Finance and Budget Committee

All right, everyone welcome to the Thursday January 22nd Finance and Budget Committee special meeting Can I have a roll call please miss Palmer. Thanks

and committee member Roth

consent calendar any anybody want to pull anything out of the consent calendar basically our minutes

** By function of the body, you're able to do so. It's kind of a similar thing as if you weren't at a meeting. You can still vote on the minutes. It is not a best practice and certainly our goal moving forward to make sure we are current each meeting, do the minutes. And in the last meeting with the understanding that we did not live stream it was

But we're I mean correct me if I'm wrong, but I believe we're establishing a new habit now of live streaming and having the minutes as an established body. So yes Much more accountability why move to approve that consent calendar second Any objections? Wonderful okay, so let's move to the discussion the fiscal year 2024-2025 on audited actuals

This may everyone turn things over to miss Cho

thank you

Good afternoon members of the Finance and Budget Committee. I will present an overview of the fiscal year 2020 fiscal

year 2024-25 on audited actuals.

I just want to emphasize that this is for the period July 1st, 2024 ending June 30th 2025. These are unaudited numbers we will have our field work for auditors beginning February 16th so these numbers may change as a result of that audit but these are the numbers as of right now So if we look at Attachment A, this focuses on the general fund revenues. So there's a comparison of what was budgeted. The next column is the unaudited actuals and the variance between the budgeted number and the revenues received. So in the variance column, if it's a positive number that means we came over what was originally budgeted for for the year.

So the green that's highlighted, the $17.4 million is what we had received for the fiscal year 24-25 so that's about one million over what was originally anticipated in the budget. I will note some of the other general fund revenue and transfers includes Some one-time grant funding. So for example we received funding for street maintenance work from a coronavirus supplemental relief supplemental appropriation as well as Funding from SB 125 which was used to purchase the trolleys in that fiscal year so those are for example revenues that we won't see recurring in the future and

May I ask a question? So that $828,000 positive variance in the other general fund revenue and transfer, that's what you were referring to with those two grant examples. Is that right?

Yeah, there are other factors included like for example in 2425 interest was budgeted at 160,000 but actuals came in above 500. So for example that variance and what was originally budgeted and what we received plays into that 820,000

** So we've got interest plus those two grants as the big variance drivers, you think? Is that right?

** Yeah. And there were other increases such as rec classes and programs. They brought in a little bit more revenue than was originally budgeted but as you'll see in another slide also their expenses will be over what was originally budgeted because those usually go hand-in-hand. More costs for programs are usually offset somewhat with the revenues coming in for those programs as well.

And the two grant favorable items that you mentioned, one was for purchase of trolleys. What was the other one? Was it street maintenance?

Yes, it was from the Coronavirus Response Relief Supplemental Appropriations Act. The city received about $300,000 that was to cover street maintenance operations so that covered some of the salaries and public works as well as supplies and materials during that time

Okay, thank you And just one comment your property tax includes the motor vehicle in lieu item as well. Is that correct?

That's correct

Just curious so on the TOT that 335 What's the general? Thinking on that why that why that went up over the budget I mean, is that the beginning of El Roblar? No it's not. That's after that. So how would you account for that? Just curious. Actually, I'm eager to see it because if we would underestimate this year going forward, that's also a positive indicator.

I'll jump in. I think what we're seeing, our major driver in TOT is of course the Ojai Valley Inn and what was once an ancillary or accessory market for them which is conferences and corporate meetings is now a primary for them They brought on the farmhouse building, and it's really taken off to the degree that if you are a corporation and you want to book that or trade group or whatever, it's booked out a year plus in advance. And so that's a big driver that we're seeing because we get benefit from that. I see that.

Thank you.

Can I just ask a general question? Take the loose ends and try to see where it shows up somewhere else. So this variance number, this 1.1 million, is that going to show up somewhere else in our reserves? In our unassigned reserves? I mean, I'm just curious where that's going to show up.

Yeah, so that will impact the ending fund balance. So the ending fund balance will take into account the total revenues that are coming in in the general fund as well as going out. So if we are receiving more in revenues then yes, that ending balance number will go up but there's also another factor with the expenditure side as well.

And the expenditure side is also under?

Yes.

