City staff is pleased to present for the City Council’s consideration the City’s two-year Biennial Budget covering the annual periods from July 1, 2023 through June 30, 2024 and July 1, 2024 through June 30, 2025. As part of this budget cycle, the organization is shifting from an annual budget to a biennial budget to assist the City Council and City staff focus on long term and strategic considerations as the organization adapts to changes in the economy as well as within the organization.
The proposed General Fund budget including decision package requests, as summarized in this Budget Workbook, sets the financial course for the City and defines the priority of services provided to our community. It is the culmination of months of effort from City staff, City departments and City Council. The proposed budget for the coming two fiscal years anticipates continued economic growth and development, increased public safety services, increased infrastructure investments and an emphasis on employee retention and attraction.
Looking at the City’s major revenue sources, the sales tax base continues to show positive growth. Sales tax revenues is the largest revenue source for the City’s General Fund and represents 40 percent of the City’s General Fund budget. Sales tax continues to respond to the economy and growth is anticipated to continue in the coming fiscal years. Property tax, which is the City’s second largest General Fund revenue source, also continues to maintain marginal growth as development continues within the City. Staff remain cautiously optimistic as we present you with the proposed FY 2023-25 budget and are closely monitoring the state of the economy as the risk of a recession continues to loom in the coming fiscal years. As more information becomes available, staff will adjust assumptions and be back to City Council at a later date.
Overall, this budget workbook provides a preview of the FY 2023-24 and FY 2024-25 budgets and an opportunity for comments, input, and direction from City Council. The information presented tonight is based upon staff’s objective assumptions for both revenues and expenditures on information that is known as of June 6, 2023. The following are key points to consider while reviewing the Budget Workbook:
- City Mission Statement, Organizational Goals and City Council’s Top Priorities and Projects – The City’s mission statements and City Council’s top priorities and projects are provided as a reference and are the foundation for the City’s budget.
- Fiscal Policies Statement – The City’s Fiscal Policies Statement sets the financial framework for the City’s budget. Staff is proposing minor revisions to update policy language to reflect a biennial budget process. Staff is also proposing to provide additional language and clarification regarding the budget carryover process as part of the biennial budget process for both operating and capital improvement budgets. Below is the proposed language recommended to be incorporated in the City’s Fiscal Policies Statement:
- As part of the biennial budget, the City Manager shall have the authority to automatically carry over available appropriation from one fiscal year to another fiscal year for a new expenditure so long as the total appropriation per expenditure does not exceed the City Manager’s authority limit of $50,000.
- The City will carry over all capital project appropriation balances in the next fiscal year.
- General Fund Five Year Projections – The Five Year Projections represent staff’s estimate, as of June 6, 2023, of where the General Fund will be for each of the next five fiscal years. The projection serves as a tool to identify financial trends, shortfalls, and issues so that the City can proactively address them. The goal of the Five Year Projections is to assess the City's ability over the next five years to:
- Continue current service levels based upon the City's operational goals;
- Preserve the City's long-term fiscal health by aligning operating revenues and costs; and
- Maintain the City's general fund reserves based upon the City's fiscal policies.
It is important to stress that projections beyond Fiscal Year 2024-25 are not a budget and are used to highlight the need to prioritize the allocation of City resources.The purpose of the projection is to provide an overview of the City's fiscal health based on various assumptions over the next five years and provide the City Council, departments and residents of Brea a "snapshot" of the City's financial outlook beyond this budget cycle.The Five Year Projection is intended to serve as a planning tool to bring a long-term perspective to the budget process.The assumptions used in the preparation of Five Year Projections are detailed in this section of the workbook and are categorized by revenue and expenditure assumptions.
Lastly, it is important to note that any projected gains/losses to future CalPERS employer rate as a result of changes in the investment market, are amortized over a 20-year horizon with no changes for the first two years; a ramp up over the next five years, and then levels off the remaining 15 years.CalPERS rate of return fluctuates and therefore future year rates are subject to change. The current discount rate is set at 6.8% however there is no guarantee where its value will land at fiscal year-end.
- General Fund Five Year Projections with Decision Packages – This revised Five Year Projections includes all General Fund Decision Packages listed in the next tab. Included are one-time purchases which have been removed in future years. In addition, there are personnel related requests and other decision packages that incur on-going costs. These on-going costs have been included in future years.
- Decision Packages – Decision packages are department requests for new programs, personnel, and/or equipment. The decision packages are organized by fund and are not presented in any priority order. There is a total of 26 decision packages recommended to be reviewed and considered. The decision packages presented are for City Council review and feedback, as well as a preview of the needs of the upcoming two fiscal years.
- Decision Packages On-Hold - There is one decision package submitted by the Police Department that is recommended to be further evaluated and is pending until more information becomes available. The Police Department is currently seeking grant funding for the implementation of an Integrated Crime Center (ICC) and is awaiting grant notification. This request will be brought to the City Council for funding consideration in the coming fiscal year
- Fund Summaries – This section of the workbook includes the fund summaries of those funds impacted by the proposed decision packages. The fund summaries identify funding availability and includes any associated costs of the proposed decision packages.
- Successor Agency - The Successor Agency to the Brea Redevelopment Agency’s expenditure summary is presented in this section of the workbook.
Tonight's presentation will also provide an opportunity to review the City's proposed Seven Year Capital Improvement Program Budget which is provided as Attachment B. |