REPORT TO COUNCIL
SUBJECT
Title
Public Hearing: Action on the Adoption of the Proposed FY 2022/23 & FY 2023/24 Biennial Capital Improvement Program Budget and FY 2022/23 Operating Budget Changes and Approval of FY 2022/23 Municipal Fee Changes to Library Community Room Rental Fees (NOT TO BE HEARD BEFORE 7:00 PM)
Report
COUNCIL PILLAR
Enhance Community Engagement and Transparency
BACKGROUND
City Charter Section 1302 Budget - Submission to City Council requires that at least thirty-five days prior to the beginning of each fiscal year, or at such prior date thereto determined by the City Council, the City Manager shall submit to the City Council the proposed budget.
This budget continues the biennial budget process that alternates between an operating and capital budget. This year’s budget focuses on the capital infrastructure, supporting the facilities that serve our residents and community. Amendments to the FY 2022/23 Adopted Operating Budget are also included.
Study sessions were held on May 24, 2022 and June 7, 2022 to allow the City Council and public to review and provide input on the Proposed FY 2022/23 and FY 2023/24 Biennial Capital Improvement Program Budget, FY 2022/23 Operating Budget Adjustments, and adjustments to the library community room rental fees. The June 7, 2022 study session and Council report also included follow-up from the May 24, 2022 study session.
As required by California Government Code Section 65401, the FY 2022/23 & FY 2023/24 Biennial Capital Improvement Program Budget was reviewed and approved by the Planning Commission (Commission) for conformity with the City of Santa Clara 2010-2035 General Plan at their June 15, 2022 meeting.
DISCUSSION
City Charter Section 1303 Budget - Public Hearing, requires that the City Council shall hold a public hearing on the proposed budget, at which interested parties shall be given an opportunity to be heard. A Public Hearing is scheduled for the purpose of taking public input on Council adoption of the Proposed FY 2022/23 and FY 2023/24 Biennial Capital Improvement Program Budget and FY 2022/23 Operating Budget changes, the Housing Authority and Sports and Open Space Authority budgets, amendments to the Budget and Fiscal Policies, and amendments to the library community room fees.
A copy of the Proposed Budget is available for review in the City Clerk’s Office and on the City’s website at: <https://www.santaclaraca.gov/home/showpublisheddocument/77216/637868407536970000>. The Proposed Budget is also included as Attachment 1 to this document.
In addition, the City is required to calculate the expenditure appropriation limit from tax proceeds to determine compliance with Propositions 4 (Gann Initiative) and 111 (Spending Limitation Act of 1990). The City’s GANN Appropriations limit is included as a separate report for Council action. As stated in this companion report, the City’s Proposed Budget is in compliance with the GANN Appropriations Limit.
FY 2022/23 Total Budget
The annual budget serves as a financial plan and operational guide that reflects the policies, goals, and priorities of the City Council and community. The capital budget guides the City in the planning, scheduling, and budgeting of capital investments within the City.
With the recommended amendments to the Proposed Budget, the FY 2022/23 Budget totals $1.3 billion, which is above the FY 2021/22 Adopted Budget of $1.2 billion due primarily to growth in the Electric Utility within the Enterprise Funds as shown in the attached Table 1: City of Santa Clara Annual Budget.
Biennial Capital Budget and Five-Year Capital Improvement Program (CIP)
With the recommended amendments to the Proposed Budget, the Biennial Capital Budget totals $588 million and the Five-Year Capital Improvement Program (CIP) totals $830 million.
A breakdown of the capital budget by theme is on the attached Table 2: Breakdown of the Capital Budget by Theme.
FY 2022/23 Adopted Operating Budget Amendments
The City Council approved the FY 2021/22 and 2022/23 Biennial Operating Budget in June 2021. While this year’s budget is focused on the capital budget, budget amendments to the FY 2022/23 Adopted Operating Budget are necessary to reflect the updated revenue estimates and to account for updated labor and non-personnel costs in the General Fund and other funds.
Recommended Changes to the Proposed Budget
A number of changes are recommended to the Proposed Budget as itemized in Attachment 2, including the following:
• Capital Project Carryovers: The carryover of capital funds from FY 2021/22 to FY 2022/23 to complete capital projects totals $204.3 million.
• Operating Budget Carryovers: The carryover of operating funds from FY 2021/22 to FY 2022/23 to complete specific purchases totals $2.7 million.
Housing Authority Budget
The Housing Authority Fund expenditure budget totals $380,363 in FY 2022/23 as shown in the Proposed Budget. The budget allows the City of Santa Clara Housing Authority to continue to manage and monitor housing assets from the dissolution of the Redevelopment Agency. Additionally, funding will be used to support loan monitoring, administration and other programs and projects related to affordable housing.
Sports and Open Space Authority Budget
The Sports and Open Space Authority expenditure budget totals $5,420 in FY 2022/23 as shown in the Proposed Budget. The purpose of the Sports and Open Space Authority is to support the acquisition and preservation of open space within the City and the development of local sports.
