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Meetings & Agendas

June 3, 2020 Staff Report 5.1 Fiscal Year 2020-21 Final Budget

Meeting Date:                  June 3, 2020
Agenda No.                      Item 5.2
Agenda Item Title:           Fiscal Year 2020-21 Final Budget
Proposal:                         None
Environmental:                Not a Project under CEQA
Staff Contacts:                Mark Bramfitt and Carole Cooper

Analysis  

Background

At its May 6, 2020, meeting, the Commission conducted a public hearing on its Fiscal Year 2020-21 Proposed Budget, which is required by state law, and subsequently adopted a budget of $845,510, which was recommended by the Budget Committee and staff. State law requires the Commission to conduct a public hearing on the Final Budget prior to June 15 of each year.

As directed by the Commission at the May meeting, staff circulated the adopted Proposed Budget to funding agencies for review and comment. Additionally, based on the adoption of the Proposed Budget, staff provided a listing of agency apportionments, which was developed by the Sonoma County Auditor’s Office from revenues reported to the State Controller’s Office for 2017-18. No comments from agencies have been received as of the date of the writing of this report.

Fiscal Year 2020-21 Final Budget

The Fiscal Year 2020-21 Final Budget, as proposed, reflects expenditures of $845,510 in Salaries and Benefits and Services and Supplies categories. This is an increase of $83,215, or about 11 percent over the current-year adopted budget of $762,295.

Apportionments from the County, the cities in the County, and the independent special districts are projected to provide $720,274 of the needed expenditure amount. Interest from invested cash is anticipated to provide an additional $10,000. Fee revenue, although tracked during each fiscal year, is not budgeted due to the difficulty of projecting the number and types of projects that will be submitted. Fee revenue does roll over to become part of the Commission’s Fund Balance, which is the final component of the revenue aspect of the Commission’s budget – a reserve to be used at the Commission’s discretion. For 2020-21, $115,236 of Fund Balance monies are projected to be used to balance expenditures and to defray a portion of funding agencies’ apportionments.

A spreadsheet providing information about expenditures, revenues, and Fund Balance is provided, for Commissioners’ information, in Attachment 2. Information about Salaries and Benefits and Services and Supplies categories is provided below.

Fiscal Year 2020-21 Final Budget: Salaries and Benefits

The Final Budget proposes expenditures of $652,295 for staff salaries and benefits and Commission stipends. This is an increase of $39,665, or about 6.5 percent, over the current-year budget of $612,630.

In accordance with a Memorandum of Understanding between LAFCO and the County, Commission staff are County employees who work only for Sonoma LAFCO. Staffing for 2020-21 is budgeted at the same level as in the current year: 3.20 Full-time Equivalent (FTE) positions: 1.0 FTE LAFCO Executive Officer; .80 FTE Assistant Executive Officer (Administrative Analyst III in the County job classification system); .90 FTE Analyst (Administrative Analyst I in the County system); and .50 FTE Commission Clerk (Administrative Aide in the County system).

As the Commission is aware, an outside consultant is conducting an organizational assessment to make recommendations regarding appropriate staffing and workload levels for Sonoma LAFCO. In that the results of the study will not be known until after the Commission considers the Final Budget, depending on the Commission’s determinations as a result of the study, staffing levels and/or designations could change next year and affect the budget numbers.

The bulk of the greater expenditure in the Salaries and Benefits categories for next year is found in four accounts.  

  • Account 50101 (Regular Wages) is projected at $362,200, an increase of $7,885, over the current-year adopted budget, to reflect a three percent cost-of-living (COLA) increase that the County had approved last year to take effect near the end of this fiscal year with a second increase scheduled for June 2021. The County controls these determinations.
  • Account 50201-04 (Retirement) is projected to increase by just more than seven percent, or $10,440, from $141,840 to $152,280 reflecting the County’s analysis of future liabilities, determined by the Sonoma County Employees Retirement Association (SCERA) and the County’s actuary. The County controls these determinations.
  • Account 50301 (Health Insurance) is projected at $41,590, a 40 percent increase over the current-year $29,680. Over the last several years, the County has contributed a greater percentage of the cost of health insurance for employees, resulting in an increase in the amount budgeted. Additionally, for 2020-21, a staff member who previously waived health insurance coverage opted in to the system, which increases the cost.
  • Unfunded Actuarial Accrued Liability (UAAL) has been added for 2020-21, as a result of determinations by the County that it expects full cost recovery for any portion of services provided by the County, including recovery of full future retirement costs of County employees who act as employees for outside entities, such as LAFCO. The most up-to-date information that has been provided by the County to staff projects this amount for next fiscal year as $7,935.  