So I mean it's exactly what you all hope for in your own life.

And I'm just curious. This is one of those numbers that we should see later on or something because that's a good size reserve. I mean an excess of revenue

Just and just to answer that when you like for example if you look at the expenses that you're talking about on the following page and you see The seventeen eight six six, and then the sixteen one nine two and you see there's a positive variance as well When we're debating things in the council about something to fund. We're looking at that Excess of a 100% reserve as some It gives us that kind of breathing room to think about a project like that without a big impact so that's where it seems to me you would see things that would turn into a budget change like the Increase in the arts grants or the help of Ojai, you know piece like that

One other very minor point when I Looked back to the budget book and tried to tie your budgeted revenues to the budget book It looked like you were over by a small amount in this number versus what's in the budget book In this small amount that it was over is exactly equal to the fines and forfeitures number. So I don't know whether that's just a bizarre coincidence or whether you actually double counted fines and forfeitures, but I would call that out to you just for completeness sake.

Yes, we'll take another look at that. I do want to note that in the budget on the revenue side there is a contract count that is set up so for example Our admin fees with HDL related to TOT it'll show on the budget as a positive Number as if it's a revenue coming in However, that's a contra account. So that's where we charge the admin fee. So it's actually a reduction but It is all that it's exactly that amount. So we will double check that number

right? Thank you

The next attachment, Attachment B is a review of the general fund expenditures for 24-25. Similar format where we have budgeted amounts on audited actuals in the variance and in the variance if it's a positive number that indicates that we came under what was originally budgeted. Some of the major variances throughout the department are related to salaries and benefits and some vacancies. Also, generally when we're budgeting for salaries and benefits there's assumptions that we make in that budget. For example, the range insurance if they're a PEPRA classic member, so Those assumptions may not actually be the candidate who ends up filling that role So most of the variances are due to some of the vacancies in the year and also the assumptions that are made I will also call out Sorry did you have a question?

Hopefully, I'll answer them. Um, I will call out the transportation that $269,000. I know Mr. Creasy had asked a question about that That is also related to the purchase of the trolleys So when the grant funding came in the city booked at on their general fund however That was paid out of one of the transportation funds so though then Since the money came into the general fund, the general fund will transfer that expense out to the fund that originally took in the cost. So the revenues that I mentioned for that trolley purchase is offset by this transfer.

And another variance if we see by budgeted is the police department. It does look like it was, the variance is 668,000 though I will just note that the actuals for the prior year was 3.36 million so it is in line with what was actually spent in the current year. I'm sorry, in 24-25. Are there any questions on the expenditure page?

Just to clarify to make sure I understand so of the round numbers 800,000 other revenue favorability roughly 500 of that was interest and 300 speaking very big round numbers was the trolley Grant, is that right? And the trolley grant shows up as an expense in the general fund because in essence you're transferring that out to buy the trolley. Is that layman description close to right?

Yes, I will just say that $800,000 variance is an accumulation throughout the whole fund. So for example... Sorry, we're talking about revenues. Yes so it is an accumulation of mostly interest there's also a GASB entry which deals with fair market value so it's not an actual cash transaction but it reflects the fair market value at June 30th which we would have to enter into our financials and the grant receives I will say if we go line by line, there will be some under some over that offset But generally overall speaking. Those are the main or major contributors

and I'm just trying to sort of Eliminate my concern about the transportation number. So there is not a department called transportation and This was just a line item that was created to accommodate the single event of getting this money to buy the trolley. On the expense side? Yeah, okay because I was kind of worried that this expense really lived in somebody else's P&L and for some unknown reason you pulled it out and put it on a special line item but it sounds now like that. I was overly suspicious relative to how you've described it

Yeah, it's a transfer so it offsets in the general fund So it's not an extra cost somewhere

else Plus or minus to the general fund bottom line. Thank you Okay,

okay,

so the next attachment attachment C is a summary of the fun balance I So if we're looking at the chart, it starts with 23-24 audited numbers. Beginning balance is $17.9 million. Change in fund balance for that year's 3.8 resulting in an ending balance of 21.7 million. should start with 21.7 million, however in 24-25 we broke out a new fund for the public arts so that 134 reduction is to account for the transfer of the beginning fund balance to the newly created fund.

