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10/05/2021 03. Council Review of Proposed 2022 Budget- 1 of 4 • 1.411111&12 rr 11 i�O enc u nrry 1 BUSINESS OF THE CITY COUNCIL YAKIMA, WASHINGTON AGENDA STATEMENT Item No. 3. For Meeting of: October 5, 2021 ITEM TITLE: Council Review of Proposed 2022 Budget- 1 of 4 SUBMITTED BY: Bob Harrison, City Manager Jennifer Ferrer-Santa Ines, Director of Finance and Budget SUMMARY EXPLANATION: The proposed 2022 Preliminary Budget will be reviewed with Council in four study sessions scheduled as follows: Tuesday, October 5, 2021 from 9:00 am to Noon Thursday, October 7, 2021 from 9:00 am to Noon Tuesday, October 12, 2021 from 9:00 am to Noon Thursday, October 14, 2021 from 9:00 am to Noon 9:00 Introduction— Bob Harrison and Jennifer Ferrer-Santa Ines 9:15-2022 Budget Presentation—Jennifer Ferrer-Santa Ines • Preliminary Budget Book • Financial Policies — Fund Balance • FTE changes and additions • American Rescue Plan Act • Vehicle Replacement • Cyber Security and Radios - John Carney Revenues • Budgeting during COVI D • Major Revenues • Property Tax Rates / Lift Capacity • Economic Assumptions Expenses Overview 11:45 Questions, Discussion, Direction ITEM BUDGETED: NA STRATEGIC PRIORITY: Public Trust and Accountability APPROVED FOR SUBMITTAL BY THE CITY MANAGER 2 RECOMMENDATION: ATTACHMENTS: Description Upload Date Type D 2022 Budget Study Session 10.5 10/1/2021 Presentation ❑ Financial Policies 9/30/2021 Backup Material ❑ PD Equipment Replacement 10/1/2021 Backup Material ❑ FD Equipment Replacement Schedule 10/1/2021 Backup Material ❑ Preliminary Budget 9/30/2021 Backup Material ❑ Preliminary Capital Budgets 9/30/2021 Backup Material 2021 Budget Study Session # 1 Oct. 5, 2021 A ° i;\ vs Clear — Reliable — Trustworthy - City Manager- Introduction THE BUDGET PROCESS PRE - BUDGET Budget Estimates SPRING / SUMMER Summer/Fall To Do To Do (Recommended) * Official call to budget * Host a council retreat to determine priorities * Review the budget * Host a staff budget goals and objective calendar to ensure ti m e l y discussion in support of Council priorities completion of schedules *Review capital budget and budget information *Review financial policies * Revenue and expense e stimates * Review policy issues , u pdate accomplishments and goals narrative Preliminary �� �na o ,uo � � e�� Fi1I1I/Wtri1Budd �� To Do WIll.t. 4r r *Filing of preliminary budget with To Do budget message *Adopt budget by ordinance *Make preliminary budget publicly *File final budget with MRSC available *Make the final budget easily *Host public budget hearings *Set property tax levies and file with accessible to the public *Distribute to Council and Departments the county *Meet with departments and review requests for new programs, capital and other needs 2022 Budget Goals ➢ Achieve a balanced budget in every fund ➢ Assure prioritized services citywide ➢ Preserve General Fund's reserve ➢ Establish replacement funding for public safety equipment Yakima Council Strategic Priorities 1 . Public Safety 2 . Fiscal sustainability 3 . Housing 4 . Strengthening Partnership 5 . Investment in infrastructure 1 . Public Safety ✓ Continue to focus non-strategies to reduce violent crime through exceptional customer service ✓ Increase deployable strength percentage to reduce response time and improve customer service ✓ Focus on recruiting lateral police candidates to speed up the time for new hires to become productive officers ✓ Continue to focus both energy and resources to the reduction of domestic violence through improved response, investigation, and collaboration ✓ Conduct 2022 Fire Academy for new hires in first quarter ✓ Continue Structure Firefighting PPE replacement plan ✓ Purchase of Police Interceptors ✓ Term limited funding of $250,000 in American Rescue Plan Act (ARPA) funds for years 2022-2024 for additional domestic violence advocate program 2 . Fiscal Sustainability ✓ Obtain an Unqualified (Clean) audit of its 2021 financial statements ✓ Implement the new GASB 87 Lease Accounting Update as required by Governmental Accounting Standards Board (GASB) ✓ Seek funds to replace the pedestrian bridge over Wide Hollow Creek at West Valley Community Park ✓ Obtain Government Finance Officers Association (GFOA) Distinguished Budget Presentation Award for its 2022 budget publication ✓ Improve transparency in communicating city finances ✓ Conduct annual review of Council financial policies as part of the budget process ✓ Review the City's Financial Management Policy and Stewardship of Public Funds to ensure compliance and regular updates 3 . Housing ✓ Support the HOME Investment Partnership program to provide decent/affordable housing ✓ Administer programs funded by Community Development Block Grant (CDBG) benefitting low- and moderate-income neighborhood and individuals with housing, living environment, and economic opportunities ✓ $ 1 million investment for Affordable Housing using ARPA Funds 4 . Strengthening Partnerships ✓ Fully implement Granicus Peak upgrade by March 2022 ✓ In conjunction with IT, fully implement an electronic signature process by March 2022, which will increase efficiency citywide ✓ Continue to bolster our relationships with our federal partners to more effectively address gang crime throughout the Yakima Valley ✓ Air service development ✓ $500,000 investment from ARPA funds to foster partnerships with non-profits to address community needs ✓ Additional $300,000 as financial buffer, inf needed based on economic recovery in support of tourism from ARPA funds ✓ Investment of $2 million for YWCA woman's shelter for transitional housing from ARPA funds ✓ Investment of $1.5 million for homeless/mental health related programs through year 2023 from ARPA funds ✓ Support departments with timely access to financial information ✓ Establish training for all departments on how to access financial information from the City's Cayenta Financial System 5 . Investment in Infrastructure ✓ Purchase additional Fire engine ✓ Complete Cayenta upgrade February 2022 ✓ Rehabilitation of East General Aviation Apron ✓ Main Terminal Building - Installation of automated security exit lane system and roof replacement ✓ Design, Engineer, Construction of Taxilane Charlie Extension ✓ Main Terminal Building - Environmental Documented Categorical Exclusion ✓ Rehabilitation of Airport Administration Office ✓ Complete Miller Park restoration project ✓ Bravo Company Boulevard Phase 1 and Phase 2 Engineering and Environmental ✓ North 1st Street Revitalization Phase 3 ✓ Purchase six transit busses funded by American Rescue Plan Act, $2.8 million ✓ Fruitvale Nelson Dam Rebuild ✓ Tiger Oil Clean Up ✓ Investment of $1 million for fully developed residential areas that are still on septic systems from ARPA funds ✓ $6 million of ARPA Funds for Mill Site Water and Sewer improvement projects from ARPA funds General Fund Revenue Sales Tax S27,031,000 39.1% Fines Forfeits, Trans&Misc $2,595,937 3.8% Other Taxes&Assessments Charges for Services $1,080,000 $3,345,844 1.6% 4.8% Intergov't $3,731,538 5.4% Licenses&Permits $1,669,200 2.4% Utility&Franchise Tax Property Tax $20,379,582 $9,295,688 29.5% 13.4% General Fund Revenue 2022 VS. 2021 REVENUE BUDGET COMPARISON 2021 2022 2021 vs. 2022 Year-End Proposed Budget Estimate Expenditures % Change General Fund $ 67,394,079 $ 69,128,789 2.6% Parks 5,428,200 5,565,769 2.5% Streets &Traffic 6,506,149 6,478,808 (0.4)% General Government Total 79,328,428 81,173,366 2.3% Utilities/Other Operating 102,848,741 106,970,735 4.0% Capital Improvement 3 52,219,159 71,331,828 36.6% Risk Management Reserves 5,229,871 5,826,575 11.4% Employee Benefit Reserves 16,293,711 16,714,350 2.6% Trust and Agency Funds 670,057 664,267 (0.9)% Debt Service 6,453,256 6,435,960 (0.3)% Total -Citywide Budget $ 263,043,223 $ 289,117,081 9.9% Reven u es by Sou rce 2022 REVENUES General % of % of Fund Total City-wide Total Sales Tax $ 27,031,000 39.1 % $ 37,278,000 12.9 % Utility & Franchise Taxes 20,379,582 29.5 % $ 21,482,562 7.4 % Property Tax 9,295,688 13.4 % 22,188,324 7.7 % Charges for Services 3,345,844 4.8 % 57,793,619 20.0 % Intergovernmental Revenues 3,731,538 5.4 % 55,840,774 19.3 % Other Taxes & Assessments 1,080,000 1.6 % 7,174,000 2.5 % Licenses and Permits 1,669,200 2.4 % 3,146,200 1.1 % Fines and Forfeitures 1,394,000 2.0 % 1,494,000 0.5 % Transfers — — % 30,692,706 10.6 % Miscellaneous Revenue 1,201,937 1.8 % 52,026,896 18.0 % S 69,128,789 $ 289,117,081 General Fund Expenditure Personnel Benefits $13,572,443 19.7% Supplies,Equip,Misc $1,774,869 2.6% Services&Charges $9,074,890 13.2% Capital Outlays&Debt Service $308,390 Salaries&Wages 0.4% $40,337,385 58.5% Transfers $3,876,705 5.6% General Fund Expenditure 2022 VS. 2021 EXPENDITURE BUDGET COMPARISON 2021 2022 2021 vs.2022 Year-End Proposed Budget Estimate Expenditures %Change General Fund $ 66,354,486 $ 68,946,683 3.9% Parks 5,574,682 6,179,811 10.9% Streets&Traffic 6,287,622 6,476,301 3.0% General Government Total 78,216,790 81,602,795 4.3% Utilities/Other Operating 96,030,747 102,211,927 6.4% Capital Improvement 1 61,127,581 80,322,577 31.4% Risk Management Reserves 5,140,960 5,636,355 9.6% Employee Benefit Reserves 16,724,961 17,029,581 1.8% Trust and Agency Funds 670,057 664,267 (0.9)% Debt Service 6,512,255 6,436,218 (1.2)% Total-Citywide Budget $ 264,423,351 $ 293,903,720 17.8% Expend itu res by Category 2022 EXPENDITURES General % of % of Fund Total City-wide Total Transfers $ 3,876,705 5.6 % $ 30,692,706 10.4 % Salaries & Wages 40,337,385 58.5 % 68,078,671 23.2 % Personnel Benefits 13,572,443 19.7 % 38,948,304 13.3 % Operating Supplies 1,774,869 2.6 % 7,160,029 2.4 % Professional Services 9,074,890 13.2 % 69,315,508 23.6 % Capital Outlays 104,000 0.2 % 70,629,061 24.0 % Debt Service 206,390 0.2 % 9,079,440 3.1 % $ 68,946,682 $ 293,903,719 Citywide Revenue Sales Tax $37,278,000 12.9% Other Taxes&Assessments Fines,Forfeits,Trans&Misc $7,174,000 $84,213,602 2.5% 29.1% Utility&Franchise Tax $21,482,562 7.4% Property Tax $22,198,324 7.7% Licenses&Permits $3,146,200 1.1% Charges for Services $57,793,619 Intergovernmental 20.0% $55,840,774 19.3% Citywide Expenditures Personnel Benefits Supplies,Equip,Misc $38,948,304 $7,160,029 2.4% 13.3% Services&Charges $69,315,508 23.6% Salaries&Wages $68,078,671 23.2% Transfers $30,692,706 Capital Outlays 10.4% $70,629,061 24.0% Debt Service $9,079,440 3.1% Citywide Fund Balance Summary 2022 RESERVE BALANCE SUMMARY Estimated 2022 2022 Inc in Estimated % of 2022 Beg. Projected Proposed (Dec in) 2022 Ending Prop Fund Balance Revenues Expenditures Reserves Balance Exp General Fund 2 $ 14,335,190 $ 69,128,789 $ 68,946,683 $ 182,106 $ 14,517,296 21.1 % Parks and Recreation 913,962 5,565,769 6,179,811 (614,042) 299,920 4.9 % Street&Traffic Operations 1,133,950 6,478,808 6,476,301 2,507 1,136,457 17.5 % General Government Subtotal 16,383,102 81,173,366 81,602,795 (429,429) 15,953,673 19.6 % Other Governmental Operating Funds 12,831,025 28,823,781 18,308,377 10,515,404 23,346,429 127.5 % Government Capital Funds 11,733,709 35,792,287 30,915,352 4,876,935 16,610,644 53.7 % Enterprise Operating Funds 29,605,218 66,959,553 74,090,502 (7,130,949) 22,474,269 30.3 % Enterprise Capital Funds 32,186,736 35,539,541 49,407,226 (13,867,685) 18,319,051 37.1 % Internal Service Funds 3,223,023 11,187,401 9,813,04.8 1,374,353 4,597,376 46.8 % Employee Benefit Reserve 5,304,968 16,714,350 17,029,581 (315,231) 4,989,737 29.3 % Risk Management Reserves 3,555,419 5,826,575 5,636,355 190,220 3,745,639 66.5 % Debt Service&Agency Funds 2,560,778 7,100,227 7,100,485 (258) 2,560,520 36.1 % Total $ 117,383,978 $ 289,117,081 $ 293,903,721 $(4,786,640) $ 112,597,338 38.3 % Questions ? Next session -October 7th @ 9am 1 ^ it II Clear — Reliable — Trustworthy 24 car (Ilk City of Yakima Financial I4lanagement Policy e Stewardship of c'ub(ic Tunis Tony O'Rourke, City Manager Cindy Epperson, Director of Finance & Budget 129 North 2nd Street Yakima, WA 98901 25 7a6Ce of Contents Introduction 1 Policy Statement Lines of Authority 2 Yakima City Council City Manager Finance Department Department Supervisors Accounting Records and Reports 2 Basis of Accounting Basis of Budget Fund Accounting Financial Reporting Audit Capital Asset Accounting Reserve Fund Balance Policies 5 General Government Utility Enterprise Other Enterprise Debt Service Equipment Replacement Non-Enterprise Capital Risk Management Other Funds 26 Financial Planning 7 5 Year Financial Planning Model Budget Development Budget Management Revenues 10 Fees and Charges Utility Rates and Capital Fees Expenditures 11 Capital Facilities Plan 11 Cash Management and Investment 13 Purchasing 13 Capital Financing and Debt Management 14 Policy on Debt Issuance and Management Long-term Borrowing Term of Debt Interim Financing Utility Improvements Debt Issue Debt Issuance Team Bond Proceeds Disclosure Pension / Other Post-employment Benefits (OPEB) 16 27 City of'Yakima FINANCIAL MANAGEMENT POLICY & STEWARDSHIP OF PUBLIC FUNDS Policy Statement The City of Yakima is committed to the highest standards of financial management. The City Council,City Manager, and staff will work together to ensure that all financial matters of the City are addressed with care and integrity and with the best interests of the City in mind. The City Council and staff shall comply with the guidelines set forth herein. Any recommended deviation from these policies shall be clearly identified in appropriate written documentation (e.g.,staff report, resolution, or budget presentation). These policies are intended to be applied in conjunction with requirements set forth in state law,the City of Yakima Municipal Code, the City of Yakima Charter, and Generally Accepted Accounting Principles (GAAP). In the case of any conflict,the provisions of such laws, ordinances, or GAAP will control. The rules and procedures contained in this section are designed to: • Protect the assets of the City of Yakima. • Ensure the maintenance of open and accurate records of the City's financial activities. • Ensure the availability of sufficient financial resources for the City to meet both its immediate and long-term objectives. • Provide a framework of operating standards and behavioral expectations regarding fiscal matters. • Ensure fiscal compliance with federal,state, and local legal and reporting requirements. • Provide a means for the City Council to update and monitor these policies with the assistance and cooperation of the City Manager's office and the Finance Department. Page 1 28 Lines of Authority Yakima City Council -has the authority to execute such policies as it deems to be in the best interests of the City within the parameters of federal, state, and local law. City Manager- has the authority to oversee the development of the budget, make spending decisions within the parameters of the