HomeMy WebLinkAboutItem 6a. FY 2021-22 Third Quarter Budget Review Item 6a
Department: Finance
Cost Center: 2002
For Agenda of: 5/17/2022
Placement: Business
Estimated Time: 10 minutes
FROM: Brigitte Elke, Finance Director
Prepared By: Natalie Harnett, Principal Budget Analyst
SUBJECT: FY 2021-22 THIRD QUARTER BUDGET REVIEW
RECOMMENDATION
1. Receive and file the FY 2021-22 third Quarter Budget report; and
2. Adopt a Resolution entitled, “A Resolution of the City Council of the City of San
Luis Obispo, California, approving an amendment to the 2021 -22 Budget
Allocation” to appropriate $6,900 of the City’s Open Space Protection Fund
balance into operating budget.
DISCUSSION
The accompanying Financial Report for the third quarter of FY2021-22 (Attachment A)
provides a high -level overview of the City’s financial condition as of March 31, 2022. The
attached report highlights revenue and expenditure actuals for the first nine months of the
fiscal year and an update on the Major City Goal (MCG) tasks. It also includes a CIP
update and highlights milestone projects from the third quarter. The report’s focus is on
the General fund and each of the City’s four enterprise funds.
Background
Section 1: General Fund Update: As of March 31, 2022, operating expenditures trend
on target with past years’ third quarters. Tax revenues continue to benefit from the swell
in tourism and consumer spending that began at the end of last fiscal year. Higher labor
and raw material costs along with inflationary pressures also drive taxable good prices
upward and increase the City’s sales tax revenue. However, higher prices reduce
consumer demand and increase the City’s own expenditure costs. It is still unclear how
all of these factors will play into the local economic forecast, but staff expect a weakening
of sales tax receipts over the next few years back to a more gradual low-digit growth.
While some tax revenues are exceeding projections, this will be offset by Development
Review related revenues which are under-preforming by about 11% and are not expected
to meet the adopted revenue projection come fiscal year end.
Section 2: Enterprise Funds: The enterprise funds are also tracking in line with
projected budget and will likely end the year as stated in the adopted budget. Staff will
be monitoring expenses closely as inflationary and wage pressures may prompt rate
studies so that financial policies and cost recovery objectives can be maintained in the
outer years.
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Item 6a
Section 3: Major City Goal (MCG) Update: The City has made significant progress on
many of its MCG efforts. So far, twelve specific tasks have been completed and most
ongoing efforts are in progress.
Section 4: Capital Improvement Plan Update: The City completed six major projects in
the first quarter including the Downtown Parking Meter Pole Removal, Jeffrey Street
Sewer and Water Infrastructure Replacement, 2021 Downtown Pavement Improvement
Project, Energy Efficient Lighting Retrofits at City Hall and Fire Station 1, Emerson Park
Equipment Replacement, and the Downtown Crack Sealing Project.
Section 5: Fund Balances: This section provides the current fund balances for all major
funds considering Council action to date.
Section 6: Outlook and Conclusion: Based on the third quarter results, the City’s
financial picture is well on its way to full recovery from Covid-19, but new challenges await
with record-high inflation, rising interest rates, supply chain issues, and the war in
Ukraine. Uncertainty is the only certainty in economic forecas ting during these
unprecedented times. Updated long-term forecasts provided at mid-year show a balanced
budget but as assumptions change and the future becomes clearer, the long-term outlook
is bound to change with it. The City will need to remain nimble and cautious as it moves
toward Budget Supplement adoption and beyond.
Allocation of Open Space Fund Balance
In 2016, the City collected $6,900 as an in-lieu payment from the developer of the Rachel
Court project adjacent to Terrace Hill Open Space. The p roject had originally been
conditioned to install a new trailhead, however after further review of the steep topography
of the site and conversations with concerned neighbors, it was determined that the
proposed trailhead was not feasible. Instead, the project owners made the in-lieu payment
for the City to use to make other improvements at Terrace Hill Open Space. At this time,
Natural Resources Program and Ranger Service staff seek to utilize these funds for
replacement of trailhead fencing along Bishop Street at that trailhead location. Since the
funding is currently held in fund balance, the Council has to make the appropriation for
use through a resolution (Attachment B).
Policy Context
According to budget policy F, Goal Status Reports of major progr am objectives will be
formally reported to the Council on an ongoing, periodic basis.
Public Engagement
Public comment on the item can be provided to the City Council through written
correspondence prior to the meeting and through public testimony at the meeting. The
Third Quarter Financial Report for FY 2021-22 (Attachment A) will be posted on the City’s
website for public review.
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Item 6a
CONCURRENCE
Operating departments review and monitor financial results on a regular basis. The
respective fiscal officers reviewed the numbers and will be closely monitoring the budget
for the remainder of the year.
ENVIRONMENTAL REVIEW
The California Environmental Quality Act does not apply to the recommended action in
this report, because the action does not constitute a “Project” under CEQA Guidelines
Sec. 15378.
