HomeMy WebLinkAbout2024-01-18; Overview of the Fiscal Year 2024-25 Budget Process, Timeline and Proposed Position Reductions (Districts All); Chadwick, ScottTo the members of t he:
CITY COUN CIL
Date /-/f·)~cA __?'cc ,._...,,.
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ncil Me morandum
January 18, 2024
To: Honorable Mayor Blackb n embers of the City Council
From: Scott Chadwick, City Ma ag \
{city of
Carlsbad
Memo ID# 2024004
Re: Overview of the Fiscal Y 024-25 Budget Process, Timeline and Proposed
Position Reductions (Districts -All)
Consistent with the City Council's desire to reduce ongoing spending due to the forecasted
General Fund structural budget deficit and to demonstrate the most prudent use of city
resources, staff has prepared this memorandum about the planning and development of the
fiscal year 2024-25 budget. Included in this memorandum are:
• An overview of the city's current economic outlook.
• A budget planning calendar.
• Direction provided to departments as they prepare their proposed budgets.
• A new approach that will better align the Capital Improvement Program with the City
Council's 5-year Strategic Plan, while increasing transparency and City Council
involvement in project timing and funding.
• An overview of the process to propose projects for the Strategic Digital Transformation
Investment Program.
• A plan to eliminate the equivalent of.12 full-time positions from the city's workforce in
the fiscal year 2024-25 budget, which goes into effect July 1, 2024.
Background
The City Council sets the overall policy direction for the City of Carlsbad and helps staff prioritize
programs, projects and services to support that direction. Public input plays a critical role in
setting both the long-range policy direction of the city and decisions about day-to-day spending.
The City Council adopted a 5-Year Strategic Plan in 2022, which guides the city and serves as a
road map during the budget process by identifying specific, measurable objectives to be achieved
during t he five-year timeframe. The city's budget, in turn, serves as a financial plan and guiding
tool to support the city's mission, including City Council's policy priorities.
The fiscal year 2024-25 budget will preserve the city's continued fiscal sustainability by
maintaining its critical core services, achieving its goals and priorities, and being mindful of the
economic outlook. While administrative leadership's direction for the fiscal year 2024-25 budget
cycle will not require a mandated budget reduction by each department, it will continue t he
expectation that staff incorporate opportunities to do business more efficiently and focus on
spending areas that can be reduced with little to no impact on the community. These cont inued
efforts are in response to the city's anticipated structural deficit, in which the city's expenditures
City Manager's Office
1200 Carlsbad Village Drive I Carlsbad, CA 92008 I 442-339-2820 t
Council Memo -Fiscal Year 2024-25 Budget Process, Timeline and Proposed Position Reductions
January 18, 2024
Page 2
are projected to grow at a faster rate than its revenues. The city is in a much better position
today than it was even a year ago-in part due to an enhanced revenue outlook and recent
efforts by city staff to reduce ongoing costs-nonetheless, the General Fund is projecting an
annual deficit beginning in fiscal year 2028-29. It is imperative this year's budget reflect every
effort reasonably possible to address this structural deficit.
The COVID-19 pandemic and the negative economic impact it had on many of the city's revenue
sources peaked during fiscal year 2020-21 and 2021-22. In response to future economic
uncertainty at that time, the adopted budgets in fiscal year 2022-23 and 2023-24 included
reductions of nearly 2% and 3%, respectively. An accelerated economic recovery from the
COVID-19 pandemic coupled with unprecedented inflation sustained by consumer demand
contributed to the city's General Fund ending fiscal year 2022-23 with a healthy surplus. The
combined impact of these budget reduction efforts and larger-than-anticipated surplus positively
impacted the General Fund's 10-year forecast. The projected deficit is now not anticipated to
occur until fiscal year 2028-29, three years later than the timing projected last year.
Since 2021, the city has dealt with unprecedented inflationary increases, reaching a regional high
of 8.3% in May 2022. The Federal Reserve responded by increasing target interest.rates over the
last couple of years. While inflation has begun to decline, regional inflation was still at 5.2% as of
November 2023. The Federal Reserve is expected to begin reducing target rates in 2024, and
inflation will likely remain a concern the city will continue to manage.