approved budget, enter into contractual agreements, make capital asset purchase decisions, and make decisions regarding the allocation of expenses within designated parameters. Unless otherwise specified in this document, the City Manager is responsible for complying with the directives listed herein. Finance Department- has the authority to develop the budget, review the organization's financial activity, determine the allocation of investment deposits, assure that adequate internal controls are in place, and to administer the financial policies and procedures of the City. Department Supervisors -have the authority to expend City funds within approved budget authority and in accordance with procedures prescribed by the City Manager, and to recommend spending requests,within the parameters of the approved budget process, to the City Manager. The City maintains a comprehensive set of internal controls to protect the City's assets and sustain the integrity of its financial systems. Managers at all levels are responsible for implementing the City's Financial Policies, sound internal controls, and for the regular monitoring and measuring of their effectiveness. Accounting Records and Reports Basis of Accounting The City's Comprehensive Annual Financial Report (CAFR) on its financial activity shall be presented in compliance with Generally Accepted Accounting Principles (GAAP) as defined by the Governmental Accounting Standards Board (GASS). Page 2 29 • The City will establish and maintain a high standard of internal controls and accounting practices. • The accounting system will maintain records on a basis consistent with accepted standards for local government accounting and the State of Washington Budgeting,Accounting, and Reporting Systems. (BARS) Basis of Budget • The City budget is presented on a modified accrual basis of accounting. Fund Accounting The City of Yakima's accounting and budgeting systems use fund accounting consistent with guidance provided by the GASB and the Washington State Auditor's Office. The funds are grouped into categories as prescribed by the State Auditor's Office and/or other regulatory authority. Funds can be created as needed by ordinance, or through the budget ordinance. The Finance Department shall assure that the status and transactions of each account and their relationship to budget authority is clear. Financial Reporting • The annual financial report shall conform to Generally Accepted Accounting Principles and be in the form of a Comprehensive Annual Financial Report (CAFR). • The CAFR shall be comprehensive,completed in — a timely manner, and meet or exceed professional industry standards established by the GFOA. • The City's budget documents shall include comparisons to prior years. • Revenue and expenditure reports shall be prepared quarterly, presenting a summary of financial activity by major types of funds, and shall include a comparison of actual user versus budgeted revenues and expenditures to ensure adherence to the approved budget. • A written analysis of the City's activity in the areas of Central Receivables, Investment, and Debt shall be prepared quarterly. • All published reports will be available via the City's website. Page 3 30 Audit The City shall commission an annual audit of the City's financial reports and related records to be conducted by the Washington State Auditor's Office, as required by state law. At the conclusion of the audit, the auditor shall be available to brief the City Council and City Manager on the financial opinion and the audit made available to the public via the City's website. Capital Asset Accounting An effective capital asset accounting system is important in managing the city's capital asset investment. • The City will maintain a schedule of individual capital assets with values in excess of$5,000 and an estimated useful life of more than one year. All items with an original value of less the$5,000,or with an estimated useful life of one year or less,will be recorded as operating expenditures. • A fixed asset system will be maintained to identify all City assets and their location. • The City shall maintain a listing, outside of the capital asset system, of all computers and shall conduct a periodic physical inventory of those computers. • The City's Fleet Management Division shall maintain a Fleet Master Listing of all vehicles and other large motorized equipment (road graders,backhoes, etc.). The capital asset listing for vehicles shall be reconciled to the Fleet Master Listing at least annually. Inventory control of the City's vehicles shall be maintained through the fleet maintenance program. • Other non-infrastructure capital assets of the City shall be inventoried on a two year cycle. Page 4 31 I 44-4 I I I Reserve Fund Balance Policies — j The primary reason for a General Fund reserve policy is to be prepared for contingencies,but there are principle reasons for building cash reserves: • Large unforseen one-time expenditures/expenses of an emergent nature, such as a catastrophic event, a natural/manmade disaster (e.g. earthquake, windstorm, flood, terrorist attack), or excessive liability judgments. • Economic downturn or other unanticipated events affecting revenue growth. • Reasonable cash reserves are needed to maintain favorable credit ratings. Sufficient fund balances and reserve levels are important to the long-term financial stability of the City. The City shall maintain reserves required by law, ordinance, and/or bond covenants. General Government The City shall maintain reserves in the General Government Funds of at least 16.7% (or 60 days) of the total budgeted operating expenditures. This target has been met at the end of 2012. When the General Government reserve balance exceeds 16.7%, the excess may be used for one-time capital needs or may be transferred to capital reserves or risk management reserves. Utility Enterprise The City will maintain operating reserves of 60 days or 16.7% in the Water, Wastewater, Irrigation and Stormwater Operations and Maintenance Funds. This operating reserve shall be created and maintained to provide sufficient cash flow to meet daily financial needs and will be based upon total operating expenses. For budgeting purposes, operating expenses will be calculated upon the funds' total expense budgets excluding Capital transfers and the current year's debt service. • The Water, Wastewater, Irrigation and Stormwater funds will maintain capital reserves to be funded on accordance with applicable capital facility plans. Each utility will strive to transfer minimum of annual depreciation expense for capital purposes (i.e. debt service principal and asset replacement). Page 5 32 Other Enterprise Other Enterprise funds consist of Refuse, Transit and Yakima Air Terminal. • The Refuse Fund will maintain an operating reserve of 12% or 45 days. • The Transit Fund will maintain an operating reserve of 16.7% or 60 days. • The Yakima Air Terminal will maintain an operating reserve of 12% or 45 days. • These funds will strive to fund capital replacement reserves to accumulate sufficient funds to 1) match capital grants for asset replacement in accordance with capital facility planning or 2) replace assets when needed to avoid service interruption. Debt Service The City shall accumulate resources sufficient to make required payments in general obligation debt service funds. Revenue Bond reserves shall be maintained