Agenda Item Wording:
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Fiscal Year 2024/25 and 2025/26 Proposed Budget - Receive and discuss the proposed 2024/25 and 2025/26 budget.
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Deadline for Action: 6/30/2024
Submitting Department: Finance and Technology Services
Contact Name and Phone Number: Renee Nagel - Finance & Technology Director (559) 713-4375, Amee Swearingen - Budget Analyst (559) 713-4170
Department Recommendation:
No action is required tonight. This report will present an overview of the proposed fiscal year 2024/25 and 2025/26 budget. Staff will return to Council on June 17th with proposed changes, conduct a public hearing, and potentially adopt the budget.
Background Discussion:
Every two years the City of Visalia adopts a biannual budget. The Budget lays out a strategic resource allocation plan that aligns with community goals, preferences, and needs. The Budget is a policy document, financial plan, operations guide, and communication device all in one.
The Budget also:
• Determines the quality and quantity of City programs and services.
• States expenditure planned and the resources needed.
• Sets targets and provides a means of measuring accomplishments against goals and actual versus planned outcomes.
• Serves as a communication device-for elected officials, the public, and the City organization-that promotes the City’s vision and direction, fiscal health and vitality, and how the public will benefit from the expenditure of tax dollars.
The budget is a dynamic document that demonstrates to the public the City’s commitment to service, accountability to the residents, and the focus on meaningful work and significant projects. The budget document is comprised of a 2-year operating plan (annual budget), a 6-year capital improvement program (capital budget), and appropriations for debt service and other uses. The development of the operating and capital budgets, however, takes place on two separate timelines (see Table 1 - Budget Process Calendar).
The Capital Improvement Program (CIP) is a multi-year planning instrument that drives the identification, evaluation, and financing of capital infrastructure projects in need of renovation, repair and/or construction. Capital projects consist of all projects that cost more than $10,000 and are typically infrastructure, equipment, and vehicles. Capital projects range from street maintenance or construction to the renovation of municipal buildings, recreation centers and ball fields, to sewerage system replacement, and the purchase of vehicles and equipment. The CIP relates these capital project needs to the financial resources that will support their realization and the timeframe in which both the financing and work will take place. Capital projects typically carry considerable future impact, meaning, they have a life span of at least five years or more.
Over the next 2 years, staff is proposing to fund $92.4 million in capital projects. These projects were presented to Council in February, March, and April. Tonight, will be the beginning of the budget workshop meetings that will discuss the operating budget. The Operating Budget is used to finance all day-to-day operations and obligations of the City. This budget includes all departmental operations, debt service, small capital expenditures (less than $10,000), and fund transfer payments (advances and subsidies) for the next two fiscal year’s. The funding for the budget is derived from taxes, fees, licenses, fines, and inter-governmental revenues (state and federal).
The operating budget starts by creating a baseline budget and building upon that to plan out the next two years. The City uses actual numbers from the prior two years and current year projections as the baseline. Finance creates a set of strategic guidelines to help departments prepare their proposed budgets. The strategic guidelines for this two-year budget are to:
• Budget revenues conservatively
• Seek cost saving measures that produce the same service delivery at a lower cost
• Find ways to address deferred maintenance
• Produce a balanced budget
Due to the complexity of creating the budget, a timeline is created to ensure the budget can be adopted by June 30th as shown in Table 1 - Budget Process Calendar.
Staff recommends that the Council adopt a budget by June 30th to comply with City Charter provisions requiring a budget appropriation for all expenditures. However, if Council is concerned or desires further discussion of the budget, additional hearings could be scheduled. Extending adoption of the budget past June 30th would result in the City having expenditures with no appropriation, in violation of the City Charter. This would be an undesirable outcome and is not recommended by staff.
Budget Overview
The 2024-2026 Biennial Budget is comprised of all City funds, including the General Fund, Special Revenue Funds, Capital Funds, Debt Service Funds, Enterprise Funds, and Internal Service Funds. The proposed budget appropriation for FY 2024/25 is $295.4 million and $329.9 million for FY 2025/26 as shown in Table 2 - Proposed Appropriation.
Table 2
Proposed Appropriations
The guiding principles that inspired the recommendations contained in this budget were established by City Council on October 16, 2023. At this meeting Council set five budget goals and priorities which were used as a framework for budgeting operations and capital projects. Below are the budget’s strategic goals:
Economic Vitality
• Promote a vibrant economy that provides an equitable opportunity for all;
• Facilitate programs to develop, attract, and retain businesses;
• Foster economic development in both commercial and industrial.
Fiscal Strength
• Continue to maintain the City’s good fiscal health and sustainability;
• Adopt a balanced budget;
• Continue to maintain the General Fund Emergency Reserve at 30% of operating expenditures.
Invest in Infrastructure & Growth
• Plan for the development of future infrastructure;
• Maintain, improve, and replace assets and infrastructure within the City;
• Ensure safe, reliable infrastructure that benefits the community;
• Seek grant funding to maintain and expand City infrastructure to meet the community's needs;
• Manage, maintain, and enhance the City’s roadways to provide a safe and effective transportation system.
Organizational Excellence
• Provide excellent public service that is efficient, accessible, and responsive to all;
• Provide high-quality essential City services;
• Attract and retain a talented, diverse, and engaged workforce across the entire City organization;
• Utilize and add technology to increase efficiencies for City services;
• Continue to make improvements that equip the City to deliver excellent services to the community.
Quality of Life
• Maintain quality of life for the citizens of Visalia;
• Continue City efforts to reduce homelessness while collaborating and advocating regionally as appropriate;
• Provide diverse housing through a variety of programs and policies for all income levels;
• Provide diverse community experiences and personal enrichment for all ages;
• Continue to improve parks, recreational amenities, open space, and trailways for a connected community.
This budget is also responsive to community priorities, including addressing the continued service requirements indicated as essential by our public. In addition, it also aligns with the Budget Survey conducted in October 2023 to receive public input.
The budget projection includes continued revenue growth in majority of the funds as economic activity in the City continues to increase and new businesses open. While revenues continue to have small growth, we must recognize that other foreign and domestic factors (i.e. inflation, housing prices, supply chain disruptions, etc.) could negatively impact the growth and expansion of our local economy. Any of these factors could also cause another economic downturn. Staff is optimistic, but we must also be fiscally responsible by having sufficient reserves, balanced budgets, and prudent spending policies.
To view the proposed budget for FY 2024/25 & 2025/26 please visit:
<https://www.visalia.city/depts/finance/proposed_budget/default.asp>
Fiscal Impact:
None
Prior Council Action: Council conducted work sessions on Feb 20th, and March 4th, 18th, and April 1st , 15th and May 6th to review Capital Project’s.
Other: N/A
Alternatives: N/A
Recommended Motion (and Alternative Motions if expected):
recommendation
None
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Environmental Assessment Status: N/A
CEQA Review: N/A
Attachments: Copy of proposed budgets for 24-25 and 25-26; PowerPoint presentation