Fiscal Year 2020-21 Final Budget: Services and Supplies  

The 2020-21 Final Budget projects Services and Supplies accounts at $193,215, an increase of $43,550, or 29 percent over the current-year budget of $149,665. Increases are projected in a number of accounts, with explanations provided below:  

  • Account 51206 (Auditing Services) is projected at $9,000 in anticipation of initiation of a bi-annual audit covering the years July 1, 2018 – June 30, 2020.
  • Account 51207 (Auditor Accounting Services) is projected at $7,000, an increase of $2,000 over the current-year budget of $5,000, based on experience over the last several audit period cycles for Auditor’s Office staff to complete annual financial reports, in preparation for the outside audit.
  • Account 51249 (Professional Services) is increased from the current-year $10,000 to $35,000 to cover not only payments to the State Board of Equalization for boundary change processing but also to cover anticipated costs associated with consultant work on MSRs and special studies. It should be noted that, for the last several years, no funding for consultant work has been budgeted although the Commission has allowed Fund Balance monies to be used for this purpose, if needed. For 2020-21, the funds are officially included in the budget.
  • Account 51421 (Rents & Leases) is projected at $43,000, a slight increase over the current-year $42,000, to cover the incremental increase in monthly office space rental and the cost of a staff member’s garage parking not covered in the lease contract.
  • Account 51901/02 (Communications) is projected at $3,100, an increase of $500 over the current-year $2,600, to more accurately reflect the actual number of telephone lines for which the Commission is charged by the County.
  • Account 51904 (Information Systems-Data Processing) is increased to $25,000, from the current-year $22,100, to reflect more accurately, as above, the number of computer connections for which LAFCO is charged by the County.
  • Account 52091 (Memberships) is budgeted at $8,115 for CALAFCO membership. As reported previously, this reflects a revised dues structure to rectify a structural financial deficit to sustain CALAFCO, having been approved by the membership in October 2019. Due to a number of concerns raised by member LAFCOs, the dues amounts will likely be re-visited this year.  

Revenues and Fund Balance  

Agency Apportionments  

Funding of the Commission’s operations comes primarily from the County, the cities, and the independent special districts, in accordance with the Cortese-Knox-Hertzberg Act. In a formula approved by the funding agencies in 2004, the County and the cities, as a whole, each contribute 40 percent, while the districts, as a whole, provide 20 percent.  

In its adoption of the 2020-21 Proposed Budget, the Commission approved an increase of three percent across the board for apportionments. Thus, the projections for 2020-21 are:  

          County                              $288,110, an increase of $8,392 

          Cities, as a whole              $288,110, an increase of $8,392 

          Districts, as a whole           $144,055, an increase of $4,196  

In accordance with state law, the County Auditor’s Office is tasked with calculating agency apportionments and both billing and collecting apportionments. Staff worked cooperatively with Auditor’s Office staff regarding agency apportionments and is providing the attached breakdown of information by agency, for Commissioners’ information (Attachment 3). For 2020-21, the apportionments are based on revenues reported to the State Controller’s Office from 2017-18, the most recent available. Since an agency’s revenues may change from year to year, its apportionment may vary as well.  

The list of apportionments has been made available to funding agencies, as a courtesy. Formal invoicing will begin subsequent to the Commission’s adoption of the Final Budget.  

Interest from Invested Cash  

Revenue accrues through interest from the County’s investment of Commission funds. For 2020-21, staff is conservatively projecting interest revenue at $10,000 although acknowledging that actual interest payments have exceeded that amount in the last several years, due to the accumulated level of Fund Balance.  

