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Recommendation to receive supporting documentation into the record, conclude the public hearing, and take the actions necessary to adopt the Fiscal Year 2022 budget as listed in Attachment A;
Approve the revised Long Beach Recovery Act program allocations and approve the Fiscal Year 2021 departmental and fund budget appropriation adjustments for the Long Beach Recovery Act in accordance with existing City Council Policy; and
Set September 7, 2021 as the hearing date for a continued budget hearing to take the necessary actions to adopt the Fiscal Year 2022 Master Fees and Charges Schedule and establish the rates and charges for water and sewer service. (Citywide)
DISCUSSION
On July 16, 2021, the City Manager’s Proposed Budget for Fiscal Year 2022 (FY 22) was delivered by Mayor Garcia to the City Council and community for consideration. The City Council budget hearings were held on March 16, July 20, August 3, August 10, August 17, and August 24, 2021. Additionally, Budget Oversight Committee (BOC) meetings and citywide community town hall meetings were also held in the months of April, July, and August, at which the Proposed FY 22 Budget was discussed. As a result of these meetings, there were 15 scheduled opportunities for public feedback, deliberation, and input. An additional budget hearing will be held on September 7, 2021, to discuss the Water and Sewer Rates and the Master Fees and Charges Schedule. Additionally, input was solicited through the Long Beach Budget Priority Survey to obtain feedback on desired City priorities. The survey was promoted on the City’s website, Twitter, Instagram, Facebook, and at community meetings.
At the conclusion of the August 24, 2021 hearing, the City Council will amend the Proposed FY 22 Budget as it deems appropriate and adopt the proposed budget as amended. Since the publication of the Proposed FY 22 Budget, a few updates were made to the proposed revenue and expenditure budgets, which primarily address technical corrections and are listed by fund group and department in Attachments B, C, and D. The reasons for these budget adjustments are discussed at the end of this letter.
As part of the FY 22 Budget Adoption, there are two Ordinances to be considered for approval in Attachment A. The first Ordinance amends the Departmental Organization of the City (A-6). The second is the Appropriations Ordinance (A-14), which officially appropriates the funding for the Adopted Budget (approved in A-3) and authorizes expenditures in conformance with the Adopted Budget. For the Appropriations Ordinance to become effective on October 1, 2021, the City Council must first declare an emergency to exist (A-13) before adopting the Ordinance.
There are also four Resolutions that provide for approval to amend the Salary Resolution (A-7), approve the budget for the Long Beach Harbor Department (A-8), approve the budget for the Long Beach Water Department (A-9), and establish the Gann Appropriations Limit (A-12). There are also the following motions: approve the Mayor’s Recommendations (A-1); approve the BOC Proposed Recommendations (A-2); amend the Proposed FY 22 Budget (A-3); approve the revised program allocations for the Long Beach Recovery Act and increase the associated fund and departmental appropriations in FY 21 (A-4), approve the FY 22 One-Year Capital Improvement Program (A-5); approve the FY 22 Budget for the Long Beach Community Investment Company (A-10); and, approve the Harbor Fund Group transfer (A-11).
This matter was reviewed by Deputy City Attorney Amy R. Webber on August 5, 2021 and by Budget Manager Grace H. Yoon on August 9, 2021.
TIMING CONSIDERATIONS
In accordance with the City Charter, the Proposed FY 22 Budget must be adopted by September 15, 2021. Should the City Council fail to adopt the budget by that date, the City Manager’s Proposed FY 22 Budget will be deemed the budget for the 2022 Fiscal Year. The Mayor has five calendar days from the City Council adoption of the budget to use his veto authority. The City Council would then have until September 30, 2021, to override the veto action by the Mayor with a two-thirds supermajority vote (six Councilmembers).
FISCAL IMPACT
The City Charter requires that the Appropriations Ordinance govern and control the expenditure and commitment amounts stated therein relating to City departments, offices, and agencies during each fiscal year. The total Proposed FY 22 Budget for all departments and fund groups is $3,787,587,675, which comprises of $3,013,475,444 in new appropriation and $774,112,231 in estimated carryover from FY 21 for multi-year grants and projects. Attachments B, C, and D provide the financial overview by Fund Group and Department, and Citywide revenue by Fund Group, respectively.
The Appropriations Ordinance, included as Attachment A-14, totals $2,981,588,012 for all fund groups except Harbor, Sewer, and Water fund groups, and $2,985,342,096 for all departments except Harbor and Water Departments. The $3,754,084 difference between fund groups and departments is due to general City indirect costs budgeted in the Financial Management Department but charged to the Harbor, Water, and Sewer Funds, which are not included in the Appropriations Ordinance by fund groups.
