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May 5, 2020Finance Committee Minutes City Manager Kay stated that the COVID financial impacts are timely with the opportunity to make appropriate modifications to the budget. Mr. Kay also stated that the City is in a position with strong reserves where drastic changes do not have to be made at this time--only strategic tweaks that will result in a variant on the budget adopted last year. The information presented results from input provided by regional consultants, Michael Coleman, the State, and City management/staff. Mr. Kay thanked the Finance team for their efforts: Budget Manager Perini, Assistant Finance Director O’Leary, and Assistant City Manager/Interim Finance Director Warmerdam. Assistant City Manager/Interim Finance Director Warmerdam presented the discussion item “Preliminary Budget FY 2019-20 and Mid-Cycle Biennial Budget FY 2020-21” to subcommittee/Finance Committee. Due to the impacts of the March 19 stay-in-place (SIP) order issued by Governor Newsom, the budget was reevaluated accordingly. Ms. Warmerdam reminded the Committee that the City is in the middle of a two-year biennial budget starting July 1, 2019 through June 30, 2021. After committee, the next step is to go to Council with the Master Fee Schedule and proposed budget. Ms. Warmerdam stated that in the current fiscal year (FY) 2019-2020, revenues decreased by approximately 10% due to COVID impacts. In the area of Property Tax revenue representing approximately 20% of the General Fund (GF), no impact has been witnessed so far. The rolls were set last August; thus, the impact will not be seen until next year. In the area of Sales Tax revenue representing approximately 40% of the GF, there is a decrease of approximately 10% which represents approximately $5 million. Decreases are seen in the following Sales Tax categories: General Retail, Auto & Transportation, Fuel & Service Stations, Construction, Business-to-Business and Restaurants/Hotels. Increases are seen in the Food and Drug and County Pool subcategories. Transit Occupancy Tax (TOT) revenue, representing 5% of the GF, is down close to 20%. Utility Users Tax (UUT) revenue, representing 10% of the GF, is “flat” or generally stable with very little growth, and generally unaffected by COVID. Real Property Transfer Tax (RPTT) revenue, representing 5% of the GF, is down by approximately 25% with expectation to drop precipitously due to the SIP order. In the current FY, expenses increased by approximately 4%. The major areas of COVID-related expenses are from Food Pantry Grants, Small Business Grants, Rental Assistance and Basic Needs, an Industrial Hygienist, and Loss of Productivity because of the SIP. Expenditures have increased in general due to: Salary and Benefits; Consulting contracts for Community Development and Finance as a result of vacancies; Fire Service contract which has increased annually; and the debt payment on 2018 Lease Revenue Bonds for all CIPs are in effect this year. Ms. Warmerdam stated that the budget projections assume that the City will be headed into a recession next FY. For FY 2020-21 Property Tax is relatively immune to COVID and will likely remain stable with the shortage in housing. Decreases are expected for Sales Tax, Business License Tax, and Real Property Transfer Tax (RPTT). UUT is stable. Special Revenue Fuds such as State Highway Users Gas Tax and Measure B/BB are expected to decrease also. Approximately $452,000 in Community Development Block Grant (CDBG) funds are expected and will be discussed further in June. The actual budget for FY 2017-2018 and FY 2018-2019 were shown alongside the adopted and projected budgets for FY 2019-2020 and FY 2020-2021. In FY 2018-2019, there was a $6.7 million surplus with $42.7 million or 38% in unassigned Page 2City of San Leandro 62