FY 2022/23 Municipal Fee Schedule Change
On April 19, 2022, the City Council approved the FY 2022/23 Municipal Fee Schedule that will be effective July 1, 2022. At that time, the library community room rental fees had not yet been determined. These fees have been suspended since 2019 out of concern that there was not customer service alignment with the parks & recreation community room rental fees. Based on City Council feedback during the April 5, 2022 Study Session on the FY 2022/23 Municipal Fee Schedule and the new Parks & Recreation Cost Recovery Policy, revised parks and recreation community room rental fees were established for FY 2022/23. Subsequently, the Library Department met with the Board of Library Trustees (BOLT) on April 28, 2022 to discuss library community room rental fees taking into account the fees adopted for the parks and recreation community room rentals. BOLT approved the proposed library community room rental fees.
The Proposed Library community room rental fees are: $20 per meeting for non-profit or Santa Clara resident community events; $90 per hour for non-resident use; and staff charges of $30 per hour if groups require assistance throughout their reservation. The revised page from the Municipal Fee Schedule is included as Attachment 4 to this memorandum.
Budget and Fiscal Policies Revisions
The Budget and Fiscal Policies were initially added in the FY 2019/2020 and FY 2020/21 Biennial Operating Budget and formally adopted by the City Council. Revisions to the Utility Reserves section of the policies are recommended as outlined in Attachment 6. These changes primarily impact the Electric Utility Reserves to better align with system needs given the significant projected growth that is expected to nearly double the load of the utility.
June 7, 2022 Budget Study Session
The City Council and the public provided additional feedback at the June 7, 2022 study session. The City Council reiterated many of the points from the May 24, 2022 study session, including the desire to fund several items such as the El Camino Specific Plan, Transportation Demand Management, and the Precise Plan for Downtown (Civic Center Relocation Study). Funding alternatives have been included in this memorandum for these items; however, staff does not recommend additional funding commitments at this time given the significant General Fund shortfall projected to be addressed in the upcoming Biennial Operating Budget.
The City Council also continued to discuss the D.A.R.E. Program that is currently not staffed by the Police Department as well as the need for a bond measure to support unfunded capital needs and potential support for youth programs collaboration efforts. The public expressed support for the revitalization of Downtown and the relocation of City Hall, funding for the El Camino Specific Plan and a lawn bowl clubhouse replacement, and the need to address the City’s General Fund budget shortfall and unfunded infrastructure needs.
Additional detail on items raised discussed during the study session is provided below.
• D.A.R.E Program - The School Services Unit within the Police Department is responsible for the Drug Abuse Resistance Education (D.A.R.E.) program as well as other programs serving the schools and is assigned three Police Officers. While the D.A.R.E. program was not reduced or eliminated by the City Council as part of the budget process, it is currently not staffed. The D.A.R.E. program was suspended during COVID. Because of recruitment and retention issues and other higher priority needs (e.g., patrol and mental health-related responses), the positions assigned to the D.A.R.E. program remain unfilled. In January 2022, the Police Department launched a six-month focused hiring initiative that has already resulted in eight new employees hired with twelve additional new hires pending, expected at the end of June. The Police Department currently has eight Police Officer vacancies and three Police Officers in training that are anticipated to be street ready by September 2022. The Police Department continues to dialogue with the School District regarding D.A.R.E. and the need for services. Plans are in place to conduct “Run, Hide, Fight” Active Shooter training in all SCUSD schools this upcoming year.
• Lawn Bowl Clubhouse - In June 2018, $175,000 was budgeted for the repair and maintenance of the lawn bowl clubhouse. These repairs have not yet been completed and there was a question regarding the cost of replacing the modular building. In December 2018, staff presented the estimated cost of replacing the existing structure ranging from $420,000 to $530,000, resulting in a funding gap at that time of $245,000 to $355,000. With recent escalation, the current approximate cost of a modular building is roughly estimated at $750,000, resulting in a funding gap of $575,000. If this request were to proceed, further refinement of the estimate would be necessary.
ENVIRONMENTAL REVIEW
The action being considered does not constitute a “project” within the meaning of the California Environment Quality Act (“CEQA”) pursuant to CEQA Guidelines section 15378(b)(4) in that it is a fiscal activity that does not involve any commitment to any specific project which may result in a potential significant impact on the environment.
FISCAL IMPACT
With the recommended adjustments to the Proposed Budget detailed in Attachment 2, the Biennial Capital Budget totals $356 million in FY 2022/23 and $232 million in FY 2023/24 and the five-year Capital Improvement Program totals $830 million. The Operating Budget for FY 2022/23 is $1.2 billion (including Transfers, Contributions and Reserves).
Because the City Council policy for the Budget Stabilization Reserve is set at 25%, an exception to this policy is recommended as part of the adoption of the budget. The Budget Stabilization Reserve is projected to drop to $40.4 million, or 15% of the General Fund, as part of this budget.
COORDINATION
This report has been coordinated with the City Attorney’s Office.
PUBLIC CONTACT
Public contact was made by posting the Council agenda on the City’s official-notice bulletin board outside City Hall Council Chambers. A complete agenda packet is available on the City’s website and in the City Clerk’s Office at least 72 hours prior to a Regular Meeting and 24 hours prior to a Special Meeting. A hard copy of any report to Council may be requested by contacting the City Clerk’s Office at (408) 615-2220, email clerk@santaclaraca.gov or at the public information desk at any City of Santa Clara public library.