in accordance with bond covenants. All debt service reserves shall be in addition to the operating and capital reserves of the utilities. Equipment Replacement • The City shall maintain an Equipment Rental Replacement Fund for all rolling stock except for transit and fire. Reserves shall be established for equipment acquisition and replacement. The reserve is established regardless of whether the equipment is acquired via lease,gift, or purchase. • Service charges paid by City departments to the Internal Service fund should include an amount to provide for replacements when required. • Transit and Fire are excluded from the Equipment Rental Replacement Fund, primarily because they own equipment purchased by grants or voted property tax measures. Reserves shall be established for equipment replacement in the respective capital funds with the long-term goal to fund at the level of annual depreciation. • Reserves for computer software and hardware will be established should the need continue beyond the estimated initial useful life. Information Technologies is currently an operating department in General Fund. In order to establish a separate reserve balance for computer technology, a separate internal service fund will be established to be funded by a fair and equitable Page 6 33 allocation formula for all operating funds using Information Technology services. Non- Enterprise Capital Other capital funds will strive to build reserves sufficient to replace assets when needed to avoid service interruption. Excess operating reserves will be calculated at the end of each operating year, and a recommendation will be made by the Director of Finance and Budget to the City Manager to make additional transfers into capital funds. The long-term goal is to fund at the level of annual depreciation. Risk Management • The City shall maintain a liability reserve fund with a balance sufficient to fund 100% of anticipated claims reserves established by the insurance carrier in consultation with City Legal. • The Workers' Compensation self-insurance fund shall maintain a cash reserve equal to 100% of anticipated claims reserves as established by the third party claim administrator. • The Unemployment Compensation self-insurance fund shall maintain a cash reserve equal to 100% of budgeted claims and settlement expenses. • The Employees' Health Benefit self-insurance fund shall maintain a minimum cash reserve as determined by the Washington State Risk Manager's Local Government Self-Insurance Program Guidelines. Currently, this benchmark is 16 weeks or 30% of medical claims, plus 8 weeks or 15% of vision and dental claims. Other Funds Reserves shall be set through the budget process in an amount consistent with the purpose and nature of the fund. Financial Planning 5 Year Financial Planning Model The City shall maintain a long-term (five- FAIli ti year) financial planning model. The financial planning model shall be based on the currently adopted budget,and _ _ f documented assumptions, realisticallyiS/1 expected to occur, and will be designed in Page 7 34 such a way to permit analysis of alternative strategies. The plan shall be prepared for the General Government and such other funds as deemed necessary. Budget Development The goals of the Budget and Strategic Plan are to align the budget with the citizen priorities and provide the best value for each tax dollar. The City shall prepare a balanced budget that is consistent with state law, industry best practices,and the 5-Year Financial Plan. The annual budget links resources with operating programs and projects consistent with the City's Strategic Plan. The budget will fund recurring expenditures with recurring operating revenues. In order to facilitate and implement the budget process, the City Manager will propose an annual budget calendar at the first regular Council meeting in July. • The budget calendar will be comprehensive in nature and generally provide for a process that resembles the Best Practices as published by the Government Finance Officers Association (GFOA) and in compliance with the calendar provided in Washington State Law. • The City of Yakima's annual budget shall be prepared using the following schedule and process as a general guide: o Review stakeholder input such as Annual Citizen's Survey, public forums, neighborhood meeting notes and business community communication. o The City Council and City Manager will conduct a goal-setting retreat with the Department Directors updating the approved Strategic Plan, Business Plan and other policy guidance. o The Director of Finance and Budget prepares the budget preparation instructions and meets with Department Directors to distribute budget instructions and discuss budget preparation. o The instructions will include policy priorities, estimates of compensation adjustments,internal service and indirect charges. o Departments will provide to Finance budget estimates and requests conforming to the budget instructions. o The City Manager submits a proposed balanced Preliminary Budget to the City Council in conformance with state law. o Balanced budget should comprise of funding recommendations for the operating and capital budgets that do not exceed the estimated resources. o The City Council conducts public hearings on the proposed budget in conformance with state law. Page 8 35 o The City Council sets the City's property tax levies. o The City Council adopts the final budget ordinance. o The final budget document is published and posted to the City website. Budget Management %" The City will maintain a fair and equitable system to allocate overhead and other shared costs. The . : amount charged by the City for services provided under an interlocal or similar agreement will include a factor to cover the city's overhead costs when appropriate. Annual appropriated budgets are adopted at the fund level within available resources (i.e. new revenue and existing reserves). Operating program appropriations not spent during the fiscal year do not automatically carry-over into the next year and may lapse at year end. Encumbrances are purchase orders, contracts, and other commitments for the expenditure of funds. Outstanding encumbrances at the end of the year can be carried forward into the next year's budget by a formal budget appropriation authorized by Council. Capital budgets are considered adopted at the project level. Capital projects are included in the annual budgeting process for the purpose of estimating cash flow requirements. Outstanding project appropriations can be carried forward into the next year's budget by the Finance Department. Budget amendments should be presented for consideration when the need arises. Council will be apprised if the proposed funding is new revenue (most commonly grant awards) or is from existing reserves within the minimum guidelines. The City Council shall approve the number of permanent City staff positions, their classification and their assignments to specific City funds when it adopts the City's Budget. The City will utilize one-time revenues only for one-time/non-recurring expenditures or to build reserves such as the capital reserve fund. Page 9 36 The cashout of accrued leave upon separation of service from the City will be included in the appropriate operating budget if quantifiable at the time of budget development. Generally, the savings from the resulting vacancy is sufficient to fund this