classification study for one position in Information Technology.
Additionally, staff are recommending an increase in salary for the Crime Analyst position in the Police Department. When this position was created in 2021, the salary was aligned with the City’s Management Analyst classification. The City has now completed two recruitments for this position but has been unable to recruit a qualified candidate. In order to recognize the complexity of the position and recruit qualified candidates, it is recommended to match the salary to the Administrative Management Analyst classification. The current and recommended salaries are listed below:
|
Weekly Hours |
Classification FLSA Exempt |
Annual Salary |
|
|
|
Step 1 |
Step 2 |
Step 3 |
Step 4 |
Step 5 |
|
36 |
Current - Crime Analyst |
$84,601 |
$88,831 |
$93,272 |
$97,936 |
$102,832 |
|
36 |
Recommended - Crime Analyst |
$97,921 |
$102,816 |
$107,957 |
$113,355 |
$119,023 |
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 |
124 |
0 |
|
Public Works |
75 |
75 |
82 |
82 |
- |
|
Recreation & Parks |
27 |
30 |
31 |
32 |
+1 |
|
Total |
549 |
555 |
566 |
577 |
11 |
*One Limited-Term Accountant expires in 2022-2023
ALTERNATIVES
• Alternative 1 - Approve and adopt the budget and workforce changes as proposed in the staff report.
• Alternative 2 - 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 the City’s FY 2022-23 budget totaling $285.1 million, including all City funds and transfers (except for AMP). With the proposed budget, it is projected that the City will maintain an available fund balance in its General Fund of approximately $56.1 million or 45% of General Fund total expenditures and transfers out at the end of the FY 2022-23.
Included in the City’s FY 2022-23 budget is the Successor Agency FY 2022-23 budget totaling $11,391,693. The Successor Agency will fund its expenditures with Redevelopment Property Tax Trust Fund (RPTTF) revenues received in June and January of each year. Any other revenues received by the Successor Agency will be used to pay debt service and enforceable obligations.
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. However, the Capital Improvement Program Budget includes appropriations for implementation of the Climate Action and Resiliency Plan.
RECOMMENDATION
Adopt a Resolution (1) Approving and Adopting the City of Alameda Budget for Fiscal Year 2022-23; and (2) Adopt a resolution of the Successor Agency to the Community Improvement Commission Budget for Fiscal Year 2022-23; and
Adopt a Resolution Approving Workforce Changes and Amending the ACEA and MCEA Salary Schedules in Fiscal Year 2022-23, Effective July 3, 2022.
Respectfully submitted,
Margaret L. O’Brien, Finance Director
By,
Jennifer Tell, Budget Manager
Exhibits:
1. Mid-Cycle Budget Update
2. Budget Updates since May 2022 Budget Workshop
3. MCEA Salary Schedule
4. ACEA Salary Schedule