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HomeMy WebLinkAboutPresentation - Item 21 - FY2026-27 Early Direction_V17Early DirectionFY 2026 -27 GENERAL FUND BUDGET APRIL 7, 2026 1 Community Engagement efforts How we engaged with Santa Ana Residents Neighborhood Association (NA) & COM -Link Meetings Engagements across all Wards Total Meeting Attendees Community Priorities Survey Submissions Non-profit Listening Tours Committee / Commission Meetings Citywide Events 10 292 204 >1200 4 3 2 Community Priorities Survey Contacted every Council Ward Vietnamese & Spanish Interpretation services are offered at every meeting Survey available in English, Spanish, and Vietnamese 2 GENERAL FUND INFORMATION 3 FY2026 -27 General Fund Ten -Year Outlook Assumptions Revenue Assumptions Expenditure Assumptions •Property Tax : 2.79% for FY26 -27; 3.1% growth thereafter •Sales Tax : Revised to 1.9% for FY26 -27; 3.1% thereafter •CPI assumption : inflation factors for all other revenues ⚬Fluctuations in future years ⚬Only recurring revenues & expenditures included •MOUs : 5% increase in FY2025 -26; 4% increase in FY26 -27 •Labor below top step : negotiated increase + 5% merit step increases •Pension Unfunded Liability : an additional $2.2M required contribution in FY26 -27 based on updated CalPERS actuarial information •OC Fire Authority : 3.0% annual contract increase in FY26 -27, and 4.5% annually thereafter •OC Streetcar Operations : Annual estimate of $2M •Pension Stabilization Contributions: Contributions and uses to smooth future pension costs; inflation applied to all other spending 4 FY2026 -27 General Fund Ten -Year Outlook Assumptions 5 6 BALANCING STRATEGIES Expenditure Considerations For Rebalancing Mandates required by law, Memoranda of Understanding (MOU’s), bond covenants, public safety obligations, and land use regulations Core services that protect City resources and minimize liability exposure Programs and services that are not legally required but enhance the quality of life MUST HAVES SHOULD HAVES NICE TO HAVES Note: These spending categories are tools to support policy discussion by helping evaluate service levels and identify potential expenditure adjustments 7 Credit Card Processing Fee 8 •Credit card fees currently paid by the City, including the General Fund •Online and card payments increased significantly •Estimated $320,000 annually in costs that could be recovered •Proposed 2.50% fee is based on current costs to ensure cost recovery without overcharging •Would remove the current $5,000 transaction limit and provide more flexibility Note: Shall staff add a 2.50% credit card processing fee to the Miscellaneous Fee Schedule? Technology Cost Recovery Evaluation 9 •City anticipates launching a new permitting and licensing software system in June 2026 •System will improve processing times and provide a more user -friendly online experience •Staff continues to assess the full costs of maintaining and supporting enhanced technologies throughout the City •Any fee would be limited to the actual cost of providing these services and would comply with state law Note: Staff may return to City Council to discuss technology cost recovery options at a later date ONE-TIME SPENDING 10 •As reported in the Mid -Year Update (March 03, 2026), the estimated spendable fund balance for one - time expenditures in the general fund is $11.63 million •The following slides include potential options for utilizing this one -time funding One -Time Spending 11 Workers’Compensation Fund Current Status : •Reserve shortfall of approximately $16.0 million •Ongoing annual costs of about $9.7 million, only $5.9 million was originally budgeted in the current fiscal year •Increased costs driven by higher claims activity and medical expenses Setting aside one -time funds would help strengthen reserves, reduce the shortfall, and support the Fund’s long - term financial stability. Shall staff include a one -time $2.5 million transfer to the Workers’ Compensation Fund in FY 2026 -27? One -Time Spending 12 General Liability Fund Current Status : •Reserve shortfall of approximately $1.7 million •Used to pay claims and legal settlements •Ongoing exposure from claims, litigation, and potential future liabilities Setting aside one -time funds would help strengthen reserves, reduce the shortfall, and provide additional capacity for potential claim obligations Shall staff include a one -time $1.7 million transfer to the General Liability Fund in FY 2026 -27? One -Time Spending 13 Pension Cost Stabilization (Section 115 Trust) •Helps offset rising CalPERS pension costs •Costs increase when CalPERS investment returns fall below the 6.8% target •Significant projected increases in future pension contributions •$3 million contributed in FY 2024 -25 and $1 million in FY 2025 -26 •Helps earn investment returns, reduce volatility, and ensure funds are available for future pension cost increases Shall staff include a one -time $1.5 million contribution to the Section 115 Trust in FY 2026 -27? Sanitation Fund (Street Sweeping) •Staff exploring a range of options to address the funding gap, such as: ⚬Adjusting service frequency ⚬Implementing operational efficiencies ⚬Providing services in -house ⚬Seeking alternative funding sources •Current service levels cannot be maintained within existing revenues Shall staff utilize $900,000 in one -time funding to offset the projected shortfall for FY26 -27 while staff explores the above options? 