In addition to managing inflation's impact to the city's budget, aging infrastructure is another
challenge that is neither new nor unique to the City of Carlsbad. As the city continues its
transition from "growth and development" to "maintenance," the operating costs necessary to
fund infrastructure maintenance and replacement continues to grow and represent a significant
pressure on the General Fund's resources.
Pension funding also continues to have a significant impact on the city's budget. CalPERS' volatile
investment performance, particularly over the last two years, has significantly increased the
city's costs. The city has taken great steps toward mitigating the long-term risks and associated
costs by prefunding and establishing a Section 115 Trust; however, the annual required
contributions still represent a significant portion of the city's expenditure budget.
Discussion
The city's annual comprehensive budget document includes three sections: Operating Budget,
Capital Improvement Program and Strategic Digital Transformation Investment Program. A
summary of the fiscal year 2024-25 process to create each of these three budgets, as well as
priorities and changes planned for the upcoming fiscal year, are presented below.
Council Memo -Fiscal Year 2024-25 Budget Process, Timeline and Proposed Position Reductions
January 18, 2024
Page 3
Operating Budget
The Operating Budget is designed to provide funding for all ongoing city operations, one-time,
non-capital projects and work efforts, general support of the city, and the City Council's strategic
policy goals and work plans. The Operating Budget funds ongoing operating and maintenance
costs and provides for appropriate and strategic levels of replacement funding. City staff strive to
ensure that, when preparing the annual budget, one-time revenues are only used to cover one-
time costs, and ongoing costs are not greater than ongoing revenues.
Before the city's Operating Budget is presented to the City Council for adoption, city staff in all
departments prepare individual budgets for their functional areas. The table below depicts the
key phases and dates in the creation and adoption of the city's Operating Budget. This schedule
is subject to change as staff move along in the budget process.
Table 1: Operating Budget calendar for fiscal year 2024-25
Date Task
Jan. 3 City staff hold Operating Budget kickoff meeting -participants include
executive leadership and department budget preparers.
Feb. 1 Special City Council Meeting: Departmental Operations Presentation
Feb.6 Strategic Plan Update at City Council Meeting.
Feb.9 Departments submit their requested budgets to the Finance Department
budget team.
Feb. 9 -March 20 The Finance Department budget team reviews and evaluates
departments' budget submissions.
Feb. 23 Departments complete narrative sections highlighting services,
priorities, accomplishments and budget changes, which are included in
the published budget book.
March 15 Departments update their portions of city's master fee schedule.
March 20-28 Representatives from each department present their budget
submissions in meetings with the City Manager, Assistant City Manager
and Finance Department budget team.
March 28 -May 21 City leadership makes key funding decisions based on City Council
priorities, regulatory requirements, forecast data, and other supporting
data. The Finance Department budget team prepares the preliminary
budget document.
May 21 City staff present the preliminary budget to the City Council.
May 23 City staff hold a community budget workshop.
June 18 The City Council holds a Public Hearing and considers the annual budget
for adoption.
Council Memo -Fiscal Year 2024-25 Budget Process, Timeline and Proposed Position Reductions
January 18, 2024
Page 4
• Department budget submissions
There are many components that city staff across all operating departments must complete in
their initial budget submissions. Some key activities include, but are not limited to, the following:
• Review full-time and part-time employee allocations for accuracy and opportunities for
reductions or reorganizations to enhance efficiency.
• Review base maintenance and operations budgets. The base budget consists of the prior
year adopted budget for maintenance and operations, excluding any one-time
supplemental budget granted in the prior year and interdepartmental chargebacks, which
are calculated separately. Departments have discretion to change how their maintenance
and operations budgets are utilized in the upcoming fiscal year, as long as the total
requested budget stays within their allocated base.
