Finance Committee Agenda and Packet 2024 09 19

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its designated fund to the CIP fund. The Interim Finance Director responded that any governmental fund can be put into the CIP fund if that's how council desires to see, prioritize, and review it. Councilmember Kern asked if we are short $300K for the Parks fund after moving several projects into the CIP fund, where are the big projected increases in 2025 that aren't there in 2024. She doesn't feel they saw a $300k gap when the tax division was decided for ballot measure 2C. The Financial Analyst responded that, at the time we did not have projections for personnel costs for 2025; the other factor is that sales tax growth has not been what was anticipated when the discussions occurred. In addition, general increases for ongoing expenses have created this delta. Councilmember Kern commented that this is a large personnel increase. I know we have big irrigation projects that will impact some of our parks, but those appear in the CIP fund. She asked if we have an increase cost in water that goes to parks or did the $1M from the tax revenue decrease from lack of sales tax revenue. The Director of PROS responded that the gap is bigger because of a shortfall in tax revenue. Outside of the personnel cost increase, the proposed budget would be the same budget currently allocated for 2024 operating costs. He noted that there will be a slight increase for contracted mowing next year due to a required new contract in 2025 and that the majority of this shortfall is a combination of lagging sales tax, an increase in personnel and benefit expenses with existing staff, and the impacts being fully realized outside of what was projected with the alignment of the 3/8% tax being split 50/50 instead of at the historical division of the tax revenue as previously mentioned. Councilmember Kern asked if, with the funds we have and the shortage we have, are there some general fund areas PROS can cut back on in 2025/26 or are there parks costs the city can cut back on. The Director of PROS responded that cutting back on costs will cut service, noting that this is approximately 7-10% of the operating budget. It's something staff has been and continue to look into with the City Manager to assist with the alignment. The bigger, longer -term discussion of getting through the 2025/26 structural balance and how it relates to service afterwards, depending on business growth or economic vitality. Councilmember Hoefner commented that, in the detail for 25 parks budget vehicle equipment replacement jumps to 162k this year and he asked for more information on this topic. The Director of PROS responded that costs for replacement vehicles is related to a standard expected lifespan of fleet vehicles and the proposed budget for vehicle replacement is created in concert with Public Works as we age out of our equipment. He suggested that, if we are asked to evaluate the operating budget, we could start with fleet costs. Councilmember Hoefner asked staff to look at the possibility of reviewing fleet reduction options to reduce costs. Councilmember Hamlington commented that she strongly believes that the voters who approved of ballot measure 2C did not anticipate negative impacts on Parks by this tax. She expressed concern that Council will hear from the community if service is reduced. She suggested if fleet costs could be evaluated, it could be useful. She asked if there was going to be money left from the close out after balancing the tax split. Councilmember Hoefner commented that it was the projection and asked of that is still true. The Financial Analyst responded that the Minimum Reserve Policy had to be met so we took the old fund and split the fund balance between Parks and Open Space to meet the minimum reserve for the parks fund. After the minimum reserve was met, there was no funds remaining. The Director of PROS commented that there is the ability to evaluate the reserve policy since it is an internal policy, if the finance committee wants to consider policy evaluation as an option. 7/251