FISCAL IMPACT
Budgeted: No Budget Year: 2021-22
Funding Identified: Yes
Fiscal Analysis:
Funding Sources
Total
Budget
Available
Current
Funding
Request
Remaining
Balance
Annual
Ongoing
Cost
General Fund $ $ $ $
State
Federal
Fees
Other (Open Space
Protection Fund)
$6,900 $6,900
Total $6,900 $6,900 $ $
The quarterly budget review reports on current revenue and expenditure trends to keep
the Council and the community informed about the City’s fiscal picture and program
efforts as adopted with the annual budget appropriation.
The funding for the Terrace Hill Open Space improvement is available in the Open Space
Protection Fund undesignated fund balance and has to be appropriated via Council
action.
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Item 6a
ALTERNATIVES
Do not appropriate $6,900 of the City’s Open Space Protection Fund balance into
operating budget. This is not recommended because the funding was intended to be
used for enhancements at the Terrace Hill Open Space.
ATTACHMENTS
A – First Quarter Financial Report for FY 2021-22
B – Draft Resolution amending FY 21-22 Budget Allocations
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1
Third Quarter Financial Report
Fiscal Year 2021-22
Introduction
This financial report provides an overview of the City’s financial position through the third quarter of fiscal
year 2021-22 (July 1 - March 31, 2022) for the General Fund and the four enterprise operating funds. It
also provides an update on the status of the City’s Capital Improvement Program (CIP) projects and City’s
Major City Goals. Notable milestones or trends within the third quarter are addressed and detailed
throughout the document. The report is broken down into the following sections:
General Fund Update
As of March 31, 2022, operating expenditures trend on target with past years’ first quarters. Revenues
have almost entirely recovered to pre-pandemic levels. Tax revenues continue to benefit from the spike
in tourism and consumer spending that began at the end of last fiscal year. While it is unknown how long
and to what extent this pent-up demand will last and how it will impact overall revenue, the City is
currently on track to meet its overall revenue forecast for 2021-22.
1
1 General Fund Update
2
Enterprise Funds
Update
3 Major City Goal
Update
4 Capital Improvement
Plan Update 6 Outlook and
Conclusion
$77 Million
in Revenues
(YTD)
$57.1
Million in
OpEx (YTD)
3 MCG
Tasks
Completed
in Q3
6 CIP
Projects
Completed
in Q3
5 Fund Balances
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2
General Fund Revenue
Sales Tax: At the end of March 2022, about 63% of the City’s forecasted sales tax revenue for this fiscal
year had been collected due to the timing of disbursements from the California Department of Tax and
Fee Administration (CDTFA). This accounts for revenue earned July 2021 through February 2022. Like the
rest of the nation, the City experienced a surge of consumption that corresponded with the lifting of
lockdowns and stimulative fiscal and monetary policy. While the U.S economy has largely recovered from
the pandemic-driven downturn, new challenges arose. Higher labor and raw material costs along with
inflationary pressures drive taxable good prices upward and increase the City’s sales tax revenue.
However, higher prices reduce consumer demand and increase the City’s own expenditure costs. It is still
unclear how these factors will play into the local economic forecast, but staff expect a weakening of sales
tax receipts beginning in 2023.
Property Tax: Most property tax is collected in the third and fourth quarters of the fiscal year. The City
relies on the County to provide annual property tax forecasts. Throughout 2021 and into 2022, there was
a massive jump in home prices primary due to low inventory and high demand. The pandemic also allowed
residents in high-cost urban cores to migrate to lower density, more affordable regions. This phenomenon
had a cascading effect throughout the nation, and San Luis Obispo experienced an exceptionally strong
real estate market. As the Fed begins to raise interest rates, home sales are expected to decrease as
buyers will have less purchasing power in the housing market. Similar to the Sales Tax forecast, staff
expect a weakening in property tax growth back to two to three percent annually. The City has received
about 68% of its property tax forecast and expects to meet the projection of $20.1 million by fiscal year -
end.