one-time expenditure. In cases where the current budget cannot absorb an unforeseen cashout, the City Manager may re-allocate funds or request a supplemental appropriation for Council approval. Revenues Revenue estimates shall be based on forecasting methods recommended by the Government Finance Officers Association (GFOA) and shall assess the full spectrum of resources available to finance City programs and services. The City shall consider the diversification of revenue as a strategy when developing its financial plans. The City will strive to maintain as diversified and stable a revenue system as permitted. Because revenues, especially those of the General Fund, are sensitive to both local and regional economic activities, revenue estimates provided to the City Council shall be conservative. Should an economic downturn develop that results in (potential) revenue shortfalls or fewer available resources, the City will make appropriate adjustments to its budget. The City will not use one-time revenues to support ongoing expenditures. Policy on Fees and Charges The City shall review all fees for licenses, permits, fines, rates,and other miscellaneous charges at least every two years as part of the budget process. A schedule will be established to review about half of the divisional fees each budget year. User charges and fees shall be established based on a percentage of the full cost of providing the service unless otherwise provided by statute or regulation. Proposed rate adjustments, user charges,and fees shall be presented to the City Council for approval each year in the Preliminary Budget. Utility Rates and Capital Fees Utility rates should be adequate to ensure reliable, competitively priced services for our customers. Net reserves in excess of both legal requirements and minimum working cash balances should be used to minimize future rate increases by funding approved capital projects, retiring high cost debt, and augmenting fund reserves established to reduce ratepayer risk. Page 10 37 Utility rates and capital fees shall be reviewed annually, and necessary adjustments shall be made to reflect inflation, construction needs,and avoid major rate increases. Utility rate studies shall be conducted at least every six years to update assumptions and to ensure the long-term solvency and viability of the City's Utilities. System Development Charges (SDCs') shall be established at levels to ensure that all customers seeking to connect to the City's utility systems shall bear their equitable share of the cost of both the existing system and future systems. Expenditures • Management shall ensure compliance with the legally adopted budget. Additional purchases and expenditures must comply with legal requirements for approval. Priority shall be given to expenditures that will improve productivity or public safety. • Expenditures will be accounted for in the appropriate accounts. Capital Facilities Plan The purpose of the Capital Facilities Plan is to systematically identify, plan, schedule,finance,track, and monitor capital projects to ensure cost-effectiveness as well ]"r as conformance to established policies. I � I ____/./7,0 The City Manager will annually submit a financially balanced, multi-year comprehensive plan for review by the r City Council pursuant to the timeline established in the annual budget preparation schedule. The comprehensive plan will incorporate a methodology to determine a general sense of project priority according to developed criteria. The Capital Facilities Plan shall provide: • A statement of the objectives of the Capital Facilities Plan and the relationship with the City's Strategic Comprehensive Plan, department master plans, necessary service levels, and expected facility needs. • An implementation program for each of the capital improvements that provides for the coordination and timing of project construction among various city departments. Page 11 38 • An estimate of each project's costs, anticipated sources of revenue for financing the project, and an estimate of the impact of each project on city revenues and operating budgets. The operating impact information shall be provided for the period covered in the city's current five year Capital Facilities Plan. No capital project shall be funded unless operating impacts have been assessed and the necessary funds can be reasonably anticipated to be available when needed. • For the systematic improvement,maintenance, and replacement of the city's capital infrastructure as needed. • A schedule of proposed debt requirements. All proposed capital improvement projects shall include a recommended or likely source of funding. The performance and continued use of capital infrastructure is essential to delivering public services. Deferring essential maintenance and/or asset replacement can negatively impact the condition of assets and infrastructure as well as the ability to appropriately plan for required major maintenance and replacement needs. Efforts will be made to allocate sufficient funds in the multi- year maintenance, and repair and replacement of critical infrastructure assets. The city's objective is to incorporate "Pay-As-You-Go" funding (using available cash resources) in the annual Capital Facilities Plan. This will supplement funding from other sources as such bonds, grants,and developer contributions. Private development (including residential, commercial,and industrial projects) shall pay its fair share of the capital investments that are necessary to serve the development in the form of system development charges, mitigation fees, or benefit districts. When current revenues or resources are available for capital improvement projects, consideration will be given first to those capital assets with the shortest useful life and /or to those capital assets whose nature makes them comparatively more difficult to finance with bonds or lease financing. Using cash for projects with shorter lives and bonds for projects with longer lives facilitates "intergenerational equality", wherein projects with long useful lives are paid over several generations using the project through debt service payments. Page 12 39 The first year of the adopted capital plan will be the capital budget for that fiscal year. Staff will monitor projects in progress to insure their timely completion or to recommend appropriate adjustment to the Capital Facilities Plan as approved by Council if a project is delayed or deferred. Periodic status reports will be presented to City Council to share project progress and identify significant issues associated with a project. The City will make capital improvements in accordance with an adopted Capital Facilities Plan (CFP), which is aligned with the City's other long-range plans. The City will determine the least costly financing method for all new projects. The City will dedicate an ongoing$2 million annually for road restoration and rehabilitation. Cash Management and Investment The City will invest public funds in a manner which will provide the highest return consistent with maximum security. The City has a separate Investment Policy that governs this activity. All money collected by any officer or employee is to be transfered to the Department of Finance for deposit. The internal controls established by the Department of Finance includes: segregation, daily processing, timely deposits, and reconciliation of ledgers in a timely