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City Council Planning Session January 30, 2021 Financial Overview Fiscal Year 2020-21 General Fund Revenue Update Revenue Category 2019 Actual 2020% Change 2020 Actual over PY 2021 Original Budget 2021% Change 2021 Projected over PY Property Tax 108,365,261 113,313,535 4.6% 117,508,227 117,508,227 3.7% Sales Tax 38,502,470 36,232,969 -5.9% 28,690,831 34,540,800 -4.7% Transient Occupancy Tax 24,697,446 20,847,883 -15.6% 6,434,115 15,077,669 -27.7% Other Revenue (budgeted) 55,838,208 56,348,080 0.9% 46,950,731 47,108,184 -16.4% Other Revenue (unbudgeted) 2,409,210 3,210,549 33.3% N/A 3,101,227 -3.4% Total General Fund 229,812,594 1 229,953,017 0.06% 199,583,904 217,336,107 -5.5% • Net result is $17.8 million projected favorable revenue variance • Projections continuing to evolve as new information is available on the pandemic response and reopening Top Three Revenues - Fiscal Year 2020-21 Property Tax — no change from adopted budget • 4.7% assessed valuation growth and 3.7% revenue growth • Minimally impacted by the pandemic Sales Tax — updated with latest consultant conservative estimate • Revenue down from prior year, but not as much as initially projected • Staff is currently refining the projection for the remainder of the fiscal year with the assistance of the City's sales tax consultant Transient Occupancy Tax — updated with year-to-date actuals and revised projections • Forecast has evolved as more information has become available on occupancy trends • Current projection assumes recovery to 60% of pre -pandemic revenue by June • Renaissance Hotel expected to reopen on February 1st Fiscal Year 2020-21 Expenditures Update • The Finance Committee will review the second quarter report on February 18th, followed by City Council review on February 23rd • 44.7% of the General Fund budget had been expended through the end of the second quarter, indicating that expenditure savings are likely materializing • CARES Act Funds allocated to public safety costs totaling $1.0 million have been received and FEMA claims totaling $565,000 are in progress • Overall, departments are on track to stay within their budgets and generate General Fund savings for the year • Savings may not be as sizable as in past years due to an already reduced expenditure budget 2020-21 Unrestricted Resources ("Surplus") • Projected budget surplus dependent on many variables • Changing revenue landscape • Expenditure savings • Tier 3 and tier 4 budget reductions have largely not been restored • May be considered later in the year if positive revenue trends are realized • Staff recommend deferring further decisions until the end of the fiscal year to provide budget flexibility • Restoration of cuts should be evaluated in parallel to allocating funds to long-term obligations and/or infrastructure & neighborhood capital improvements Tiered Short -Term Budget Reduction Strategy Professional and Contract Svcs. $ 1,621,760 $ - $ - $ - $ - - $ 1,621,760 Other Non -Personnel Budgets 1,136,807 - - - - - 1,136,807 Personnel Services - 2,000,000 - - - - 2,000,000 Transfers Out - - 18,477,137 500,000 - - 18,977,137 Capital Budgets - - 2,500,000 - - - 2,500,000 Insurance - - - 2,000,000 - - 2,000,000 Equipment Replacement - - - 2,500,000 - - 2,500,000 Contingency Reserve Draw - - - - 2,304,399 - 2,304,399 Cuts Restored in First Quarter - - - (500,000) (2,304,399) - (2,804,399) • Public Works will provide an update on deferred capital projects later in this presentation • ISF charge reductions can be evaluated at year-end Fiscal Year 2021-22 Preliminary Revenue Outlook Revenue Category 2019 Actual 2020 Actual 2021 Original Budget 2021 Projected 2022% Change 2022 over PY Projected Projected Property Tax 108,365,261 113,313,535 117,508,227 117,508,227 121,610,251 3.5% Sales Tax 38,502,470 36,232,969 28,690,831 34,540,800 36,553,400 5.8% Transient Occupancy Tax 24,697,446 20,847,883 6,434,115 15,077,669 19,027,493 26.2% Other Revenue (budgeted) 55,838,208 56,348,080 46,950,731 47,108,184 51,602,552 9.5% Other Revenue (unbudgeted) 2,409,210 3,210,549 N/A 3,101,227 N/A N/A Total General Fund 229,812,595 229,953,017 199,583,904 217,336,107 228,793,696 5.3% • $11.5 million of projected revenue growth • Projections continuing to evolve as new information is available on the pandemic response and reopening Top Three Revenues - Fiscal Year 2021-22 Property Tax — estimating 3.5% increase in revenue Inflation factor for 2021 assessment roll only 1.036% (values assessed as of January 1, 2021) • First time below 2% since fiscal year 