Transient Occupancy Tax (TOT): Tourism along the central coast made a strong comeback as the region
re-opened. Monthly TOT receipts continue to reach all-time highs largely driven by high room rates and
this trend is expected to continue through the end of the fiscal year as events like the Cal Poly graduation
General Fund Revenues Q3 Actuals %
Received Total Budget Q3 Actuals %
Received
Variance
from prior
year
Tax & Franchise Revenue
1 Sales and Use Tax (July-Feb only)12,992,006$ 78%20,790,779$ 14,612,545$ 70%12.5%
2 Local Revenue Measure G (July-Feb only)5,671,451$ 50%25,810,000$ 18,605,007$ 72%228.0%
3 Property Tax 14,328,003$ 73%20,157,153$ 15,678,822$ 78%9.4%
4 Safety Prop 172 283,603$ 90%493,000$ 397,306$ 81%40.1%
5 Transient Occupancy Tax 4,449,342$ 71%9,051,000$ 7,463,904$ 82%67.8%
6 Utility User Tax 3,836,893$ 69%5,383,000$ 4,113,205$ 76%7.2%
7 Business Tax*2,949,239$ 103%2,832,000$ 2,883,654$ 102%-2.2%
8 Cannabis Tax 604,408$ 151%1,000,000$ 726,989$ 73%20.3%
9 Franchise Fees 1,351,002$ 88%1,575,000$ 1,354,911$ 86%0.3%
10 Gas Tax (Special Revenue Fund)790,471$ 73%1,223,937$ 848,619$ 69%7.4%
11 SB1 Gas Tax (Special Revenue Fund)560,392$ 70%915,000$ 612,248$ 67%9.3%
12 Total Tax & Franchise Revenue 47,816,810$ 68%89,230,869$ 67,297,208$ 75%41%
13 Development Review 5,491,412$ 92%6,745,770$ 4,424,527$ 65.6%-19.4%
14 Parks & Recreation 1,056,468$ 100%1,615,555$ 1,054,110$ 65.2%-0.2%
15 Fire 1,130,567$ 83%1,421,460$ 1,191,657$ 83.8%5.4%
16 Police 446,475$ 81%611,590$ 412,474$ 67.4%-7.6%
17 General Government 1,794,731$ 103%1,712,976$ 1,214,451$ 70.9%-32.3%
18 Grants & Subventions 2,836,649$ 143%1,202,883$ 1,539,632$ 128.0%-45.7%
19 Total 60,573,112$ 73%101,338,220$ 77,134,061$ 76%27%
2020-21 2021-22
*Business license and tax certificate renewals are due before September 30th, therefore anticipated revenue for the year has been collected.
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3
return to in-person. However, as inflation increases and pent-up demand declines, the City expects to see
this growth plateau and possibly decline over the next 12 months. Interestingly, when looking at the
Smith travel report data, the region’s average daily rate (ADR) sky-rocketed, but its occupancy rate (the
number of rooms booked) has actually declined. Although it is hard to analyze the direct correlation
between the two, since the room inventory in San Luis Obispo has increased, the data indicates that the
increased rates are at the core of overall revenue growth. This will be closely monitored based on national,
state, and regional travel trends.
Utility User Tax: Year-to-date UUT revenue is tracking higher than it did in FY 2020-21 because of a change
in collection and administrative responsibilities to a third-party vendor, HDL which caused a delay in last
year’s collection. The transition to HDL took place in February and took a few months for remitters to
correctly follow. The City projects to hit the $5.3 million budget by fiscal year-end. There is a slight
seasonality in UUT, resulting in more revenue during the spring and summer periods compared to the fall
and winter periods. The City also anticipates increased revenue in Q4 because of its change in remittance
frequency. Remitters that expect to remit less than $10,000 per year now only remit at the end of the
year. The City expects to receive a full year’s worth of payment for just over 30 service suppliers.
Cannabis Tax: Since April 2021, the monthly cannabis tax revenue collected has stayed very consistent.
This suggests that demand for cannabis retail is relatively stable and unlikely to decrease in the fourth
quarter. The City’s second retail operator opened at the end of March and a non-retail storefront operator
may open before the end of the fiscal year. While the new business will lead to additional cannabis
revenue, staff expect some cannibalization to partially offset the new revenue.
Development Review: By the third quarter in Fiscal Year 2022, Development Review revenues are 11
percent below the projections included in the 21-23 Financial Plan of what is expected at this point in the
year. Development Review revenues tend to be “lumpy”, meaning large projects with high fees have a
high influence on total revenue collection compared to the projections.
The following summary highlights likely Development Review revenue shortfalls in the current fiscal year:
Reduced revenues in planning and zoning is a result of fewer planning applications and building
permits for new commercial buildings. Updates to the City’s Zoning Regulations in 2018 and again
in 2021 included substantial efforts to streamline the City’s discretionary approval processes.
These efforts are working, resulting in fewer planning applications overall, and a shift towards
applications for “Director’s Action” rather than Minor or Major Use Permits.
The total number of building permits is trending lower this year. The reduction is across the board
and not centered in any one sector, although staff has heard anecdotally that challenges created
by COVID-19 with respect to supply chain and workforce constraints has played a role. Looking
forward, inflation and increased interest rates may continue to slow growth in building permits.
However, there are many large projects with high construction values in the permit process. This
includes two hotels, several mixed-use projects, a Porsche and Tesla auto dealership, and new
tract housing.
Code Enforcement revenues are trending low for two reasons. First, the City has realized less
revenue from using a debt collection service than projected. The use of a debt collector to recover
costs involves substantial lead time and delays associated with legal action when the violator is
unresponsive. For many of our smaller cases, this work can represent high effort and low re turn
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4
for the collection agency. In addition, a retirement and internal promotion in the division resulted
in a vacant Code Enforcement Officer II position for the majority of the fiscal year to date.
Less than 30 percent of revenues have been collected from the Infrastructure Plan Check and
Inspection projection due to fewer applications than anticipated and infrastructure plan check
processing cycles often span fiscal years. Fees are not collected at the time of permit application
- only when the permit is issued. Going forward, staff is working with the permitting database to
determine if a deposit system can be implemented, which would allow for some cost recovery on
the front end of these plan check processes. At this time, staff notes some projects that were
anticipated during Fiscal Year 2022 are now slated for Fiscal Year 2023. Over $2.2 million of total
revenue is anticipated in both fiscal years from Infrastructure Plan Check and Inspection if the
projects anticipated move forward, which is almost nine percent lower than what was projected
in the 2021-23 Financial Plan. It may be prudent to adjust revenue projections downward for the
next fiscal year given the anticipated increase in interest rates and other factors in the general
economy that may cause projects with significant infrastructure outlays to slow.