So with that 21.6 million Beginning fund balance with a change in $1.2 million, resulting in an ending balance of $22.8 million. And if we're looking at the reserve policy, we're taking 100% of prior year's expenditures at the 13 million leaving approximately 9.8 million unallocated. And for 25-26 with the same formatting beginning balance 22.8 change in balance of negative million ending balance 21.8 taking on 100% Expenditures of prior year 16.9 16.2 million, ending in a 5.6 million unallocated.

I will just note that this ending fund balance is not necessarily all liquid. General Fund absorbs the timing difference of grant receipts for example and so that's not all cash. There are some receivable balances in there as well.

So I'm seeing I see exactly what you're saying. So when I see the 100% reserve, let's say for 2425 unaudited that 13040 is directly reflecting the Audited expenditures for the prior year. I get that so then when we say when we're working with our 100% reserve number We're always going to refer back to not the budget, but the actuals for the prior year once we know that. So that's going to be our number. So even until we know that number, our 100% reserve is roughly known but not exactly known. Okay, that's interesting to know.

Yeah, well what it does what's interesting though is because you would say if you look at the the budgeted let's say Budgeted expenditures for the year and then you end up coming in under that on the expenditures. You you essentially have more Potential aft above the 100% reserve That's interesting way of thinking about it. Okay Thank you for that

Yes I want to make sure that I understand the makeup of the reserve, because I think that's really important. And I was looking at the CAFR page 80. I hate to switch gears on you, but this is where it talks about net position and fund balance. And

we go through those categories. Microphone

please. Is your microphone on? Make sure it's on,

yeah. All I am trying to do is from what I understand the fund balance takes out the non-spendable From the successor agencies and then all of that restricted the restricted revenues That are for a specific purpose, and you don't go through and say community development Capital improvements and you see there's 6.6 million in capital improvements from measure C So I'm just trying to wrap my head around what those committed reserves are for. They could be projects that were started, they had a contract to deliver some goods...

Oh yeah, I'm sorry, page 80? Oh okay you don't have the CAFR, okay.

Also, just if I could because the public doesn't have what you're looking at either I think this is an item that we'll probably have to come back and answer for you later because if anyone is watching this or They don't they don't have the reference and it wasn't posted as part of the agenda. We can't does that make sense?

Yeah, okay. I was just trying to make sure that when we look at fund balance, we know there's certain parts that are restricted. It's not just open and-

Sure, but this is just a conversation that we'll have to have with you afterwards or as a future item just because the public can't participate.

Oh, I see. That'd be a great conversation to have in the future though. I

totally would love

to

have that. Because I just want to better understand and make clear it's not just a free for all. One

thing I would like to add on that issue, I think Mr. Olson actually asked this question in one of our prior meetings about how much of the general fund reserve is committed or earmarked for certain things versus others? And the answer we got after going through it a little bit was, the vast majority of the general fund reserve is uncommitted. It is there to be used as a buffer or however the city council decides to use it.

However, the rest of the reserve funds are largely committed one way or another and so Renee for your thinking in general and the way I think about reserve funds and general fund, by and large play money. Everything else is in the rent bucket or the replacement bucket or who knows what but it's not really touchable.

But for a future agenda item, I would say we would want to just simply look at the amount of the reserve. Does it make sense? And look at what other cities do just as some comparison. Not for today.

Not for today. I was just trying to bring it

up

and have it be able to understand and talk about really what that amount is.

Mayor, what I infer from that is what we've talked about before to have a robust review of the reserve policy associated with the General Fund Reserve because you know how we got to 50 then we knew how we got to 100 but we're still waiting for that scientific analysis. Understood. That's correct. That's my interest.

Okay super

yeah

That concludes my presentation for the first item. If there's any other questions?

Sorry, Ms. Cho, did you want to... You've also broken out down below and maybe we touched on this I didn't hear but do you want to talk about the Measure C fund dollars? Oh right thank you please if you don't mind

no sorry Yes, so we have the emergency fund balance on that bottom of the attachment C. It's broken down in the same format as we just reviewed. So for example I will start at the top 23-24 audited beginning balance was $6.7 million The change in fund balance for that year, $660,000 resulting in an ending balance of 7.4. That same 7. 4 is the beginning balance for 24-25 and the change in balance is negative 2.2 million reducing the fund balance to 5.1.