14 High -Priority One -Time Projects ($2 Million) 15 One -time resources are proposed to address high -priority needs and maintain flexibility during the fiscal year •$1 million in Public Works for the highest priority facility repairs and improvements (such as Bowers Museum, Eddie West Field Stadium, community centers, and fire stations) •$1 million in Non -Departmental for unforeseen high -priority needs Shall staff include the $2 million one -time allocation for these projects in the FY2026 -27 budget? 16 One -Time General Fund Uses RECURRING OPERATING BUDGET RECOMMENDATIONS 17 Miscellaneous Fees 18 Fees are charged for services to individuals and must not exceed the cost of providing those services •Employee wage increases of 5% (FY 2025 -26) and 4% (FY 2026 -27) •Workers’ compensation and liability costs increased by 10% and 9% •Pension and benefit costs continue to rise •Inflation impacts contract services and operational costs Shall staff include a miscellaneous fee increase of 4% in the FY2026 -27 budget based on increased service costs? Movies at the Park $93,000 $498,000 $30,000 Fiestas Patrias -7oK Chicano Heritage -11.5K July 4th Celebration -7.5K 5k/10k Run -3.5K Tet/Lunar Festival -6.6K Movies at the Park -8.2K Noche De Altares -38K Juneteenth -3.7K $983,000 $115,000 $80,000 $127,000 $20,000 Tet Festival City Events Events & # Attendees Cost Offset Strategies •Increase sponsorship revenue •Implement or expand participant and vendor fees •Evaluate event cost structure and scalability of service 19 5K/10K $20,000 Boards, Commissions & Committees 20 Arts & Culture Should funding levels for Arts & Culture programming be maintained or reduced? $965,000 Total Arts & Culture Spending 21 Immigration -Related Services 22 Current Year Spending for Immigration - Related Services: •Universal Legal Defense Program: $300,000 •Ayuda Sin Fronteras Program ⚬Round 1: $100,000 ⚬Round 2: $150,000 ⚬Round 3: $150,000 ⚬Potential Round 4 Request: $150,000 •Total Potential (Current Year): $850,000 Program Outcomes (Round 1 & 2) •250 households served (487 individuals) •Type of Assistance: ⚬187 households –utilities only ⚬47 households –rental and utilities ⚬16 households –rental only $850,000 Animal Care Shelter Good News Challenges Debt on the shelter facility will be paid off in FY2025 -26, saving approximately $750K in annual debt service costs Annual Savings Shelter operating costs have doubled over the past five years and are expected to continue rising ~$750,000 23 Note: Staff will evaluate options to improve long-term cost sustainability, including service delivery, partnerships, and cost recovery strategies County Seat Impacts 24 •A large amount of government-owned parcels not generating property tax in the City, yet still utilizing public services such as right-of-way maintenance •Additional impacts of homelessness due to the County jail and social service facilities in the City •Increased public safety costs to support safety and traffic management 25 NON-GENERAL FUND HIGHLIGHTS SARTC Subsidy •General Fund began subsidizing SARTC in FY2021-22 with a $1.1 million subsidy •One -time funding of $5.4 million was also appropriated in the same fiscal year •The city cannot sustain the annual subsidy at the current rate •Staff will work to increase lease revenue and improve cost recovery to reduce General Fund support 26 Building Maintenance Operations 27 Building Maintenance Operations •Transition Building Maintenance operations to the General Fund to simplify administration •Costs for non -General Fund activities will continue to be covered through the Indirect Cost Allocation Plan •Change is administrative and will not impact the General Fund on an ongoing basis •$930,000 estimated spendable fund balance transferred to the General Fund upon fund closure, with staff to return with recommendations for high -priority facility repairs •One -time charges on new development to help fund capital improvements required to accommodate growth •Examples include: ⚬Transportation Improvements ⚬Traffic signal upgrades ⚬Street and intersection capacity enhancements ⚬Storm drainage facilities ⚬Other public infrastructure The Public Works Agency is finalizing a Development Impact Fee Study and will provide an update to the City Council at a later date Developer Impact Fees 28 29 FOLLOW UP & NEXT STEPS Next Steps May 5 May TBD May 19 June 2 June 16 Preliminary results of Budget Priorities Survey & other outreach efforts, draft General Fund Summary Draft versions: Budget, Miscellaneous Fees & Capital Improvement Program (CIP) Incorporating City Council feedback & alignment with community priorities Public Hearing, Approve Resolution of Classification & Compensation Plan, Adoption of Miscellaneous Fee Schedule & CIP 2nd reading to adopt Budget Ordinance 30 READY FOR DIRECTION 31