Encroachment Permits, Engineering Development Review Fees (associated with building permits),
and Building Permit Plan Check revenues are all on track with projections.
Other Department Revenue (Parks & Rec, Fire, Police): Overall, fee-generating department programs are
operating at the level projected. Some programs are facing hurdles related to hiring challenges and related
site closures but the decreased revenue is offset by some programs exceeding revenue projections.
General Government/Subventions and Grants: General government and grant revenues fluctuate from
year-to-year based on availability and award success. This category also includes miscellaneous “net zero”
revenue that is offset by expenditures. Although the year-to-date amount is lower than last year, staff
expect to receive the projected revenue by year-end.
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5
General Fund Expenditures
Overall expenditure trends are on track with budget. The graphs below include third quarter consumption
for FY 21-22 compared to budget. The “Total Expenditures & Obligations” column includes both costs that
have already been incurred and costs that are obligated on purchase orders.
Table 1 - Expenditures by Type:
There are no significant variances to point out in the General Fund. It is expected that contract services
and other operating expenses may track above 75% because annual purchase orders are set up at the
beginning of the year and the funds are considered “Obligated” from that point forward. Staffing should
track at a consistent level and 70% is consistent with expected expenditure levels.
Table 2: Expenditures by Department:
All the General Fund departments are tracking in line with budget. Fire is trending higher than other
departments mainly because of unbudgeted overtime costs associated with sending City firefighters to
aid with wildfires throughout the state. This cost is offset by mutual aid revenue. The Police department
is also trending high because of wage increases that were negotiated after budget adoption and therefore
not included in the department budget. Any overage because of this will be offset by the City’s staffing
contingency included in the “non-departmental” cost center.
Expenditure Type Initial Budget Budget
Adjustments Total Budget
Total
Expenditures &
Obligations
% Consumed
Staffing 59,262,760$ 2,333,810$ 61,596,570$ 42,893,223$ 70%
Contract Services 9,506,909$ 1,224,717$ 10,731,626$ 7,233,328$ 67%
Other Operating Expenses 6,528,435$ 268,839$ 6,797,273$ 5,084,071$ 75%
Utilities 2,865,838$ -$ 2,865,838$ 1,940,482$ 68%
Total 78,163,942$ 3,827,365$ 81,991,307$ 57,151,103$ 70%
Department Initial Budget Budget
Adjustments Total Budget
Total
Expenditures &
Obligations
%
Consumed
Public Safety
Police 19,233,231$ 142,255$ 19,375,486$ 14,671,527$ 76%
Fire 14,039,098$ 732,916$ 14,772,014$ 11,387,296$ 77%
Community Services Group (CSG)
CSG Admin 685,132$ 6,399$ 691,532$ 490,997$ 71%
Community Development 7,061,215$ 797,053$ 7,858,268$ 4,840,712$ 62%
Parks & Recreation 5,178,095$ 69,721$ 5,247,816$ 3,328,200$ 63%
Public Works 15,229,985$ 637,570$ 15,867,556$ 10,932,466$ 69%
Utilities - Solid Waste (AB939)228,699$ 103,572$ 332,271$ 134,222$ 40%
Internal Services
Administration 10,464,934$ 57,313$ 10,522,247$ 7,117,809$ 68%
City Attorney 1,330,474$ 170,000$ 1,500,474$ 954,392$ 64%
Finance 2,230,601$ 24,500$ 2,255,101$ 1,608,526$ 71%
Human Resources 1,751,860$ 54,750$ 1,806,610$ 1,236,074$ 68%
Non-Departmental/Support
Services 730,615$ 1,031,315$ 1,761,930$ 446,225$ 25%
Grand Total 78,163,942$ 3,827,365$ 81,991,307$ 57,151,103$ 70%
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6
Enterprise Fund Update
Utilities: Water and Sewer Funds
The tables below include third quarter actuals for FY 2021-22 compared to the projection. The “Total
Expenditures & Obligations” column includes both costs that have already been incurred and costs that
are obligated on purchase orders.
Revenue: Revenues are on track for both funds but appear to be trending low in the Sewer Fund because
a majority of a $3.5 million state grant that has not yet been received. Due to utility billing timing, the
figures above include revenue through the March 15th billing period. Revenues have increased compared
to last fiscal year mainly because of a rate increase of 3.5% which went into effect July 1, 2021.
Additionally, there has been an increase in commercial usage associated with the reopening following the
pandemic closures, an increase in irrigation driven by the current drought, and a return of Cal Poly
students to campus and the community.
The COVID-19 pandemic and resulting California State water shut-off moratorium has resulted in an
increase in the past due water accounts. The City received $263,000 under the CA Water and Wastewater
Arrearage Payment Program to provide financial relief for water bill payments to those customers
impacted by COVID-19. The program is supported by federal funding allocated by the state legislature to
cover past due payments from residential and commercial customers accrued between March 4, 2020
and June 15, 2021.