With the budgeted numbers for the current 25-26 year we are seeing a reduction in that ending balance to about 1.8.

And if I could jump in, this is not accidental. This is very deliberate because what this council has said is that the voters approved this additional TOT increase and they were very specific on what they wanted it to be used for and what they didn't say was keep that money in the bank. They said infrastructure improvement, fire hardening, climate resiliency There was four or five things that they mentioned that they wanted to see done. And so this council has, for the past couple years, been investing in those areas and therefore spending down the balance. Ultimately we will probably if this type of leadership continues you would expect a fairly low ending balance in Measure C simply because the council is given direction to spend that on the town improvements as the voters approved at the ballot.

Just to add one little piece, because I do notice that there tends to be a habit not among this group where the one line from the actual measure says that the fund capital improvement and maintenance projects including street paving, fire mitigation, code enforcement, climate change mitigation until voters decide otherwise. What I noticed people tend to do is pick the one that is most important for them to say, that's what Measure C supposed to be?

And it seems to me that when the measure came out, it's deliberately broad. So look at needs

just since you brought it up there and we've talked about this before but I would also recommend this committee at a future meeting discuss You know a proposed measures II policy to bring to the City Council because there's no apportionment Yes within the voters language and so that's fine if the council wants that to have that freedom fine But it doesn't really call for you know, so for instance We're just now diving into proactive code enforcement all that That was approved years ago and there really hasn't been much of a needle move until this council said. Hey, we want to start doing that

I would I you're suggesting this I would further suggest that if we could come up with percentages that seemed reasonable at least as Ballard and that we then assign a category for that measure see spending to say oh yeah We've were apportioning it these kinds of ways obviously everything doesn't cost the same but It would be interesting to know that we're spending it in

those and we of course would want to do that In concert with the city attorney's office because this is approved by the voters We want to make sure that okay was you know, is that consistent with what the intent probably was? I Know that goes without saying but

yep

Could I just add, I would definitely really appreciate that. I remember looking for discussions about Measure C funds in previous city council meetings and I remember a meeting where there was a discussion about $1 million appropriation for fire Safety or whatever the languages and I just want to be clear that you can't really Appropriate a million. I don't know how that would work in this environment with measure C funds So I I just am wanting to know that or bring that up as I think that's just an example of I think we need to have that that Defined a little bit about how much where We always know that you're going to spend the money where you need it to go no matter what, but it's a nice to have a target.

Just respond I That dollar amount is correct and I the intention if I mr Harvey tell me if you disagree Was to say this is an amount of money of which we think this is a high priority something along these lines We will be spending so there was not a portion to any particular vendor or project as you know So I at least for me it gave a kind of a ballpark simply to say oh This is what we're thinking about in terms of prioritizing or what? We're up to which is I hear you saying that too so we're in the midst of Using those funds, right but there's there's room there to spend more. So it's the right kind of spend as well

Yeah, I would agree with what the mayor is saying but this all begs the further question that we probably really need to get serious about developing a policy and have it embedded in public and

establish

that. So

I appreciate you bringing that up

Any questions about this first item It's very nice to see this and the numbers this way and thanks for the clarity Anything else on this? Let's move on. So item number two, fiscal year 2025-26 midyear budget adjustments.

Sorry,

Ms. Cho, please proceed. I'm sorry.

Sorry. I

am

sorry. So the next presentation will be on the midyear review of the current fiscal year, fiscal year 25-26. Again I will go through a similar format so if we look at attachment A it's a review of the general fund revenues. So again first column is what was budgeted for, second column is what we have received as of January 25th and the variance. I just want to also note that the year-to-date amount seems a little bit low, but that's because of the timing of the allocation of the major revenue sources that we get in so there is a lag. So not to worry. That's not what we receive for half the year. It's just the timing of receipt of allocations.

I have one question about that. So, a budget that I managed in the past which was nothing like this or even the scale but I would have similar things where I would say over the course of a year I would have an amount that I could spend but it was maybe front loaded or back loaded so when people looked in July and they say you have 70% left or you only have 30% left they would get nervous and I would say My data over the years would show at this point I should be 70%.

