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Home My WebLink About1_Introduction TO: Honorable Mayor and City Councilmembers FROM: Lauri Aylaian, City Manager DATE: May 19, 2020 SUBJECT: Fiscal Year 2020-2021 Proposed Budget This proposed budget for the Fiscal Year 2020-2021 has been prepared while considering the extraordinary economic challenges of the global COVID-19 pandemic. With the volatility of nation’s economy, revenue projections are continuously changing and more than difficult due to the ongoing closures. In what staff hopes is a conservative approach, staff is estimating a reduction in revenues from pre-pandemic estimates of approximately 25%. Past economic trends, national economist’s projections and local predictions continue to swing the pendulum. With this in mind, estimated General Fund revenues of $48.6 million will not exceed the General Fund estimated expenditures of $58.8 million. This proposed budget includes a request, if needed, to use General Fund Reserves, to meet the current estimated obligations of the City. The extent to which reserves are needed to fund the gap will not be known until the end of the year, however, staff will be constantly reviewing and comparing revenues and expenditures to prior years to see any visible trends. In 2018, the City Council approved a revision to the General Fund Reserve Policy. The purpose of the revised policy was to establish reserves for long-term City needs, including emergency situations of all types, known and unknown. The City, as of the close of the last fiscal year, had a little over $80 million in available General Fund reserves, $63 million of which is committed to the City’s identified needs as well as emergencies and other uncertainties. The majority of the balance of the reserve is used to sustain General Fund operations and service delivery throughout the budget year during our seasonal peaks and valleys, when revenues vary. As we have always done, the City contracts for services including police and fire services, recreation services, animal control, trash collection, street sweeping, etc. This continues to be fiscally prudent and keeps ongoing costs down. Staff will again continue to look for areas where contracting would be a cost savings option or operationally more efficient as well as continue to reach out to our contracted partners to see where costs could be minimized during these uncertain times. Continuing in this effort internally, the City intends to pause hiring any currently vacant positions until more is known about what staffing resources will be needed as the City’s operations adjust to the impacts of the pandemic. CITY OF PALM DESERT INTEROFFICE MEMORANDUM Fiscal Year 2020-21 Proposed Budget May 19, 2020 Page 2 Throughout the upcoming fiscal year, staff will continue to monitor revenues and expenditures and report any new information or needed modifications. GENERAL FUND OVERVIEW Revenue The General Fund is the primary fund used to finance the daily operations of the City. The estimated General Fund revenues of $48,643,337 represent a decrease of approximately $12 million (19.8%) over the current fiscal year’s original revenue estimate of $60,673,722. The table below shows the current fiscal year’s original revenue estimate, the estimated current year actual and the proposed FY 2020-21 budget for revenue. Highlights/Significant Changes – Revenue  The transient occupancy tax (TOT) revenue projection is decreased dramatically by approximately 47.8% as a result of current forecasts as they relate to hotels and their ability to re-open and adjust to the new safety requirements established post current pandemic shutdown orders.  The property tax revenue projection reflects a slight decrease of 5.8% as a result of the pandemic forecasts and anticipated declines in assessed valuations. Current forecasts suggest that property tax may see a larger decline in the 2021/2022 fiscal year due to the timing of assessment deadlines.  