Beginning in April 2022, Utility Department staff began working with residents, business owners, and
community members to “catch up” on past due accounts with the option of payment plans for
outstanding account balances. In additional to payment options for outstanding balances, staff
highlighted the Customer Assistance Program (CAP) which provides discounted water and sewer rates to
Water/Sewer Fund Revenue Q3 Actuals % Received Total Budget Q3 Actuals % Received Variance from
prior year
Water Fund 15,694,211$ 74%24,452,759$ 17,188,341$ 70%10%
Sewer Fund 11,858,132$ 73%22,500,887$ 13,849,276$ 62%17%
Total 27,552,343$ 73%46,953,646$ 31,037,617$ 66%13%
2020-21 2021-22
Expense Type by Fund Initial Budget Budget
Adjustments Total Budget
Total
Expenditures &
Obligations
% Consumed
Water Fund
Staffing 4,730,739$ (6,369)$ 4,724,370$ 3,198,348$ 68%
Contract Services 765,881$ -$ 765,881$ 481,883$ 63%
Other Operating Expenses 12,138,663$ (13,631)$ 12,125,031$ 10,592,832$ 87%
Utilities 679,072$ -$ 679,072$ 391,747$ 58%
Water Fund Total 18,314,354$ (20,000)$ 18,294,354$ 14,664,809$ 80%
Sewer Fund
Staffing 4,816,352$ 112,039$ 4,928,392$ 3,244,928$ 66%
Contract Services 1,081,706$ -$ 1,081,706$ 719,466$ 67%
Other Operating Expenses 1,921,632$ 3,961$ 1,925,593$ 1,584,137$ 82%
Utilities 793,027$ -$ 793,027$ 404,041$ 51%
Sewer Fund Total 8,612,717$ 116,000$ 8,728,717$ 5,952,572$ 68%
2
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7
income-eligible customers. Shutoffs for non-payment began in early April with volumes equivalent to pre-
pandemic levels and only 54 accounts out of 15,958 subject to discontinued service.
Expenditures: There are no significant variances to point out at this time. It is normal and expected that
contract services and other operating expenses track above 75% because annual purchase orders are set
up at the beginning of the year and the funds are considered “Obligated” from that point forward. Staffing
should track at a consistent level and the actuals seen above are due to staffing vacancies and subsequent
savings during staffing transitions. Throughout the fiscal year, Utilities staff experienced major cost
increases in the areas of chemicals and electricity rates, largely due to supply chain issues. The true impact
of expenditures will be fully realized at the close of year end.
Parking Fund
The tables below include third quarter actuals for FY 2021-22 compared to budget projection. The “Total
Expenditures & Obligations” column includes both costs that have already been incurred and costs that
are obligated on purchase orders.
Revenue: With the implementation of revenue enhancement strategies focused on Parking structures,
metered parking, and enforcement, the parking fund is positioned to meet or exceed its revenue
projections this fiscal year. Through the first half of the year structure revenues were significantly
impacted by lower-than-expected downtown activity, staff vacancies and equipment issues. This revenue
stream has picked up over the last quarter. Overall revenue is about 80% higher than it was last year.
Expenditures: The Parking fund is realizing significant savings due to staff vacancies; however, this is
partially offset by the need for additional contract services to maintain the workload. Overall, the fund
will likely end the year with some expenditure savings which will help replenish the fund balance that was
depleted during the pandemic.
Transit Fund
The tables below include third quarter actuals for FY 21-22 compared to the projection. The “Total
Expenditures & Obligations” column includes both costs that have already been incurred and costs that
are obligated on purchase orders.
Parking Fund Revenue Q3 Actuals % Received Total Budget Q3 Actuals % Received
Variance
from prior
year
Parking Fund 2,236,603$ 97%4,551,136$ 3,999,725$ 88%78.8%
Total 2,236,603$ 97%4,551,136$ 3,999,725$ 88%79%
2020-21 2021-22
Expenditure Type Initial Budget Budget
Adjustments Total Budget
Total
Expenditures &
Obligations
% Consumed
Staffing 1,666,213$ 45,000$ 1,711,213$ 887,755$ 52%
Contract Services 606,806$ 145,000$ 751,806$ 654,139$ 87%
Other Operating Expenses 365,917$ -$ 365,917$ 301,259$ 82%
Utilities 211,301$ -$ 211,301$ 123,848$ 59%
Parking Fund Total 2,850,237$ 190,000$ 3,040,237$ 1,967,001$ 65%
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Revenue: Most of the Transit Fund revenue is from State and Federal grants that are received at the end
of the year. Revenue is on track to meet the projections by the end of the year. Coronavirus Aid, Relief,
and Economic Security (CARES) Act funding covered Transit’s operating costs in Fiscal Year 2021-22. This
freed up formula based federal 5307 dollars that the City received to be used on capital outlay, specifically
the purchase of two electric buses. The Transit Program also received American Rescue Plan Act (ARPA)
funding that is being used to construct the electric vehicle infrastructure needed to support the City’s
acquisition of two zero emission buses.