2016-17 • Home sales strong, but AV growth has been trending down for the last few years Sales Tax — used consultant's conservative estimate • Continued recovery/growth expected • May be revised upward as the current year progresses Transient Occupancy Tax — expected continued gradual improvement • Conservative forecast, with revenue growing from 60% to 80% of the pre -pandemic level by the end of the fiscal year • Full recovery would likely follow in fiscal year 2022-23 Operating Budget Development Budget Process Timeline mk7 Ea�-j JANUARY NOVEMBER FEBRUARY COUNCIL PLANNING SESSION DEPARTMENTAL Rayn ffeevrff wrlh departmemy to A7.qew AUTUMN/WINTER budgeyear as APRIL PREPARATION opinions from c=0onmleParis for speda&e fnprewsVrig sionomic trena!s. Start descuss6ons w&h Departments and the FINALIZECITY Crty Manager to)dentify areas where LIABILITIES & LONG- chor�gesin mr&e defWyymighrbe in arder. MANAGER RANGE PLANNING PERSU.,,.%-.- OPERATING REVIEW RmkraVopenMigAr3bUXfes.sLrcA BUDGET DEVELOPMENT ftwawthaCfly!srewnueand as WorkersGwnpaum%,aR Genera: Co C- . ,- --.: , -, - , - -;- ;: -; : , , �:;!nrg experldftum assuuFdms� Cy thg&kly. Pension.UndRewso Mbn%,er maAs pm6mkxwy WsyrwtE LfabMes Perzcrme.a: eid'az ^g orer.—.!7jchonges. re=.wNdWorm Cl LJ M% 61 — pr 1116, 4±j kkhl pr' pr' mk7 Ea�-j 0 NOVEMBER FEBRUARY REVENUE DEPARTMENTAL Rayn ffeevrff wrlh departmemy to A7.qew BUDGET revenue pr4eWonsondseek outside PREPARATION opinions from c=0onmleParis for speda&e fnprewsVrig sionomic trena!s. Start descuss6ons w&h Departments and the Crty Manager to)dentify areas where chor�gesin mr&e defWyymighrbe in arder. JUNE CITY COUNCIL REVIEW CAyCWndf1EVf9M aCYLM and VOMS unpropased butet f-b*rT qzgram eniaanrernerus & bu� MvIspom. MAY JULY FINANCE COMMITTEE REVIEW BUDGET IMPLEMENTATION F&rxvxe Commmee wY? make recon7nerm&mm to support or &4= ae@M FLZd Year with budgetasmvripgarn to the QyCoun& 3d0prGdbVQW N Public Review of the Budget .. Department Sat, Jan 30, 2021 Special Council Fleeting Council Planning Session Thurs, Feb 18, 2021 Finance Committee Long-range Financial Forecast (LRFF) Update Feb 8 — 19, 2021 City Manager/ Departments City Manager?Department budget meetings to discuss department budgets & Program Enhancement Requests Tues, March 9, 2021 City Council Study Session Early Look CIP Budget Thurs, March 11. 2021 Finance Committee Discuss revenue budget assumptions Thurs, April 15, 2021 Finance Committee Review FY 21 budget & FY 22 assumptions Fri, April 23, 2021 City Manager/Finance Finalize budget; prepare, print proposed budget documents Tues, May 11, 2021 City Council Study Session FY 22 1s, Budget Review Tues, May 25, 2021 Joint City CouncillFinance Fly 22 2^d Budget Review Committee Study Session Tues, June 8, 2021 City Council Meeting Public hearing and adoption of Fly 22 budget and GANN limit Operating Budget Pressures • Continuation of Pension Investment Loss Mitigation • Service Needs • Funding for Homeless Strategies • Refuse /Recycling Contract Increase • Increased Enforcement • Code Enforcement Staffing • Boardwalk Ambassador Program • Harbor Department Staffing 13 Recent Unfunded Actuarial Liability Payment History Minimum UAL Contribution Base Annual Discretionary Payment CaIPERS Investment Loss Mitigation Total UAL Payment 2017-18 2018-19 2019-20 2020-21 2021-22 Actual Actual Actual Projected Projected $24,959,949 $25,569,840 $26,196,003 $29,078,448 $30,029,330 8,914,622 8,930,160 8,803,997 5,921,552 4,970,670 - - - 5,000,000 TBD 33, 874, 571 34, 500, 000 35, 000, 000 40, 000, 000 35, 000, 000 • The City has directed additional resources toward annual discretionary UAL payments in recent years • Council ultimately included an additional $5 million contribution in the fiscal year 2020-21 budget, bringing the total to $40 million Pension Funding Options • Finance Committee and City Council reviewed several scenarios last year for addressing anticipated future CalPERS investment return challenges • Staff recommended an additional $5 million for five years, followed by a reduced $2 million per year until UAL eliminated • City Council direction: evaluate the additional contribution annually • Options available • Move forward with an additional $5 million contribution from surplus • Include $5 million in a reserve account from surplus like this year • Return to the prior $35 million per year contribution strategy $400 $300 $200 $100 Impact of Continued $35 Million Payments on Funded Status and UAL 0 84% 86% 0 75% 77% 79% 80% 82/0 73/ $329 9 89% 91%3% 95% •, $299 $283 $267 $249 $231 $211 . $189 $166 E $142 $115 $85 97% 99% 100% $52 $16 $35 $35 $38 $38 $ 0 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 UAL Balance (Mil) Payment (Mil) Funded Status Source: Cal PIERS Pension Outlook Overview tool Assumed 7% investment return Service Needs Funding for Homeless Strategies Partnership with Costa Mesa on Permanent Homeless Shelter • 20 beds allocated to Newport Beach, 5 Year Agreement • Capital Contribution of $1.6M, funded from Affordable Housing Reserve and Hoag Development Agreement • Annual operating cost of $1 M to begin when Shelter opens, anticipated early April • Hoag contribution: $300,000 annually for 10 years for homeless shelter costs Permanent Supportive Housing Partnership with PSH Developers • Proposed City Contribution - $3,000,000 • Potential Funding sources: Development Agreements - Affordable Housing contributions, General Fund surplus 18 Refuse/ Recycling Contract Increase Additional Annual Costs Residential Refuse Collection - $2,900,000 increase with 2% annual adjustment Additional Revenue Opportunity Citywide Recycling Fee Increase to fully recover current recycling costs - potential new revenue of $1,361,000 Public Hearing on March 23, 2021 Net Cost to the General Fund if fee approved - $1,539,000 19 Code Enforcement Staffing Code Enforcement Statistics Year Total Cases 2019 3,864 2020 3,866 Property Residential STL Cases Work w/o Permits Maintenance Building Records 62 417 400 11138 195 581 478 11059 Code Enforcement Staffing Employee Number Cost Full -Time 3.00 included Part -Time .75 Included Contract .75 $104,000 Sun Mon Tues Wed Thurs Fri Sat 6:30a 7:30a 7:30a 7:30a 7:30a 7:30a 7:30a 4:30p 5:30p 5:30p 5:30p 5:30p 5:30p 5:30p 6:00p 6:00p 6:00p 6:00p 3:00a 3:00a 3:00a 3:00a Red highlight indicates additional contract hours Contract hours added in the current fiscal year as a pilot program 21 Boardwalk Ambassador Program Boardwalk Ambassador Pilot Program: • Community Service Corporation (CSC)- private contractor with boardwalk safety experience • Focus in Newport Beach: improve quality of life for residents/visitors to the peninsula by ensuring compliance with City municipal codes and boardwalk safety rules • Provide friendly advice, guidance, and directions to visitors in need of assistance • CSC will provide staff that are highly visible, approachable, and professionally uniformed. • Goal of the pilot program is to provide additional presence and visibility on the boardwalk to augment our PET, HLO, and Area 1 Patrol deployments Newport irk" aa� Beach Ambassador r m i 22 Boardwalk Ambassador Program • Boardwalk Ambassador Pilot Program - $75,000 • Two 2 -person teams, including a supervisor, that will patrol the boardwalk on foot • The area of responsibility is E Street to 36th Street, including the Balboa and Newport Piers • For now, the teams will deploy Friday/Saturday/Sunday during daylight hours (1 OAM-6PM) • Status: • Agreement with CSC finalized, customized Newport Beach uniforms are being procured by them at their cost • First deployment is anticipated by the first week of February 2021 Annual Costs: Teams scheduled on Fridays, Saturdays and Sundays $110,000 Teams scheduled on Saturday and Sunday $ 88,400 m Harbor Department Staffing • Department established July 1, 2017 • Model based on part-time staffing - operates 7 days a week • Authorized Staff- 2 Full-time employees, 16 part-time employees • Turnover in last 3.5 years - 19 employees • Select Statistics Activity FY 2019-20 Public Dock Enforcement 3,857 Sea Lions 460 Mooring Check 2,898 Anchorage Check 1,514 Registration/Insurance 990 Code Enforcement Actions 111757 Harbor Department Staffing FY2021-22 Requests Additional Support for mooring management- 1 permit technician to support: vessel documentation, insurance, equipment service records, code enforcement documents, mooring transfers, reservations, expansion of Marine Activities Permit program, issuance of new permits to mooring permittees ($94,000) Additional Support for Code Enforcement- 1 code enforcement officer to support: Marine Activities Permits, dock time limits, on -water enforcement, noise, trash, derelict vessels, etc. ($94,000) 25 FY 2021-22 Budget Development Service Needs Summary Service Needs Total Cost Unfunded Homeless Shelter Beds $ 1,000,000 $ 700,000 Refuse/Recycling Contract 21900,000 2,9001000 Recycling Fee Revenue * (1,361,000) Contract Code Enforcement 104,000 104,000 Boardwalk Ambassadors Program 1101000 1101000 Permit Technician - Harbor 94,000 94,000 Code Enforcement Officer - Harbor 94,000 94,000 Total $ 4,302,000 $ 2,641,000 * If fee increase is approved