• Consider supplemental budget needs. As mentioned previously in this memorandum, for
the fiscal year 2024-25 budget, the city will strive to achieve continued fiscal sustainability
by maintaining its critical core services, achieving its goals and priorities and being
mindful of the economic outlook. As such, the upcoming year's budget preparation does
not include a process for departments to request additional funding. However, city
administrative leadership will consider crucial budget needs if they relate to the city's
response to a changing regulatory environment, new laws, cost increases for existing
essential services and other needs.
• Calculate the interdepartmental chargebacks that will be allocated citywide for costs such
as those related to information technology, fleet, workers' compensation, risk
management and other miscellaneous administration. City staff from these areas will
work with other departments to determine needs for the upcoming fiscal year before
calculating chargebacks. The fleet and information technology calculations also include
budgeting for capital outlay for planned replacements, such as vehicles and computers
that have reached the end of their useful lives.
• Estimate revenue for the upcoming year. Some departments have specific sources of
revenue, such as recreation fees. The Finance Department manages general city revenue
collected, while city staff budget for revenue that is department specific.
After departments' requested budgets are submitted and reviewed, an integral part of the
budget preparation process takes place when department staff meet individually with the City
Manager, Assistant City Manager and Finance Department budget team to present their
proposed budgets for the upcoming year. During these meetings, department staff justify their
requested budgets, which may include presentation of data and analysis to support proposed
spending, year-over-year spending trends and information on how programmatic efforts support
the city's 5-Year Strategic Plan. The discussions during these meetings help to ensure that
executive leadership has thoroughly evaluated requested budgets and planned efforts for the
upcoming year, in order to make decisions on the preliminary budget that will be presented to
the City Council for consideration.
Council Memo -Fiscal Year 2024-25 Budget Process, Timeline and Proposed Position Reductions
January 18, 2024
Page 5
Capital Improvement Program
The City of Carlsbad Capital Improvement Program, or CIP, reflects the city's ongoing
commitment to maintaining the highest standards of quality facilities for our community today
and in the future. It is a planning document, not a commitment for spending. The five-year
program outlines the expenditure plan for future capital projects and the corresponding
revenues to pay for those expenditures.
Projects that are shown in the CIP are generally defined as any construction, rehabilitation or
replacement of major infrastructure such as streets, libraries, parks, fire stations and
administrative facilities, water, sewer and drainage facilities, and other facilities that are located
on or in the ground. In most cases, the total construction cost of each of these assets is recorded
and tracked as part of the city's inventory of capital infrastructure assets and other city-owned
property.
The timeline for developing the upcoming fiscal year's CIP is dictated in Administrative Order
No. 50, Capital Improvement Program -Project initiation, Prioritization, Budgeting and Adoption
Procedure. City staff may submit proposed new CIP projects in December for the upcoming fiscal
year. Project requests are evaluated initially by the CIP Steering Committee Meeting in January
and again in April. This evaluation includes project prioritization and scoring, followed by the
determination of project timing as forecasted funds are available. Based on funding availability
and priority level, proposed CIP projects are then incorporated into the preliminary CIP Budget.
Once the City Council adopts the proposed annual CIP Budget, projects receive an appropriation
that authorizes spending in the amount specified for the adopted fiscal year only. Estimated
budget information is shown for a 15-year period to provide the most comprehensive
information about known future projects. Spending authority in future years is not granted until
adoption of the annual proposed CIP Budget associated with each year.
Changes to the CIP Process
City staff have made changes to the CIP process for fiscal year 2024-25 to accomplish the
following:
• Increase transparency around how projects are selected for inclusion, project timing and
funding status.
• Demonstrate stronger alignment to the City Council's 5-Year Strategic Plan.
• Establish more realistic expectations for project cost estimates and delivery.
• Continue to comply with Government Finance Officers Association and SANDAG reporting
requirements.
These changes include:
• A stronger focus on the next five fiscal years, while remaining a 15-year planning
document.
Council Memo -Fiscal Year 2024-25 Budget Process, Timeline and Proposed Position Reductions
January 18, 2024
Page 6
• Introducing four project categories to clearly communicate the project's purpose. These
include (1) strategic plan, (2) critical need, (3) maintenance, and (4) closeout.