The proposed Harbor, Water, and Sewer Fund Group budgets are in separate City Council Resolutions included as Attachment A-8 and A-9, respectively, and total $805,999,662. The Board of Harbor Commissioners adopted the budget for the Harbor Department by minute order on May 24, 2021. The Board of Water Commissioners adopted the budget for the Water Department by Resolution on June 24, 2021.
User fees and charges in the Master Fees and Charges Schedule and Water and Sewer Rates will be presented to the City Council on September 7, 2021, to allow for sufficient time for noticing and public hearing requirements. Should adjustments be made to the Master Fees and Charges Schedule, the FY 22 budget may be impacted. Any items impacting the FY 22 budget would be brought to the City Council in the first citywide departmental and fund budget appropriation adjustments.
Other requested City Council actions include:
• Adopting the program allocations of the revised Long Beach Recovery Act and increase the FY 21 departmental and fund budget appropriations accordingly, included as Attachment A-4. The allocations are being discussed and approved as part of the FY 22 budget process, but the action is to appropriate the funds beginning in FY 21 to start spending on priority projects that are ready as soon as possible. Unspent funds at the end of FY 21 will be carried over to FY 22 and beyond as necessary.
• Approving the FY 22 One-Year Capital Improvement Program (CIP) budget, included as Attachment A-5, which is contained in the Appropriations Ordinance.
• Amending the Departmental Organization Ordinance included as Attachment A-6. This amendment incorporates changes to departments, bureaus, and divisions for FY 22. These organizational changes are necessary to implement changes reflected in the Proposed FY 22 Budget. A redline version of the changes is also provided.
• Adopting the amended Salary Resolution for FY 22, which creates and establishes positions of employment while fixing and prescribing the compensation for officers and employees, is included as Attachment A-7.
• Adopting the FY 22 Long Beach Community Investment Company (LBCIC) budget, included as Attachment A-10. The LBCIC budget is prepared annually for City Council approval and is a subset of the Housing Development Fund. The LBCIC oversees the delivery of housing and neighborhood revitalization services. The LBCIC approved its FY 22 Budget on June 23, 2021.
• Adopting a Resolution, included as Attachment A-12, establishing the Gann Appropriations Limit (Limit) for general purpose expenditures. In November 1979, the voters of the State of California (State) approved Proposition 4, also known as the Gann Initiative (Initiative). The Initiative places certain limits on the amount of tax revenue that can be appropriated each fiscal year. The Limit is based on actual appropriations during FY 79 and prevents overspending proceeds of taxes. Only those revenues that are considered as “proceeds of taxes” are subject to the Limit. The Limit is recalculated each fiscal year based on certain inflation and population factors provided by the State. The Proposed Budget includes tax revenue estimates that are at 46.03 percent of the 2021-2022 Appropriations Limit and, therefore, do not exceed the Limit. The City Auditor reviews this calculation for conformance to the law.
After the City Manager delivered the Proposed FY 22 Budget to the Mayor, technical adjustments were made to complete the budget. These changes are shown in Attachments B, C, and D. Changes include the following:
1. An expense and revenue budget increase in the Public Works Department in the Capital Projects Fund Group by $8,000,000, offset by a transfer from the General Fund to support the infrastructure funding necessary to comply with legal ADA obligations related to sidewalk and curb requirements. This is required and planned for spending in the Proposed FY 22 budget that was inadvertently left out of the budget. The increase in the Citywide Activities Department in General Fund Group of $8,000,000 to reflect the transfer to the Capital Projects Fund Group will be offset by a release of $7,200,000 from reserves previously set aside for liabilities and required mandates (not part of the General Fund Operating or Emergency Reserves), and by $800,000 from anticipated FY 21 Measure A year-end surplus.
2. A revenue decrease in the Long Beach Airport Department in the Airport Fund Group by $4,611,627 as a technical correction to align budget more accurately with the Airport Cares Act funding to be expended in FY 22.
3. An expense increase in the Development Services Department in the Development Services Fund Group by $167,990 to align budget with anticipated expenditures for the Fire Department Plan Check MOU.
4. A revenue increase in the Tidelands Fund Group in the Citywide Activities Department by $1,772,497 to correctly reflect the anticipated FY 22 transfer amount from the Harbor Department to the Tidelands Fund Group based on an estimate of 5 percent of Harbor’s FY 21 gross operating revenue. The previous budgeted amount was $18,809,414 but updated projections are now $20,581,911, which was inadvertently not updated in the Proposed Budget.
The remaining changes were minor, technical adjustments made to various funds and departments to align budget with grants, revenues, and/or personnel benefit corrections.
SUGGESTED ACTION
Approve recommendation.
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Respectfully Submitted,
JOHN GROSS
INTERIM DIRECTOR OF FINANCIAL MANAGEMENT
APPROVED:
THOMAS B. MODICA
CITY MANAGER