Fee Revenue  

Those who seek LAFCO action pay fees to cover costs associated with staff’s work to process applications. Payment of a fee or deposit against costs is authorized in the Cortese-Knox-Hertzberg Act. As indicated earlier in the report, fee revenue is tracked during the year but is not budgeted due to the difficulty in projecting the number and types of applications that will be submitted. At year-end, fee revenue rolls over into the Fund Balance, providing a substantial reserve which is available at the Commission’s discretion.

Fund Balance  

  • Since LAFCO became an independent agency in 2001, the Commission has maintained undesignated, unreserved funds to meet unexpected or unforeseen needs of Sonoma LAFCO. In years past, these monies have been used for various purposes, as needed, such as balancing the Commissions budget at the end of a fiscal year, funding a move of the LAFCO office (three times), or providing credits to funding agencies to reduce apportionments.

The staff report for the 2020-21 Proposed Budget provided a table showing the variance in the amount of Fund Balance accrued since 2001, when LAFCO became independent and the present. The amount fluctuated between about $26,000 initially to the present almost $488,000. The accumulation, especially over the last several years, has resulted from less-than-expected expenditures and greater-than-anticipated revenues.

For 2020-21, use of $115,236 of Fund Balance monies is projected to bridge the gap between projected expenditures and what the Commission, in its approval of the Proposed Budget, determined was an acceptable level of increased apportionments for funding agencies. Without use of Fund Balance monies, the increase to funding agencies’ contributions for the 2020-21 budget, as adopted in May, would have been more than 19 percent. 

Staff believes that, subsequent to using Fund Balance monies to balance the 2020-21 budget, sufficient funds – projected at near $335,000 - will remain as a healthy reserve to support the Commission over the next several years, as needed, under the “new normal,” due to impacts on funding agencies as a result of the coronavirus pandemic.

Staff also notes that, if, as a result of the organizational assessment recommendations, the Commission determines to adjust staffing levels with different salaries and benefits costs, such change would not be implemented until after adoption of the 2020-21 Final Budget. As a result, the Commission might need to use Fund Balance monies to support the desired changes, depending on when implementation, if approved, would occur.

Fee Schedule

Each year, staff reviews the Commission’s schedule of established fees and makes recommendations to the Commission regarding proposed changes, if warranted. State law requires that fees charged not exceed the reasonable costs of providing the services for which the fee is charged.

At this time, except for updating environmental fees charged by the California Department of Fish and Wildlife, at this time, staff is not recommending any changes in the fees to be charged for 2020-21 and proposes to continue the level of fees as currently charged. The Fee Schedule is attached for information (Attachment 4).

Summary

The proposed 2020-21 Final Budget is projected at $845,510, an increase of 10.9 percent over the current-year Adopted Budget of $762,295. Both Salaries and Benefits and Services and Supplies categories are projected to increase to allow Sonoma LAFCO to accomplish its work plan and meet its goals in implementation of state law.

Agency apportionments, interest from invested cash, and Fund Balance monies will balance the projected level of expenditures. Fees from the receipt of applications will be tracked and accrue to the Fund Balance at year-end. The Fund Balance will be maintained at a prudent level to allow sufficient undesignated reserves to meet unexpected needs, as the Commission directs.  

Recommendation 

Staff recommends that the Commission take the following actions on the Fiscal Year 2020-21 Final Budget and Fee Schedule at the June 3, 2020, meeting:

  1. Conduct a public hearing on the Fiscal Year 2020-21 Final Budget and Fee Schedule.
  2. Adopt the Fiscal Year 2020-21 Final Budget and Fee Schedule, with any desired changes.
  3. Direct staff to maintain an undesignated, unreserved Fund Balance to meet unforeseen or unexpected needs and/or, if needed, to balance the level of expenditures and revenues during the fiscal year.
  4. Direct staff to transmit to funding agencies the Fiscal Year 2020-21 Final Budget and Fee Schedule.
  5. Request the Sonoma County Auditor-Controller-Treasurer-Tax Collector to prepare and send to each funding agency a statement of its apportionment for Fiscal Year 2020-21 and collect apportionments as directed by state law.

Alternate Recommendation 

None

Attachments

  1. Draft Resolution
  2. Fiscal Year 2020-21 Final Budget, as proposed
  3. Listing of Agency Apportionments for Fiscal Year 2020-21 (subject to verification by Auditor’s Office)
  4. 2020-21 Proposed Fee Schedule