manner, physical security procedures, and the use of automated system resources. The City of Yakima shall process all vendor claims timely and efficiently. All payment of vendor claims shall be in accordance with Washington law and shall be adequately documented and approved. Purchasing �� Purchasing facilitates the timely procurement /0%."4„„„•-:k of goods and services to help customers fulfill their missions by providing cost effective 1opportunities to purchase quality goods and i` services at the best value while conducting ��) Page 13 40 business in a legal, fair, open, and competitive manner. The City has a separate Purchasing Procedure Manual that governs this activity. Page 14 41 Capital Financing and Debt Management Policy on Debt Issuance and Management The City shall work to maintain strong ratings on its debt including maintaining open communications with bond rating agencies concerning its financial condition. Currently Standard and Poor's has rated the City A+ for general obligation and AA- for Water/Wastewater revenue bonds. Long-term Borrowing Long-term borrowing shall be confined to capital investments or similar projects with an extended life when it is not practical to be financed from current revenues. The City shall not use long-term debt to finance current operations. Term of Debt Debt payments shall not extend beyond the estimated useful life of the project being financed. To the maximum extent possible, the City will fund its It capital needs on a pay-as-you-go basis. 11111 I Interim Financing ti<< I With Council approval, interim financing of capital projects may be secured from the debt financing market place or from other funds through an Interfund loan as appropriate in the circumstances. Utility Improvements Financing of utility improvements will be consistent with the utility master plans,Council rate policies, and other factors in order to balance the effect of major improvements on utility rates. System development charges, grants, and low interest loans to fund capital projects shall be used when possible. Overall, the utilities should maintain a debt-to-equity ratio of 60/40. The City shall strive to maintain minimum debt service "coverage" in accordance with bond covenants. Debt Issue The City shall strive to use special assessment, revenue, or other self-supporting bonds in lieu of general obligation bonds. Long-term general obligation debt shall be utilized when necessary to acquire land or capital assets based upon a review of the ability of the City to meet future debt service requirements. The Page 15 42 project to be financed should also be integrated with the City's long-term financial plan and Capital Facilities Plan. General obligation debt should be used when the related projects are of a benefit to the City as a whole. Every project proposed for financing through general obligation debt should be accompanied by a full analysis of the future operating and maintenance costs associated with the project. The City should avoid issuing general obligation (non-voted) debt beyond seventy percent (70%) of its general obligation debt capacity in order to maintain a reserve for emergencies. The City shall use refunding bonds where appropriate to achieve cost savings of approximately 4% net present value (NPV), to restructure its current outstanding debt,and/or improve restrictive bond conditions. The City shall evaluate the best method of sale for each proposed bond issue. When a negotiated sale is used, the City shall consider using an independent financial advisor to advise the City's participants in matters such as structure, pricing, and fees. These services shall be regularly monitored by the Finance Department. Debt Issuance Team In order to effectively plan and fund the City's capital investment projects, a team will be established for each debt issuance. The staff team members shall consist of the City Manager, a Finance Department representative, and applicable department management representative(s) (related to the projects to be financed). External team members shall consist of Bond Legal Counsel and a financial advisor and/or underwriter with demonstrated experience in Washington State debt issuance when appropriate. By state law, Council is required to authorize a debt issuance. Bond Proceeds The City shall comply with IRS regulations concerning use of and reinvestment of bond proceeds. The City shall monitor and comply with IRS regulations with regard to potential arbitrage earnings. If arbitrage earnings are believed to be above amounts provided by IRS regulations,the City will set aside earnings in order to pay the appropriate amount to the federal government as required by IRS regulation. Page 16 43 Disclosure The City shall provide full secondary market disclosure related to outstanding debt. Pension/ Other Post-Employment Benefits (OPEB) Liabilities The City has pension obligations for retired police officers and firefighters hired prior to March 1, 1970. The 1011 , Washington Law Enforcement Officers and Firefighters Retirement System (LEOFF 1) pays pension benefits for eligible employees working when that system was established. However,LEOFF 1 statutes call for the � employing agency to cover 100% of medically necessary costs for the life of the employees working on March 1, 1970 q and hired before the closing of the LEOFF 1 system in 1977. T• City has contracted for actuarial studies to be done e y 5 years for these benefit programs (Police and Fire sions and medical obligations). Historically, these benefits have been funded on a "pay-as-you-go" basis, which is substantially below the actuarial determined contributions. The current Unfunded Actuarial Accrued Liability (UAAL) of LEOFF 1 Fire and Police pensions and post-employment medical benefits, along with post- employment benefits arising from allowing retirees to remain on the City's self- insured medical plan with the same premium as active employees total $74.9 million. The City will strive to increase its funding level of pre-LEOFF pension and LEOFF 1 medical obligations. Related Documents ➢ Investment Policy - Ordinance 2011 - 134 (6/9/11) ➢ Contracting Policy (Purchasing Authority) ➢ Interfund Loans - Ordinance 2013 - 011 (3/19/13) Page 17 General Fund Reserve Policy Comparison City Population Minimum Reserve Bellevue 148,164 15% of General Fund revenues Everett 111,475 20% of operating revenues Kent 132,319 18% of current year budgeted expenses Pasco 75,432 90 days worth of expenditures Renton 101,751 12% of operating expenditures Richland 58,225 16.7% of operating expenditures Tukwila 20,347 18% of previous year revenues Yakima 93,637 16.7% of expenditures Police Equipment Replacement Schedule Vehicle Type Beg Bal 1992-2010 2011-2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 CAR $2,237,057.86 $ (49,301.99) $(1,842,137.91) $ (88,476.75) $ (70,840.24) $ (60,522.99) $ (38,394.33) $ (21,908.79) $ (21,908.79) $ (16,926.05) $ (14,464.02) $ (11,751.99) $ (424.02) $ - $ - MOTORCYCLE $ 259,824.10 $ - $ (208,022.98) $ (18,029.49) $ (18,029.49) $ (7,871.07) $ (7,871.07) $ - $ - $ - $ - $ - $ - $ - $ - OTHER $ 452,067.68 $ (66,465.17) $ (237,138.38) $ (23,636.29) $ (23,636.29) $ (23,116.93) $ (22,820.77) $ (22,820.77) $ (22,820.77) $ (9,612.28) $ - $ - $ - $ - $ - SUV $3,167,610.96 $ - $(2,468,787.72) $(118,077.85) $ (118,077.85) $ (118,077.85) $ (118,077.85) $ (83,099.37) $ (54,037.64) $ (30,586.33) $ (16,611.28) $ (16,611.28) $ (10,312.78) $ (7,626.60) $ (7,626.60) TRUCK $ 24,563.15 $ - $ (8,187.72) $ (1,364.62) $ (1,364.62) $ (1,364.62) $ (1,364.62) $ (1,364.62) $ (1,364.62) $ (1,364.62) $ (1,364.62) $ (1,364.62) $ (1,364.62) $ (1,364.62) $ (1,364.62) VAN $ 121,675.76 $ (61,352.89) $ (39,995.37) $ (3,819.93) $ (3,819.93) $ (3,819.93) $ (3,819.93) $ (2,523.90) $ (2,523.90) $ - $ - $ - $ - $ - $ - Annual Depreciation/Replacement $6,262,799.51 $(177,120.04) $(4,804,270.07) $(253,404.93) $ (235,768.42) $ (214,773.39) $ (192,348.57) $ (131,717.45) $ (102,655.72) $ (58,489.28) $ (32,439.92) $ (29,727.89) $ (12,101.42) $ (8,991.21) $ (8,991.21) Annual Equip Replacement Funding $1,000,000.00 $1,000,000.00 $1,000,000.00 $1,000,000.00 $1,000,000.00 $ 1,170,547.86 $ 32,439.92 $ 29,727.89 $ 12,101.42 $ 8,991.21 $ 8,991.21 Accumulated Replacement Funding $1,000,000.00 $2,000,000.00 $3,000,000.00 $4,000,000.00 $5,000,000.00 $ 6,170,547.86 $6,202,987.78 $6,232,715.67 $6,244,817.09 $6,253,808.30 $6,262,799.51 Accumulated Replacement Funds Needed $(6,170,547.86) Fire Equipment Replacement Schedule Vehicle Type Beginning Balance 1992-2000 2001-2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031-2039 FIRE TRUCK $ 5,087,557.90 $(14,429.85) $ (2,566,942.29) $(239,948.05) $ (239,948.05) $ (220,531.65) $ (210,998.40) $ (210,998.40) $ (210,998.40) $ (198,463.35) $ (186,984.38) $ (175,792.76) $ (137,333.81) $ (474,188.53) OTHER $ 181,127.82 $ (3,200.00) $ (124,023.21) $ (16,812.36) $ (6,739.25) $ (6,739.25) $ (6,739.25) $ (6,739.25) $ (6,739.25) $ (825.33) $ (825.33) $ (825.33) $ (92.00) $ (828.00) SUV $ 363,985.64 $ (4,569.80) $ (312,762.20) $ (14,950.62) $ (8,909.91) $ (6,754.32) $ (3,645.17) $ (3,645.17) $ (3,645.17) $ (1,701.10) $ (1,701.10) $ (1,701.10) $ - $ - TRUCK $ 682,928.81 $(43,617.89) $ (451,187.34) $ (27,605.37) $ (27,605.37) $ (26,228.91) $ (26,228.91) $ (10,828.29) $ (10,828.29) $ (10,828.29) $ (10,828.29) $ (10,828.29) $ (10,828.29) $ (15,485.28) VAN $ 18,437.00 $ (7,374.80) $ (11,062.20) $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - Annual Depreciation/Replacement $ 6,334,037.17 $(73,192.34) $ (3,465,977.24) $(299,316.40) $ (283,202.58) $ (260,254.12) $ (247,611.72) $ (232,211.10) $ (232,211.10) $ (211,818.07) $ (200,339.09) $ (189,147.48) $ (148,254.10) $ (490,501.81) Annual Equip Replacement Funding $ - $2,000,000.00 $ 800,000.00 $ 800,000.00 $ 800,000.00 $ 800,000.00 $ 105,794.69 $ 200,339.09 $ 189,147.48 $ 148,254.10 $ 490,501.81 Accumulated Replacement Funding $2,000,000.00 $2,800,000.00 $3,600,000.00 $4,400,000.00 $5,200,000.00 $ 5,305,794.69 $5,506,133.78 $5,695,281.26 $5,843,535.36 $6,334,037.17 Accumulated Replacement Funds Needed $(5,305,794.69) , ‘ 4 , " CITY OF • /....40 liiiir 47 /i lc•-• ..e..,, i . if-ii • 1.•31 #1',,V.s.. ..*. ,I Yakima v. ,,,, •..• .•... l \ ev•-o � WashingtonI ........„,_„‘„:%„.„...,,,..„,„„„„, � 1 1 . �:OR AT EV `�.�� 111041:4);A: e,..." ild,,,c4e I .1 "Sill tt: , '°,1 1 .., , 0 • '411111 V a 1 i s I- • . • L. _ • i. s- ' 1 11'& . 000 S ..._•00 1 41. 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',1,1j1,,Ap4 R�.v �� CITY of Yakima 2022 PRELIMINARY BUDGET TABLE OF CONTENTS Page Budget Summary Introduction 1 Challenges / Recommendations 5 Revenues . _ 7 Expenditures . . . . 17 Debt Service . . . 20 General Fund Financial Health / Fund Balance . . . . . . . . . 25 Other Funds . . . . . . . . . . . . . 27 Preliminary Budget by Functional Grouping 29 See the 2022-2026 Capital Budgets document for detailed information on capital budget items. 50 51 INTRODUCTION The budget process requires us to evaluate annually the city's priorities,both city services delivery and maintaining infrastructure,across many funds,being mindful of long-term fiscal sustainability. The goals of the 2022 Budget are: 1. Achieve a balanced budget in every fund. 2. Assure appropriately-prioritized service delivery. 3. Preserve General Fund's fund balance. 4. Establish funding for equipment replacement for Public Safety(Police&Fire)vehicles. The City of Yakima seeks to improve the quality of the budget document every year to provide a more comprehensive and understandable document. Having added revenue forecasting and debt detail in the prior three years,last year's budget added a 5-year Capital Project fund planning. Year one of the five-year capital budget is incorporated into the balanced adopted budget,while years two through five show commitments and consequences that should be considered in advance. The full version of the budget will include department accomplishments and goals and objectives that support the Councils Strategic Priorities. Department directors and managers began a continuous review of ongoing current year budget-to-actual expense management,formulate 2021 year-end estimates and project 2022 proposed budget figures based on known circumstances that pertain to each program under their management. The City relies on budgetary controls,with multiple levels of review,as part of the overall system of checks and balances to manage service delivery and monitor that the underlying funding is being received as budgeted. Finance staff meet with managers quarterly and inform both the public and city council through quarterly financial reports in regularly-scheduled public meetings. Two new funds were added in 2021: 1) A Special Revenue Fund 136"Clean City Fund" to account for the utility tax increase imposed on the City's waste systems'commercial refuse collection to be used to meet Clean City program objectives and 2) an"American Rescue Plan Act(ARPA) Fiscal Recovery Fund"to account for the award and future expenditure of the American Rescue Plan Act funds. The budget process starts at the beginning of the year,with strategic planning. The most recent Strategic Priorities of Yakima's City Council are: 1. Public Safety 2. Fiscal Sustainability 3. Housing 4. Strengthening Partnerships 5. Investment in Infrastructure 2022 Budget Challenges In March 2020,the City of Yakima declared an emergency for the COVID-19 pandemic,in line with the State and County. As in most cities in America,the economic consequences of business restrictions and closures impacted the City's Sales Tax,Lodging Tax,Building Permit Fees,Business Licenses,Fire Inspection fees,Utility Tax,Gambling Tax,Parking Enforcement and various criminal justice revenues. County-wide,new COVID cases and new variants of the COVID-19 virus continue to be a concern primarily due to evidence of an increase in transmissibility. several departments in the City have experienced a reductions in staffing as a result. The 2022 Budget is designed to aid the City of Yakima understand the revenue and expenditure forecast and its impact on the City's financial reserves. An enhanced Capital Budget document has been added to the budget to provide a long-range view of infrastructure and capital expenditures. There is also ongoing discussion regarding City of Yakima/2022 Preliminary Budget-1 52 perpetual vehicle replacement in 2022. The primary purpose of this document is to provide context for present and future budget decisions and to understand the long-term financial impacts. Specifically,the 2022 Budget needs to be sensitive to: • Maintaining General Fund reserves. The estimated year-end balance is$14,517,296(21.1%). • Implementing a scheduled Capital expenditures plan and increasingly implementing pay-as-we-go to reduce avoidable financing costs. • Fitting debt service