The projected sales tax revenue also reflects a sharp decrease of 17.3% based on current forecasting models and the uncertain economic recovery post pandemic shut down orders. This considers both delays of receipts due to deferrals and also the potential that some businesses may not be able to recover at all. Revenue Category Budget FY 2019-20 Estimated Actual FY 2019-20 Proposed Budget FY 2020-21 % Change Sales tax 19,055,000$ 13,715,873$ 15,750,000$ -17.34% Transient occupancy tax (incl Short Term Rentals)16,320,800$ 10,350,678$ 8,514,517$ -47.83% Property tax (Secured, Unsecured & SARDA Tax Increm) 7,848,372$ 7,749,737$ 7,395,702$ -5.77% Franchises (Cable/Gas/Electric/Waste)3,100,000$ 3,110,000$ 3,125,550$ 0.82% Timeshare mitigation fee 1,450,000$ 1,467,904$ 1,482,583$ 2.25% Business license tax 1,275,000$ 1,015,000$ 1,200,000$ -5.88% Transf in (AIPP, Traf Safety, Parkview, Recyc, GC Maint)2,448,050$ 2,556,050$ 2,526,010$ 3.18% Permits/Fees 2,178,500$ 2,543,975$ 1,966,875$ -9.71% State payments (VLF, Parking Bail, MV Iieu)4,186,000$ 4,418,778$ 4,501,600$ 7.54% Interest & Rental 1,216,000$ 1,919,000$ 641,000$ -47.29% Reimbursements/Other revenues 1,596,000$ 1,609,900$ 1,539,500$ -3.54% Totals General Fund 60,673,722$ 50,456,895$ 48,643,337$ -19.83% Fiscal Year 2020-21 Proposed Budget May 19, 2020 Page 3  The pandemic equally effects interest rates in the current economic climate, so it is also anticipated to see a decrease of approximately 47.3% based on current data. Expenditures The General Fund operating expenditure budget is $58,788,926 which represents a decrease of $1.8 million (3%) in the total projected expenditures over the current fiscal year’s approved original budget of $60,577,888. Highlights/Significant Changes - Expenditures  Personnel service costs decreased by 6% from vacancies.  Overall employment benefits decreased by 1.8% from vacancies  The required pension liability payment increased by approximately 13%  Transfers out increased due to the increase cost for fire services (by adding a squad at Station 71 CC action 5-14-2020)  Other decreases are associated with various budget adjustments to right size goals in light of the current situation. Expenditure Category Budget FY 2019-20 Budget FY 2020-21 % Change Police Services 22,276,228$ 19,510,810$ -12.41% Salaries 11,154,500$ 10,492,900$ -5.93% Benefits 4,376,396$ 4,299,206$ -1.76% CalPERS Required Payment 3,352,000$ 3,783,502$ 12.87% Interfund Transfers Out 5,802,451$ 7,011,508$ 20.84% Professional Services 4,620,712$ 4,910,067$ 6.26% Other Operational Expenditures 3,968,519$ 3,766,967$ -5.08% Repair & Maintenance 3,775,607$ 3,757,900$ -0.47% Contributions 605,500$ 604,000$ -0.25% Travel & Meeting Costs 425,975$ 460,066$ 8.00% Capital Outlay 270,000$ 192,000$ -28.89% Total 60,627,888$ 58,788,926$ -3.03% FY 2020/21 CITY OF PALM DESERT GOALS GOAL STATUS 1 Implement the changes required by the California Voting Rights Act-conduct public outreach and education create two-district election process Proceed with remaining work 2 Analyze the impact of a regional policing contract, accounting for proposed Sheriff staffing redist model to improve efficiency. Proceed-Implemt efficiencies at earliest practicable date. 3 Define purpose, scope, budget for broadband fiber masterplan. Proceed as planned. 4 After balancing scope with avail funding, complete design of a new Discover PD center. PAUSE 5 Complete the comprehensive Fee Study- prepare implementation strategy. Proceed as resources permit consid changes in processes based on COVID 19 6 Council Chamber Rehab & Civic Center Parking Lot Upgrades PAUSE 7 Construct Main Lobby Improvements PAUSE 8 Select a prof consulting firm to begin conceptual site plan of No. Sphere Park and adjacent 10-acre affordable housing project. PAUSE 9 Complete construction of Phase 1 of the San Pablo Avenue Improvements and begin construction of Phase 2. Proceed as planned. 10 Begin construction of the multi-year President’s Plaza Parking Lot Rehabilitation Project. PAUSE for 1 year 11 Develop and implement a five-year Digitization Master Plan. Proceed as planned. 12 Go live with web portal for application, payment, and issuance of certain permits, and for scheduling inspections and checking status of building permit reviews. Proceed at current more aggressive rate.