• Budgeting based on project phase. This means rather than budgeting for the entire cost
of a project well in advance of when the project is scheduled to begin, City Council will be
asked to consider appropriating money phase by phase. Phases include: scoping,
conceptual design, final design and construction.
For example, as part of the annual budget process, city staff will request appropriations for a new
project, starting with initial scoping. This typically involves early planning work and a feasibility
analysis. When that work is completed, staff will return to City Council to request appropriation
for conceptual design. When that is done, staff will return to City Council to request funding for
final design, and so on.
These changes will provide the City Council with a greater ability to direct the pace and funding
of major projects, while increasing transparency around projects that are planned and underway.
Strategic Digital Transformation Investment Program
The Strategic Digital Transformation Investment Program, or SDTIP, is a comprehensive approach
to planning for and funding digital transformation efforts throughout the city. The purpose of this
program is to provide for an annual investment strategy, not a commitment for spending, that
outlines a five-year expenditure plan for future digital transformation and technology projects
and the corresponding revenues necessary to pay for them.
The timeline for developing the upcoming fiscal year's technology budget is dictated in
Administrative Order No. 89, Strategic Digital Transformation Investment Program -Project
initiation, Prioritization, Budgeting and Adoption Procedure. Similar to the CIP, staff are invited to
submit proposed new projects annually in December. Projects are then evaluated initially in
January and again in April by the city's executive leadership, which assigns a priority level and
funding strategy. Priority projects are then added to the preliminary SDTIP Budget. Although
budget estimates are included for the total project cost, staff request authorization for funding
only the amount needed each budget year. This authorization comes when the City Council
approves the annual budget.
Positions Recommended for Elimination in the Proposed FY 2024-25 Budget
In response to City Council feedback requesting staff identify additional ways to contain ongoing
operational costs within the organization, staff conducted a review of staffing levels, workload
and existing vacancies in an effort to find new opportunities for savings. As a result, staff have
identified 12 full-time equivalent positions that will be recommended for elimination as part of
the fiscal year 2024-25 budget, beginning July 1, 2024. The 12 positions that would sunset
June 30, 2024, include nine vacant full-time, two currently filled part-time positions and two
currently filled full-time positions.
Council Memo -Fiscal Year 2024-25 Budget Process, Timeline and Proposed Position Reductions
January 18, 2024
Page 7
When considering a reduction in workforce, our goal is to reduce to the extent possible any
negative effects on the service we deliver to the community. The anticipated impacts of
eliminating the positions along with the cost savings are identified below.
1. Management Analyst -Office of the City Manager (Vacant)
The primary function of this position is to prepare and monitor the budget for the City
Manager and City Council offices, perform data analysis, assist with special events,
prepare Administrative Orders for City Manager consideration and triage requests for
action that were directed to the City Manager's Office. This position became vacant in
December 2023. The duties of the position have been delegated to the Executive
Assistant to the City Manager, Legislative & Constituent Services Director and
Intergovernmental Affairs Director. The potential impacts of this position remaining
vacant is the increased workload assigned to other staff in the office, which may result in
a delay to the completion of special projects.
Savings: $132,625
2. Senior Office Specialist -Office of the City Council (Vacant)
The primary function of this position is to coordinate City Council proclamation
presentations, assist with special events and serve as the contact to the City Council when
the Executive Assistant is not available. This position has been vacant since July 2023.
Staff have found efficiencies and redistributed work that will allow this position to be
eliminated while still supporting the City Council's clerical needs. The duties of the
position have been redistributed to the Executive Assistant to the City Council and the
Secretary/Receptionist in the City Manager's Office. Staff have not identified any
negative impacts of this position remaining unfilled.