in to existing revenue streams and service levels. • Expenses in 2022 mirror 2021's plus obligations such as contracts and approve staffing changes and modifications. • Factor in new known realities and positioning for contingencies. The COVID-19 emergency continues to be an on-going event hindering revenue and expenditure forecasting and the ability to deliver city services which would be affected by revenue downturn. Since 2015,City Council has made the General Fund's fund balance a top strategic priority. Recognizing the inter- relationships across all funds,the following chart summarizes how the preliminary 2022 projected budget currently predicts resulting fund balances by category,pending further decision-making. In this table,the negative Parks& Streets number represents use of fund balance from prior year transfers,while the negative figures for Debt and and Enterprise Construction largely reflect the timing of expenditures of balances carried forward from prior year. For example,the spending down of funds received in prior years restricted to Arterial Streets projects represents a legitimate expenditure in excess of in-coming revenues. 2022 PRELIMINARY BUDGET FUND BALANCE IMPACT 2022 Projected Budget Surplus Revenues Expenditures (Deficit) General Fund $ 69,128,789 $ 68,946,683 $ 182,106 Parks and Streets 12,044,577 12,656,111 (611,534) Restricted Funds(100's) 34,802,491 24,099,723 10,702,768 Debt(200's) 4,618,610 4,618,868 (258) Capital(300's) 29,813,577 25,124,006 4,689,571 Enterprise Construction(400's) 104,316,444 125,315,078 (20,998,634) Transfers(500's) 33,728,326 32,478,984 1,249,342 Agency(600's) 652,267 652,267 Trust(700's) 12,000 12,000 Total Projected Budget $ 289,117,081 $ 293,903,720 $ (4,786,639) 2-City of Yakima/2022 Preliminary Budget 53 The following two charts compare the 2021 projected year-end estimate and preliminary proposed 2022 budget by fund groupings. The first chart showing expenditures and the second chart showing revenues. 2022 VS. 2021 EXPENDITURE BUDGET COMPARISON 2021 2022 2021 vs.2022 Year-End Proposed Budget Estimate Expenditures %Change General Fund $ 66,354,486 $ 68,946,683 3.9% Parks 5,574,682 6,179,811 10.9% Streets&Traffic 6,287,622 6,476,301 3.0% General Government Total 78,216,790 81,602,795 4.3% Utilities/Other Operating 96,030,747 102,211,927 6.4% Capital Improvement 1 61,127,581 80,322,577 31.4% Risk Management Reserves 5,140,960 5,636,355 9.6% Employee Benefit Reserves 16,724,961 17,029,581 1.8% Trust and Agency Funds 670,057 664,267 (0.9)% Debt Service 6,512,255 6,436,218 (1.2)% Total-Citywide Budget $ 264,423,351 $ 293,903,720 17.8% 2022 VS. 2021 REVENUE BUDGET COMPARISON 2021 2022 2021 vs.2022 Year-End Proposed Budget Estimate Expenditures %Change General Fund $ 67,394,079 $ 69,128,789 2.6% Parks 5,428,200 5,565,769 2.5% Streets&Traffic 6,506,149 6,478,808 (0.4)% General Government Total 79,328,428 81,173,366 2.3% Utilities/Other Operating 102,848,741 106,970,735 4.0% Capital Improvement 3 52,219,159 71,331,828 36.6% Risk Management Reserves 5,229,871 5,826,575 11.4% Employee Benefit Reserves 16,293,711 16,714,350 2.6% Trust and Agency Funds 670,057 664,267 (0.9)% Debt Service 6,453,256 6,435,960 (0.3)% Total-Citywide Budget $ 263,043,223 $ 289,117,081 9.9% 1 It is normal for these funds to accumulate reserves for the purpose of upcoming expenditures toward new equipment and facility improvements and then spend them down in large amounts. City of Yakima/2022 Preliminary Budget-3 54 _.......„..„......,,,,,x‘‘ F-4, ***** ***** l' '''• i .-- ... ., .., 0,, hc••• - . 'I 6..p,..44 s • : ,,, 1 Q....\‘46por .:p. ‘I ••-----ov Y. l ''". o is+ . • ,f � •. .• : ...) '1,-.. ••• ••. t' ':. .4 ,.0 '•••' .NisiS ,,, 11k 4'PORATED %k••vv,,,,.----''''' 4-City of Yakima I 2022 Preliminary Budget 55 GENERAL FUND CHALLENGES 1 RECOMMENDATIONS The Preliminary 2022 Budget,as in most years at this phase of the process,has a General Fund(001)that has many more demands on it than funding will accommodate. Staff has met with multiple departments over multiple iterations to explore possible options to stay within forecasted funding levels. A long-term approach is imperative to preservation of General Fund fund balance and critical in the demonstration of improved financial position. Staff has left no revenue nor expenditure possibility out of consideration for potential manageable opportunities. Challenges identified during 2020/2021 that should be addressed in 2022 • COVID-19 is a continuing event clouding the forecasting of several revenue sources. • Police and Fire vehicle replacements have been deferred in past budgets. Police vehicles require a contribution of approximately$1,000,000 each year to perpetually replace all police patrol and detective vehicles,$800,000 for the Fire Department to perpetually replace all fire vehicles. While many of these vehicles were replaced with revenue loss from ARPA funding this year,a long term solution needs to be found. • Long-term Capital Expenditure planning is a key component of balanced budgeting;current-year operational needs compete for resources with infrastructure repair and maintenance. Over 20 Capital funds are included in this year's budget,providing balanced long-term decision-making. Budgeting continued capital expenditures for the Mill Site is an example of this challenge. Immediate Recommendations • The current COVID-19 emergency must be overcome. • Staff has made significant expense cutbacks and assumptions to arrive at a balanced budget. No doubt there are additional options,issues and measures to consider during study sessions. Staff has identified some policy issues that are currently excluded from the proposed budget and expects further policy-level prioritizing discussions. • Council is requested to review staff presentations on the services that are in or out of the proposed budget, consider strategic priorities,and give staff feedback and direction on reserve and service levels. • Policy-level guidance is sought from city council on long-term priorities which,in aggregate,exceed foreseeable resources and therefore require strategic planning and will be discussed in study sessions. Long-term Recommendations Past bond rating analysis has cited two factors-General Fund reserve levels and the local economy measured by average household income-as impediments to the City's fiscal health. Staff is recommending increases to General Fund Reserve Policy from 16.7%to 25%in order to better handle unforeseen circumstances that regularly impact the City's ability to maintain current levels of service. Longer-term solutions include many efforts through normal service delivery that allows the City's private sector to thrive,which leads to the improved Sales Tax revenue that a healthy,thriving economy and an expanding population produces naturally. Further,the City's normal service delivery that allows the City's property owners to thrive and enjoy improved property values will similarly produce an improved Property Tax revenue over time. • Millsite landfill mitigation and road construction is an investment in future Property and Sales Tax revenue. • Future development is an opportunity for businesses that raise the average household income. • With sustained population growth,the city is likely to experience normal growing pains as service levels require additional staff,vehicles,equipment and other resources. City of Yakima/2022 Preliminary Budget-5