ALTERNATIVES
1. Approve the Proposed FY 2022/23 and FY 2023/24 Biennial Capital Budget, including the recommended revisions detailed in Attachment 2 (Majority Affirmative Council Votes Required);
2. Approve the FY 2022/23 Operating Budget changes included in the recommended revisions detailed in Attachment 2 (Five Affirmative Council Votes Required);
3. Approve the Appropriation Schedule for capital funds totaling $355,855,666 in FY 2022/23 and $232,042,249 in FY 2023/24 and the FY 2022/23 Appropriation Schedule for operating funds totaling $1,177,765,064 as detailed in Attachment 3 (Majority Affirmative Council Votes Required);
4. Approve the Housing Authority FY 2022/23 expenditure budget of $380,363 as presented in the Operating Budget (Majority Affirmative Council Votes Required);
5. Approve the Sports and Open Space Authority FY 2022/23 expenditure budget of $5,420 as presented in the Operating Budget (Majority Affirmative Council Votes Required);
6. Adoption of a Resolution amending the library community room rental fees in FY 2022/23 Municipal Fee Schedule, including $20 per meeting for non-profit or Santa Clara resident community events; $90 per hour for non-resident use; and staff charges of $30 per hour if groups require assistance throughout their reservation as shown on Attachment 4 (Majority Affirmative Council Votes Required); and
7. Approve the revised Budget and Fiscal Policies as described in Attachment 6 (Majority Affirmative Council Votes Required).
At the Budget Study Sessions, the City Council expressed interest in a number of funding needs. The following alternatives would provide the City Council options to fund various items as part of the adoption of the FY 2022/23 and FY 2023/24 Capital Budget.
8. Add funding of $200,000 in the General Fund to support the Transportation Demand Management program offset by a reduction to the General Fund Land Sale Reserve (Five Affirmative Council Votes Required).
9. Add funding of $1.0 million in the General Fund to support the El Camino Real Specific Plan, offset by a reduction to the General Fund Land Sale Reserve (Five Affirmative Council Votes Required).
10. Add funding of $325,000 in the General Fund to support a precise plan for Downtown to study the potential move of City Hall to Downtown offset by a reduction to the City Council Initiatives carryover in the General Fund (Majority Affirmative Council Votes Required).
11. Other actions as determined by the City Council; any General Fund actions would be offset by a reduction to the General Fund Land Sale Reserve (Five Affirmative Council Votes Required).
RECOMMENDATION
Recommendation
That the City Council, and the City Council acting as the Governing Boards of the Housing Authority and the Sports and Open Space Authority take the following actions:
1. Approve the Proposed FY 2022/23 and FY 2023/24 Biennial Capital Budget, including the recommended revisions detailed in Attachment 2 (Majority Affirmative Council Votes Required);
2. Approve the FY 2022/23 Operating Budget changes included in the recommended revisions detailed in Attachment 2 (Five Affirmative Council Votes Required);
3. Approve the Appropriation Schedule for capital funds totaling $$355,855,666 in FY 2022/23 and $232,042,249 in FY 2023/24 and the FY 2022/23 Appropriation Schedule for operating funds totaling $$1,177,765,064 as detailed in Attachment 3 (Majority Affirmative Council Votes Required);
4. Approve the Housing Authority FY 2022/23 expenditure budget of $380,363 as presented in the Operating Budget (Majority Affirmative Council Votes Required);
5. Approve the Sports and Open Space Authority FY 2022/23 expenditure budget of $5,420 as presented in the Operating Budget (Majority Affirmative Council Votes Required);
6. Adoption of a Resolution amending the library community room rental fees in FY 2022/23 Municipal Fee Schedule, including $20 per meeting for non-profit or Santa Clara resident community events; $90 per hour for non-resident use; and staff charges of $30 per hour if groups require assistance throughout their reservation as shown on Attachment 4 (Majority Affirmative Council Votes Required); and
7. Approve the revised Budget and Fiscal Policies as described in Attachment 6 (Majority Affirmative Council Votes Required).
Staff
Reviewed by: Kenn Lee, Director of Finance
Approved by: Rajeev Batra, City Manager
ATTACHMENTS
1. FY 2022/23 & FY 2023/24 Proposed Biennial Capital Improvement Program Budget and FY 2022/23 Operating Budget Changes
2. Recommended Revisions to the FY 2022/23 & FY 2023/24 Proposed Biennial Capital Improvement Program Budget and FY 2022/23 Operating Budget Changes, including the carryover of FY 2021/22 funds to FY 2022/23
3. FY 2022/23 and FY 2023/24 Appropriation Schedules
4. FY 2022/23 Municipal Fee Schedule Change - Library Fees
5. Resolution amending the FY 2022/23 Municipal Fee Schedule for Library Fees
6. Revised Budget and Fiscal Policies
7. Table 1: City of Santa Clara Annual Budget
8. Table 2: Breakdown of the Capital Budget by Theme