Savings: $83,681
3. Deputy City Clerk -City Clerk (Vacant)
The primary function of this position is to prepare City Council agendas and minutes;
serve as Clerk for the Legislative Subcommittee and Economic Subcommittee: process
recorded documents, claims, bonds, agreements and contracts; provide notarization
services; and maintain Form 700 filings for city consultants. This position became vacant
in December 2023. The duties of the position have been delegated to the Senior Deputy
City Clerk and Deputy City Clerk. The potential impacts of this position remaining vacant
include potential delays in preparation of City Council meeting minutes, responding to
City Council inquiries, and processing of contracts, agreements, bond releases and
recorded documents. In addition, City Clerk's Office staff will no longer be able to perform
quality control on all board, commission and committee meeting materials that are
prepared by staff in departments with commissions.
Savings: $94,346
Council Memo -Fiscal Year 2024-25 Budget Process, Timeline and Proposed Position Reductions
January 18, 2024
Page 8
4. Lead Librarian -Library & Cultural Arts (Vacant)
The primary function of this position is to support public services at the Carlsbad City
Library on Dove Lane. This position became vacant in November 2023 due to a promotion
of an employee to Senior Librarian. Management of full-time and part-time employees,
including training, mentoring and payroll, previously handled by the Lead Librarian will be
delegated to a Senior Librarian. A librarian or part-time librarian would assume the
workload at the public service desks. The potential impacts of this position remaining
vacant include reduced public programs. The city currently has three other Lead
Librarians and those positions are currently filled.
Savings: $111,742
5. Production Technician -Library & Cultural Arts (Vacant)
This was a new position approved as part of the fiscal year 2023-24 budget that has
remained unfilled since approval of the budget. The primary function of this position was
to coordinate audio-visual, technical and front-of-house support in the Schulman
Auditorium, Cannon Art Gallery, Gowland Meeting Room and Community Room. Job
responsibilities are currently managed by one Production Technician who accrues about
$10,000 in unbudgeted overtime. Without a second Production Technician, the plan is to
distribute some of the work to library staff at a comparable job classification level.
Without a second Production Technician, program offerings and rentals in the Schulman
Auditorium may need to be reduced.
Savings: $80,957
6. Parks Maintenance Worker-Parks & Recreation (Vacant)
The primary function of this position is to perform general skilled trade work within parks,
beach accesses and trails. Work includes general repairs and replacements of assets (e.g.,
broken or worn park/beach access/streetscape amenities, such as benches and trash
receptacles). This position became vacant in December 2023. The duties of the position
will be performed by a combination of other Park Maintenance Workers and contracts for
outside services. Repairs and replacement of assets, painting/graffiti abatement, and trail
surface refurbishment will be routinely reviewed and prioritized.
Savings: $89,371
7. Associate Engineer-Community Development (Vacant)
The primary function of this position is to perform grad~ng and improvement plan checks
and discretionary permit reviews. This position became vacant in May 2023. The duties of
the position will be distributed to the three existing senior engineering positions within
the Land Development Engineering Division of Community Development without a
significant service level impact.
Savings: $50,239
Council Memo -Fiscal Year 2024-25 Budget Process, Timeline and Proposed Position Reductions
January 18, 2024
Page 9
8. Business Systems Specialist -Inform ation Technology (Vacant)
The primary function of this position is to implement and support public safety
technology, develop requirements, and gather and analyze data for operational reports.
The position became vacant in May 2023. The duties of the position have and will
continue to be absorbed by existing Information Technology staff. Low priority projects
may be delayed.
Savings: $135,382
9. Senior Environmental Specialist -Environmental Sustainability (Vacant)
The primary function of this position is to supervise staff and coordinate environmental
sustainability programs to ensure compliance with regulatory requirements of SB 1383.
This position became vacant in September 2023. The duties and responsibilities of the
position will be reassigned to the Senior Program Manager. Because this program is now
in its second year of implementation, minimal service level impacts are expected.
Savings: $131,959
10. Chief Innovation Officer-Innovation & Economic Development
The Innovation and Economic Development Department is led by a Chief Innovation
Officer (CIO). The position directs city process improvements, data governance and
economic development. Potential impacts of eliminating this position may include
diminished representation, advice and counsel on cross-departmental leadership groups
and diminished opportunities within city departments to advance innovative concepts
and technology. Necessary responsibilities of the position will be absorbed by existing
staff within the Innovation and Economic Development Department. In addition, the
Senior Program Manager and the Economic Development Manager will report directly to
the Deputy City Manager, Administrative Services. The Data Services Manager, Strategic
Plan Analyst and five Geographic Information Services positions will report to the
Information Technology Director.
