On June 22, City Manager Ray Casey informed the city council that three entities would be open as a joint item regarding the city council, Successor Agency to the Yucaipa Redevelopment Agency and the Yucaipa Housing Authority for the fiscal year 2020-2021 budget and Capital Improvement Program (CIP).
At the June 8 council meeting, the city council, board members of the Successor Agency to the Yucaipa Redevelopment Agency and the Yucaipa Housing Authority considered the 2020-2021 draft budget for all funds and the draft Capital Improvement Program for fiscal year 2020-2021. After careful consideration of the draft budget document, council directed staff to proceed with the preparation of the proposed budget for adoption.
The city continues to maintain its strong financial condition while making substantial investments in public infrastructure and public facilities throughout the community, despite the current economic environment. Yucaipa, like many cities, experienced reductions in total operating revenues over the period beginning nine years ago, including the loss of Redevelopment funding. After four years of positive trending General Fund revenues, Yucaipa was hit with unsustainable public safety cost increases this year, followed by the current coronavirus recession. Sales tax revenues are down significantly in FY 2019/2020 and are forecasted to stay down in FY 2020/2021 (15% below FY 2018/2019 levels), but according to the County Assessor’s office, property tax revenues are predicted to be slightly ahead of last year.
As a result of a long-term fiscally conservative approach to budgeting and expedient reallocation of resources to meet the needs of the community, the city was able to balance its budget in FY 2019/2020 without drawing from its General Fund balance. However, in order to cover the pandemic costs, the city did have to draw from its Fire Fund balance. With the completion of several service level options prioritized in the goals and objectives process and included in the 2019/2020 Budget, and “freezing” several others due to the COVID-19 recession, no new service level options are being promoted for FY 2020/2021, except as required, with a focus on completing current priorities in programs and projects.
The FY 2020/2021 proposed budget indicates operating revenues exceeding operating expenditures by just under $3,000 with all departments making cuts to training, materials, supplies, and contract budgets. With the Paramedic Assessment lacking an automatic CIP escalator clause, the city’s general fund will continue to subsidize the paramedic costs at ever increasing levels. Other projects and services are expected to be affected by both the COVID-19 recession and the growing Public Safety budget imbalance.
The budget has been developed with six very conservative strategies. 1) Conservative/worst case scenario as it relates to General Fund expenditures; 2) Impact on current levels of service is reduced to the best abilities and no new service level options be presented for council consideration. 3) Undesignated (unassigned) General Fund Balance for priority capital improvements is temporarily suspended and a new Development Impact Fee policy, including 50% repayment to the General Fund of all net Development Impact Fee payments be included with the final budget. 4) The Paramedic Assessment Program, as approved in 2004, was projected to cover expenses for a period of 10 years. Lacking an escape clause (CIP) and with ever increasing costs in the program, revenues exceeded expenses in the earlier years and expenses were expected to exceed revenues later on in the program. At council direction, staff completed a draft Fire Strategic Plan two years ago, but that plan was essentially put on hold with the results of the ensuing ballot measure (Measure E) which did not pass. 5) The Capital Improvement Program Budget has been based on conservative assumptions and despite the continuing “uptick” in commercial development in the community; residential permits are still below historic levels as a result of high sewer, water and school fees according to local builders. Development Impact Fees are still being estimated at conservative levels. 6) The 2020/2021 Proposed Capital Improvement Program Budget does not project any new capital improvement projects but rather continues to emphasize the completion of projects that had been on the list previously. Even without any new CIP, the city has a substantial number of capital improvement projects to be constructed over the next several years funded largely with Development Impact funds, Measure I, SB1 funding, grants and partnerships.
“In the last budget study session (June 8), staff encouraged council to make any revisions or suggested changes that we weren’t able to cover in that meeting between then and now,” said Casey.
Casey summarized the two changes that council provided which were the description for programming at the Yucaipa Performing Arts Center as “efficient.” The other change was the Interfaith Council has typically received $3,000 in funding from the city in the budget for the last several years and was left out of the draft that was submitted to council at the last meeting.
“Staff is recommending that council adopt and approve all of the actions in the staff report, the Successor Agency to approve item No. 1, and the Housing Authority approve recommendation No. 1,” said Casey.
The actions on the staff report of the six items included council to 1) Adopt Resolution No. 2020-11 approving Fiscal Year 2020-2021 Budgets for the city of Yucaipa General Fund, Special Revenue funds, Capital Projects funds, the Internal Service Fund, and the 2020-2021 Capital Improvement Program; and 2) Adopt Resolution No. 2020-14 adjusting the Appropriations Limit for Fiscal Year 2020-2021; and 3) Adopt Resolution No. 2020-41, adopting Measure I, five-year CIP; and 4) Adopt Resolution No. 2020-42, approving the revised five-year Capital Project Needs Analysis (CPNA) for fiscal years 2019-2020 through 2023-2024 and 5) Adopt Resolution No. 202-37, approving a list of projects for FY 2019-2020 funded by SB1 fund; and 6) Amend the Fund Balance Policy for the General Fund by decreasing the portion of the City’s General Fund Balance committee for severe economic emergencies from 30% to 20% of the annual operating budget.