Expenditures: There are no significant variances to point out at this time. For the first half of the year the
Transit Program realized significant savings as it was temporarily operating at reduced service levels based
on current ridership demand. The department also had a vacant Transit Manager, backfilled with an
interim position, for several months which explains the savings in staffing. It is normal and expected that
contract services and other operating expenses track above 75% because annual purchase orders are set
up at the beginning of the year and the funds are considered “Obligated” from that point forward. In the
case of the Transit fund, the majority of the Contract Services budget is for the annual transportation
services contract with First Transit, Inc. Staffing should track at a consistent level and the actuals seen
above are consistent with where the City should be.
Transit Fund Revenue Q3 Actuals % Received Total Budget Q3 Actuals % Received
Variance
from prior
year
Transit Fund 1,793,868$ 37%7,555,049$ 1,838,208$ 24.3%2.5%
Total 1,793,868$ 37%7,555,049$ 1,838,208$ 24.3%2.5%
2020-21 2021-22
Expenditure Type Initial Budget Budget
Adjustments Total Budget
Total
Expenditures &
Obligations
% Consumed
Staffing 358,181$ -$ 358,181$ 210,503$ 59%
Contract Services 904,871$ -$ 904,871$ 254,392$ 28%
Other Operating Expenses 3,407,654$ -$ 3,407,654$ 3,380,680$ 99%
Transit Fund Total 4,670,706$ -$ 4,670,706$ 3,845,574$ 82%
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Major City Goal Update
Table 3a: Major City Goal Tasks with Completion Dates in FY 2021-22 Q3
Strategy Task Department
Original
Completion
Date
Updated
Completion
Date
1.1 - For all members of the
community
a. Establish a process for the City to recognize and
promote Minority-owned businesses.ADM (ED/DEI)FY22 Q3 FY23 Q2
1.1 - For all members of the
community
b. Implement protocols within the City’s Office of
Economic Development to reach out to existing
and new Minority-owned/operated businesses to
learn of their experiences operating in SLO, and to
identify ways the City can be of support.
ADM (ED/DEI)FY22 Q3 FY23 Q2
2.1 - Establish Office of DEI a. Design DEI Administration, Function, and
Operations of the Office Admin-DEI FY22 Q3 Completed
2.1 - Establish Office of DEI b. Develop DEI Base Operating Budget Admin-DEI FY22 Q3 Completed
2.1 - Establish Office of DEI d. Develop positions; Hire Staff Admin-DEI FY22 Q3 Completed
2.1 - Establish Office of DEI
h. Hire Interns - Cal Poly, Cuesta, community
candidates - .25 FTE - 2 positions Y1 @ midyear /
2 - Y2, full year
Admin-DEI FY22 Q3 FY23 Q1
2.4 - Inclusive & Equitable
Workplace
a. Develop and Adopt Diversity Statement for the
Organization Admin-DEI FY22 Q3 FY 23 Q1
3.6 - City Homelessness Team
Coordination
b. Develop a Strategic Plan to guide a sustained
effort of engagement by regional partners, non-
profit partners, and community members to
identify and implement coordinated solutions to
chronic homelessness.
CDD FY22 Q3 FY23 Q1
3.10 - Mobile Crisis Unit
(MCU) Pilot Program
Implmentation
a. Pair a crisis worker with an Emergency Medical
Technician (EMT) to provide non-emergency
response and care to unhoused community
members.
FD/CDD FY22 Q3 FY22 Q4
4.4 - Alternative and
Sustainable Transportation
a. Establish consistent mode split tracking and
reporting method, consistent with performance
monitoring recommendations as called for in the
Active Transportation Plan and CAP Connected
Communities task 1.1.
PW FY22 Q3 FY23 Q2
4.4 - Alternative and
Sustainable Transportation
i. Complete construction of the Orcutt Road/Tank
Farm Road Roundabout, reducing congestion and
auto emissions and improving access and safety
for bicycles, pedestrians and drivers.