Savings: $280,893
11. Senior Program Manager for Diversity, Equity & Inclusion {DEi) -Human Resources
This position was created as part of the fiscal year 2021-22 budget, and the primary
function and intent of the position was to develop, implement and lead a diversity, equity
and inclusion program including the review of current practices and policies to support
the city's DEi Work Plan and maintain knowledge of diversity best practices. St aff has
det ermined that management and implementation of the DEi related work can be
delegated to other staff in t he Human Resources Department now that t he DEi program
has been operationalized throughout the organization.
Savings: $155,785
Council Memo -Fiscal Year 2024-25 Budget Process, Timeline and Proposed Position Reductions
January 18, 2024
Page 10
12. Administrative Assistant -Administrative Services (Part-time)
The primary function of this position is to perform administrative work within the
Administrative Services Branch. This position reports to the Deputy City Manager in
Administrative Services. Work includes processing accounts payable batches, purchase
order processing, contract routing, credit card statements and various other
administrative work for the department. This position is also responsible for the
preparation of Carlsbad Tourism Business Improvement District (CTBID} agendas,
attending and preparing minutes for the CTBID quarterly board meetings. This position
will become vacant January 22, 2024. The duties of the position will be distributed
among the relative departments within Administrative Services with minimal service level
impacts.
Savings: $31,733
Hourly Professional -Communications & Engagement (Part-time)
The primary function of this position is to promote awareness of and participation in city
programs, services and events, primarily focused on community services. Because the
Communication & Engagement Department has taken advantage of several new
technologies to streamline both its operations and how it communicates with the public,
this position could be eliminated while continuing to meet the city's core communication
and engagement needs. Parks, recreation, library and cultural arts programs would
continue to be supported by the Communication & Engagement Department; however,
some non-essential communication efforts may be scaled back as needed.
Savings: $30,167
Fiscal Impact of Proposed Position Eliminations
General Fund savings resulting from the elimination of these positions is estimated at $1.llM in
fiscal year 2024-25. General Fund cumulative compounded savings at year five is anticipated to
be $6.63 million. Non-General Fund savings is estimated at year five to be $1.61 million, for a
combined compounded savings at year five of $8.25 million.
Comprehensive Annual Budget
City staff will bring forward a preliminary version of all three budget programs described above in
the fiscal year 2024-25 comprehensive budget at a regular City Council meeting in May 2024. City
staff will also hold a Community Budget Workshop in May 2024 and communicate the feedback
received to the City Council in a Council Memorandum. The City Council will receive the final
comprehensive budget in June 2024 for adoption. Following budget adoption, city staff will
prepare the fiscal year 2024-25 budget book and make it available to the public by September
2024.
Next Steps
A special City Council meeting will be held on February 1, 2024, which will include a presentation
on departmental operations, current budgets, staffing and services. The purpose of this
Council Memo -Fiscal Year 2024-25 Budget Process, Timeline and Proposed Position Reductions
January 18, 2024
Page 11
presentation is to inform the City Council as they prepare to make decisions about the 5-Year
Strategic Plan and its priorities for the upcoming fiscal year. Following the regular City Council
meeting on February 6, 2024, when the 5-Year Strategic Plan will be discussed, staff will
incorporate input received from the City Council into the annual budget process and resulting
preliminary budget, which will be presented at the regular City Council meeting currently
scheduled for May 21, 2024.
cc: Cindie McMahon, City Attorney
Geoff Patnoe, Assistant City Manager
Mickey Williams, Police Chief
Michael Calderwood, Fire Chief
Laura Rocha, Deputy City Manager, Administrative Services
Gary Barberio, Deputy City Manager, Community Services
Paz Gomez, Deputy City Manager, Public Works
Zach Korach, Finance Director
Sheila Cobian, Legislative and Constituent Services Director