So, I don't know if that's something that could come up at any point in the future where we said... We've done some kind of forecasting by looking at past years to know that if you said, oh, by this time of year, if we're at 30%, we know that we're on track or we know we're behind. Would be interesting to know.

Yeah, we can come with that information. Only if you think

that's useful.

I think, Mayor, what you're alluding to is something that we've talked about before and that is the need for a more frequent budget versus actual analysis. If if I had my druthers we would have a quarterly close soft close not hard close where we said last quarter this was the revenue this was the expense You would compare it to last year's numbers. So the timing issues that you described, frontloading, backloading and so on, to the extent they're consistent year over year which for revenues they definitely are.

And as I look at this number here, I see TOT year-to-date pretty much half of the budget. So I think TOT gets remitted on a monthly basis. So that one really doesn't have lumpiness. It has seasonality but not lumpiness every seat. Sales tax obviously is pretty lumpy. Not that it's lumpy when it gets remitted at the point of sale, but lumpy when it gets remitted to the city.

Property tax also has some lumpiness in it. But if you had a quarterly process that we have described in the past, it would go a long way Our ability to manage in a nimble fashion, as well as our ability to not be nervous about gee whiz what's it going to look like when the whole year finally wraps up. So I think that's an objective that really has to be near the top of your very long list of financial process improvements.

** Well, I just would add and that is a good suggestion. We have a future agenda item at the end of the meeting and that would be a good suggestion for this committee to recommend. I've been in other cities where they've done that type of reporting on a monthly basis and candidly that was not very helpful because... ** Too much. ** But quarterly is probably yeah then you're taking the mid-year and moving it just a little more in depth and I think that's worthwhile.

But even on a chart like what we're looking at right now, when the public looks at it and they say well if we're not at mid-year or something like that as you say, blumpiness is the word that Mr. Creasy used. The public would understand at this point in time we should be at 30%. It adds a lot of confidence if you do a quick scan.

Yeah, we can implement that going forward. Also we do contract with HDL who specialize in forecasting these revenue sources so they do give a breakdown of where we should estimate to be receiving and so we currently are on track on that schedule.

I heard you say that absolutely it would just be that it would come out in the report and that's really nice to know that they're reporting out on that makes everybody happy right? That's great

So if we move on to attachment B, this focuses on the general fund expenditures. This one has 2425 unaudited actuals and then current year budget numbers, year-to-date into the variance. I will say in the year-to date, we roughly paid through December so there is also a little bit of a timing difference there and again the variance here if it's positive we are under where we had budgeted for If we look at the bottom line of the variance, it's about 50% of the total budget. So roughly about half the year is where we're

at.

I'll pause if there are any specific questions on this page but it does break it down by the general fund departments.

back on the expenditure, the revenue side. If we go back to the revenue side and look at these two charts, I appreciate you having those charts because you can quickly see TOT is up to 47%, whereas in prior year it was 40%. And that's a significant jump and also So it's nice to have these charts in here and I just wanted to acknowledge and appreciate that shows, it's easier to remember when you can see that. And also the other general fund revenues and transfers are significantly lower by half as much 12% than in previous years it was 22%.

Well, one explanation is we're only halfway through the current budget year. So that number will certainly change between the two numbers, right? One's completed and one's mid-year.

That in fact is likely going to be the major reason because for example interest favorability last year around numbers half a million you're gonna have round numbers north of that this year but that's not yet in your mid-year number TOT at 40% year-end last year, 44 now just recognizes the fact that it gets received on a more regular basis where other things don't. So those differences in percentages are really just you know think of them as random numbers. You don't need to

worry about them.

Well, this is and tell me if I heard you correctly. This is four months worth of data essentially speaking right? Yeah, it's not even six months worth of data Yeah, you said it's through September Yes, but you said that there are some things that take there's a

lag time

That's the point I'm trying to make is that even in the lag time of what you're collecting, the main difference that we're seeing is what Mr. Creasy just pointed out is we're seeing a snapshot in time without completion.

Once we get that quarterly analysis all these questions will fade into the distance.

So going forward to the expenditures, are there any questions?

Looking at page 3, I'm just curious. Transportation, we don't have anything budgeted for 25-26?