The 20020-2021 Proposed General Fund Budget, including recommended Service Level Options, but excluding fire and paramedic related activities, projects total estimated revenues in the amount of $23,059,364 and expenditures in the amount of $23,056,429. This results in a net amount of General Fund revenues over expenses equal to $2,935. The total projected expenditure budget for Fire and Paramedic Services for Fiscal Year 2020-2021 is $5,997,536, which requires $732,135 from the Fire Fund Balance.
Mayor Pro Tem Denise Allen said, “Just for clarification, the budget subcommittee did meet today and we went over the budget.”
“We found it to be on target and of course we are continuing to explore ways to keep our emergency services budget (police, fire, paramedic) from having to dip into other services or funds that we are providing to the members of this community. We are going to try to continue to be creative and find solutions,” said Allen.
Councilmember Dick Riddell complimented staff for putting together a balanced budget “under very trying circumstances due to the Coronavirus and reduced income. I think staff did a great job of putting this together,” said Riddell.
Riddell made a motion to approve items 1-6 on the city council agenda. Councilmember Bobby Duncan seconded the motion and it carried 5-0.
The Successor Agency to the Yucaipa Redevelopment Agency
During FY 2011-2012, the legislature of the State of California eliminated every redevelopment agency (RDA) in the state and in order to effectively wind down any active projects/programs the Successor Agency to the Yucaipa Redevelopment Agency was formed. The purpose is to monitor those remaining activities to completion and exhaust or transfer any and all assets maintained by the former RDA. The Successor Agency will continue to be responsible for debt service payments on the outstanding bond issues and certain administrative expenses subject to the approval of the State Department of Finance (DOF). Staff anticipates that 2020-2021 Recognized Obligation Payment Schedules (ROPS) will likely be considered a last and final ROPS.
The Draft 2020-2021 Budget was presented to the Successor Agency on June 8. The Proposed Budget projects total expenditure for FY 2020-2021 in the amount of $690,333 and total revenues in the amount of $774,183 include the debt service requirements associated with the Tax Allocation Bonds issued in June 1998, 2004, and 2010.
Councilmember Greg Bogh called for a vote for the Successor Agency to the Yucaipa Redevelopment Agency item No. 1 which recommends the council to adopt Resolution No. 2020-13, approving the 2020-2021 Budget for the Yucaipa Housing Authority. Mayor David Avila made a motion to approve the item. Allen seconded the motion and it carried 5-0.
The Yucaipa Housing Authority
The Redevelopment Dissolution Law provides that upon dissolution of the redevelopment agency (RDA), the city, county, or city and county that authorized the creation of the RDA may elect whether to retain the housing assets and functions previously performed by the RDA. This was eliminated by the state of California also during FY 2011-2012, whereas the city of Yucaipa specifically elected to not retain the housing functions of the former RDA, and housing assets and functions were then transferred to the Yucaipa Housing Authority.
As the result, the Yucaipa Housing Authority became the “housing successor” under Health & Safety Code section 34176(b)(3) and therefore the Yucaipa Housing Authority should have been eligible for a housing entity administrative cost allowance. With the dissolution of RDAs, up until FY 2115-2016, there were no revenue sources available to fund housing obligations. As a result, all costs associated with administering housing related issues have been borne by the City’s General Fund.
This changed in FY 2015-2016 with the approval of the repayment of General Fund advances where the amount of 20% of the calculated loan repayment is set aside for housing-related obligations. Once the General Fund advances are fully paid, which occurred in FY 2017-2018, the housing set-aside allocations reverted back to zero. Unfortunately, the state of California, Department of Finance interpreted the law unfavorably to the city in that, the DOF claims that the allowance does not apply to public entities that actually created the Housing Authority so long as the creating entity “controls” the Housing Authority. As a result, the DOF has denied an allowance to the Yucaipa Housing Authority. The matter has been litigated and the appellate court has ruled in favor of the DOF. As a result, the anticipated Housing Administration Allowance is no longer expected.
The Draft 2020-2021 Budget was presented to the Yucaipa Housing Authority on June 8. The Proposed Budget projects total expenditures for FY 2020-2021 in the amount of $37,228 and total revenues in the amount of $0. Available funding options will be evaluated including the potential of utilizing a portion of the residual receipts from housing projects. The Authority will continue to incur a moderate level of expenses in the administration of three approved senior living projects.
Bogh called for a vote for the Yucaipa Housing Authority item No. 1 which recommends the council to adopt Resolution No. 2020-13, approving the 2020-2021 budget for the Yucaipa Housing Authority. Allen moved the item with the revision for the date to be changed from 2020-2019 to 2020-2021. Duncan seconded the motion and it carried 5-0.
Supporting documents are available for public view on the city of Yucaipa website at yucaipa.org.