PW FY22 Q3 FY23 Q1
3
Page 1033 of 1284
10
CIP Update – Completed and Ongoing
ID#Spec# Fund Project Current Construction
Status
Approximate
Project Budget
Expended
1 91425 Water Terrace Hill Pipeline and Pressure
Reducing Valve Rehabilitation Completed Q1 FY22 775,000$
2 91647 General Fire Station 1 HVAC Replacement Completed Q1 FY22 $ 170,000
3 1000066 Water Bee Bee/Cuesta/Loomis Waterline
Replacement Completed Q1 FY22 1,275,000$
4 1000198 General Silt Removal 2021 Completed Q2 FY22 $ 110,000
5 91385 General Sinsheimer Irrigation and Stadium
Drainage Completed Q2 FY22 425,000$
6 91609 General Broad Street/Woodbridge Pedestrian
Hybrid Beacon Completed Q2 FY22 $ 450,000
7 1000196 General Mission Plaza Railing Upgrades Completed Q2 FY22 80,000$
8 1000021 General Meadow Park Pathway Maintenance Completed Q2 FY22 $ 400,000
9 91392 General Laguna Lake 2021 Maintenance Dredging
Project Completed Q2 FY22 605,000$
10 90742 General Meinecke Strom Drain Repair Completed Q2 FY22 $ 30,000
11 1000111 General Swim Center Therapy Pool Boiler
Replacement Completed Q2 FY22 60,000$
12 1000163 Parking Downtown Parking Meter Pole Removal Completed Q3 FY22 $ 150,000
13 1000090 Water/Sewer Jeffrey Sewer and Water Replacement Completed Q3 FY22 1,875,000$
14 1000167 General 2021 Downtown Pavement Improvement Completed Q3 FY22 $ 3,980,000
15 1000060 General Energy Efficient Lighting Retrofits - City
Hall and Fire Station 1 Completed Q3 FY22 $ 15,000
16 1000190 General Emerson Fitness Park Equipment
Replacement Completed Q3 FY22 $ 300,000
17 1000180 Parking Downtown Crack Sealing Completed Q3 FY22 $ 43,900
18 1000184 Parking Monterey and Broad Improvements Construction Ongoing $ 67,000
19 91385-16 General Sinsheimer Court Entrance Hardscape Construction Ongoing $ 163,000
20 1000034 Water Reservoir 1 Cover Replacement Construction Ongoing $ 700,000
21 91375 General Railroad Safety Trail Taft to Pepper Construction Ongoing 3,980,000$
22 1000034 General French Park Parking Lot Construction Ongoing $ 97,000
23 91611 General Tank Farm Road and Orcutt Roundabout Construction Ongoing 3,510,000$
24 91562 General Parks and Recreation Office
Rehabilitation Construction Ongoing $ 605,000
25 91506A Water Groundwater Contamination
Characterization Project Construction Ongoing $ 825,000
26 91118A Sewer Calle Joaquin Lift Station Replacement Construction Ongoing 8,534,000$
27 91219 Sewer Wastewater Resource Recovery Facility
Upgrade Construction Ongoing $ 123,331,000
Completed & Ongoing Construction Capital Projects (July 2021 - March 2022)
Completed in Q3
4
Page 1034 of 1284
11
Fund Balances
The fund balance is the fund balance at the beginning of the fiscal year plus the difference between
revenues and expenditures. The beginning fund balance represents the residual funds brought forward
from the previous year (ending balance). In the case of the enterprise funds, the “Working Capital” is a
shown below. Working Capital is equal to the fund’s current assets minus current liabilities. The total
balance includes reserved or restricted amounts.
Fund Balance/Working Capital by Fund
101 - General Fund $ 42,576,722
601 - Water Fund $ 32,342,869
602 - Sewer Fund $ 33,856,317
611 - Parking Fund $ 13,169,906
621 - Transit Fund $ 2,713,366
Outlook and Conclusion
Based on the third quarter data, the City’s financial picture is well on its way back to full recovery from
COVID-19, but new challenges include record-high inflation, rising interest rates, supply chain issues, and
the war in Ukraine. Uncertainty is the only certainty in economic forecasting right now which will be
considered for the 2022-23 Budget Supplement.
While inflation causes revenue trends to look favorable, it is also important to consider the impact on the
City’s own expenditures. The cost of services, construction, utilities, and supplies are all rising. Not to
mention, the City is experiencing the same labor market challenges that the nation is facing. In order to
ensure its competitive standing as an employer, the City embarked on a compensation study that found
that the City’s base salaries are about 8.55% below the median. Updated long-term forecasts provided at
mid-year show a balanced budget but as assumptions change and the future becomes clearer, the long-
term outlook is bound to change as well. The City will need to remain nimble and cautious as it moves
forward.
CalPERs Update
In July 2021, CalPERs reported a 21.3% net return on investments for the 12-month period that ended
June 30, 2021. Under the Funding Risk Mitigation Policy, approved by the CalPERS Board of Administration
in 2015, the double-digit return triggered a reduction in the discount rate used to calculate employer and
Public Employees’ Pension Reform Act (PEPRA) members contributions. The discount rate, or assumed
rate of return, will drop from 7% to 6.8% on ongoing basis. The lowering of the discount rate will increase
both employee and employer normal cost and also influence the unfunded liability. However, the double-
digit gains should offset the impact of the lower discount rate on the unfunded liability.
6
5
Page 1035 of 1284
Page 1036 of 1284
R ______
RESOLUTION NO. _____ (2022 SERIES)
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN LUIS
OBISPO, CALIFORNIA, APPROVING AN AMENDMENT TO THE 2021-
22 BUDGET ALLOCATION
WHEREAS, in accordance with the San Luis Obispo City Charter Section 802, the
City Manager submitted the 2021-23 Financial Plan to Council for its review and
consideration on June 1, 2021; and
WHEREAS, on June 1, 2021, the Council approved and appropriated the 2021-22
budget allocation including operating expenditures, debt service, and capital
improvement plan budget (R-11251); and
WHEREAS, the City received $6,900 in 2016 for trailhead improvements at
Terrace Hill that was paid by a developer; and
WHEREAS, the revenue was deposited into the Open Space Protection Fund and
currently resides in the fund balance; and
WHEREAS, the City will now be utilizing the funding to build new fences at Terrace
Hill and needs to appropriate the expenditure budget from fund balance.