Yeah, so that $269,000 was related to the trolley purchase. So I don't believe that there's any plan for the current SB 125 grant? I

think the bigger question is transportation falls, I believe within the city manager's department. I think that's where that money is pulled from. I think that your question right but we do budget for transportation, but it is not in this Right, that's I think that's the question

Yeah, that line item was specific for that transfer.

Right? Because we're comparing... That function exists within the city manager's department budget. So instead of transportation it should say trolley purchase. It could say something

like that, sure. And then here is with recreation, the big bump in the budget from the 24-25 actuals and 365 and now we have 722 in the 25-26 budgeting increase.

Yes, so I believe that's related to a position for the manager. That was not previously...

That's correct. We did create a recreation manager position that we moved in there. I think we also added an administrative position as well. So yeah, we increased staffing in that department.

If I might ask, it seems to me the questions that possibly we're asking right this moment would really be looking at budget adjustments to date because these items that we see in the mid-year review would have been things that came up in the budget when we approved it. So when we're asking questions like why is this more than before? That was a question that came up in our budget review cycle when we approved the budget.

I would say generally yes, Mayor. But there as you may recall we had a process when we were first looking at the budget where we identified several departments that had very large increases over the prior actual and the request went out to try to vet those, but there were no changes made by virtue of that. So I think that question is still lingering, but you are correct from a process point of view. The budget process is the primary mechanism by which you decide whether that number is right or not

For sure. To me, it's the next pages where you see these adjustments to the budget where you'd say oh I'm not...I don't want to jump ahead. I'm saying that's where that conversation happens is when we made decisions we should be able to look at these things and remember when we enacted them because its recent history.

Yes if everything was tickety-boo that's exactly what it should be. Yes that's in the dictionary. We'll talk afterwards if you want.

So if we move on to attachment C, as the mayor said this is the list of budget adjustments to date. This was the same listing that was provided at the last Finance and Budget Committee meeting just to be updated for the activities since then. The Total impact is two million dollars. However, the items listed in blue are the ones that affect general fund So of that 2 million about half of that affects the general fund. The others are hitting special funds

And did you see my comment about the double count on these secure all? budget adjustment and I don't know if he had a chance to read that or not, but your 185,000 adjustment on November or October 14th. In fact that was not enacted So that one needs to come off this list and in fact the council sent it back for Review and it came back the next month in November at the 194 point eight so you didn't actually get two bumps to that budget You just got the latter one And I'm certain of that because I've looked at the minutes and they didn't approve that item.

So a minor issue, but it is almost $200,000 so it's worth

capping. I had one little tiny question too which is the November 18th OUSD grant match? Now my understanding was we're matching the grant if they received the grants. So we're just setting it, we're allocating it and setting it aside, but it's not money spent yet.

Correct.

OK, got it. Cool. I hope it does get spent. Well,

I can say being a renter of Matilija that place is pretty bloody expensive so they better fix it up because otherwise we might find another place to do the play in our backyard or something.

So when I look at the total request for all the funds you pointed this out I'm just clarifying again this is the general but also capital improvement that's the total all of the above?

The $2 million is inclusive of all the funds. Of that $2 million, $1 million affects the general fund.

Sorry, you said that probably and I missed it 1 million of the two is general fund.

Yes So everything highlighted in blue or font in blue?

Yep

Is general fund related so the total at the bottom of the summary requests by phone

you sorry It's right there below. I see it now

Thank you very much for that And you just have to take a hundred eighty five thousand off of that million forty nine number to fix that one glitch

Yeah, we'll look into that. Okay.

No understood got it Is there, let me see. Then is a shorthand way of saying that the work that we've done so far in the council this year with additional things in the general fund like help of Ojai, etc., have roughly been something on the order of $1 million?

No, because I think what we're saying is The hit to the general fund is that but you that's all the council direction has hit other funds as well I just

meant to say

that in

the

general

fund. So yes,

okay

And I will add that these adjustments are reflected in that fund balance summary saw on the previous Discussion item Yes, so there's another attachment that's gonna follow with the updated number.

Somebody's phone is going crazy.

Attachment D is a Mid-year budget adjustment requests. So these are not currently reflected in numbers that we have been reviewing so far These are additional appropriations being requested So I'll just go through the list The first one is and