NOW, THEREFORE, BE IT RESOLVED by the Council of the City of San Luis
Obispo as follows:
Page 1037 of 1284
Resolution No. _____ (2022 Series) Page 2
R ______
SECTION 1. The 2021-22 budget is hereby amended to appropriate $6,900 of the
City’s Open Space Protection Fund balance into operating budget.
Upon motion of _______________, seconded by _____________, and on the
following roll call vote:
AYES:
NOES:
ABSENT:
The foregoing resolution was adopted this _____ day of _____________________ 2022.
___________________________
Mayor Erica A. Stewart
ATTEST:
________________________
Teresa Purrington
City Clerk
APPROVED AS TO FORM:
________________________
J. Christine Dietrick
City Attorney
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the official seal of the
City of San Luis Obispo, California, on ______________________.
___________________________
Teresa Purrington
City Clerk
Page 1038 of 1284
FY 2021-22 3rdQuarter Budget ReportMay 17, 2022
Recommendations21.Receive and file the FY 2021-22 3rd Quarter Budget Review; and2.Adopt a Resolution entitled, “A Resolution of the City Council of the City of San Luis Obispo, California, approving an amendment to the 2021-22 Budget Allocation” to appropriate $6,900 of the City’s Open Space Protection Fund balance into operating budget3.Adopt a Resolution entitled, “A Resolution of the City Council of the City of San Luis Obispo, California, approving an amendment to the 2021-22 Budget Allocation” pay $150,000 from the City’s Insurance Fund balance.EB0
Slide 2EB0 [@Harnett, Natalie] - we should probably add a third recommendation regarding the $150K for claims coverage. Elke, Brigitte, 2022-05-16T04:34:21.197
General Fund Update$77 Millionin Revenues (YTD)$57.1 Million in OpEx(YTD)3 MCG Tasks Completed in Q36 CIP Projects Completed in Q33
Revenue Overview Major FundsFund FY21 Actuals FY22 Actuals % ReceivedVariance from Prior Year General Fund $ 60,573,112 $ 77,134,061 76% 27%Water Fund $ 15,694,211 $ 17,188,341 70% 10%Sewer Fund $ 11,858,132 $ 13,849,276 62% 17%Parking Fund $ 2,236,603 $ 3,999,725 24% 79%Transit Fund $ 1,793,868 $ 1,838,208 24% 2%4•All funds currently on trend with budget projections•Spike in major tax revenue from increased consumer spending, inflation, tourism
Expenditure Overview Major FundsFund Total Budget Total Expenditures & Obligations % ConsumedGeneral Fund $ 81,991,307 $ 57,151,116 70%Water Fund $ 18,294,354 $ 14,664,809 80%Sewer Fund $ 8,728,717 $ 5,952,572 68%Parking Fund $ 3,040,237 $ 1,967,001 65%Transit Fund $ 4,670,706 $ 3,845,574 82%Total $ 116,725,321 $ 83,581,072 72%Percent expended* by typeStaffing70%Contract Services67%Other OpEx75%Utilities68%5
Major City Goal Update3Major City Goal tasks completed•Design DEI Administration, Function, and Operations of the Office•Develop DEI Base Operating Budget•Develop positions – hire staff6
Capital Improvement PlanCompleted projects in Q3 of FY 2021‐22:•Downtown Parking Meter Pole Removal•Jeffrey Sewer and Water Replacement•2021 Downtown Pavement Improvement•Energy Efficient Lighting Retrofits – City Hall and Fire Station 1•Downtown Crack SealingOngoing Projects•Monterey and Broad Improvements•Sinsheimer Court Entrance Hardscape•Railroad Safety Trail Taft to Pepper•Tank Farm Road and Orcutt RoundaboutFull list on page 13 (Attachment A)Total budget for completed or active projects: $152.6 million7
8Budget Recommendations:1. Allocation of Open Space Protection Funds2. Allocation of Insurance Fund Balance• Authorize use of $150,000 from Insurance Fund Balance to cover claims and related expenses for remainder of FY22• Several unanticipated and high-cost claims• Insurance Fund balance is structured to accommodate fluctuations in liability costs• Allocation of in-lieu payment that was received from developer in 2016• Funds are designated for trailhead work at Terrace Hill Open Space• Will be used to replace trailhead fencing along Bishop StreetHN0
Slide 8HN0 [@Havens, Candace] [@Domini, Nickole]Harnett, Natalie, 2022-05-13T18:57:56.619
Recommendations91.Receive and file the FY 2021-22 3rd Quarter Budget Review; and2.Adopt a Resolution entitled, “A Resolution of the City Council of the City of San Luis Obispo, California, approving an amendment to the 2021-22 Budget Allocation” to appropriate $6,900 of the City’s Open Space Protection Fund balance into operating budget.3.Adopt a Resolution entitled, “A Resolution of the City Council of the City of San Luis Obispo, California, approving an amendment to the 2021-22 Budget Allocation” to pay $150,000 from the City’s Insurance Fund balance.