REPORT TO COUNCIL AND SUNNYVALE FINANCING AUTHORITY
SUBJECT
Title
Annual City Council Public Hearing on FY 2024/25 Budget and Resource Allocation Plan and Establishment of Appropriations Limit and Sunnyvale Financing Authority Public Hearing on FY 2024/25 Budget
Report
BACKGROUND
The City Charter requires a Public Hearing be held prior to the adoption of the City’s budget and resource allocation plan.
Additionally, Article XIIIB of the California Constitution established appropriations limits on government agencies within California. Originally enacted by Proposition 4 in 1979, the appropriations limit creates a ceiling for the appropriations of tax proceeds that can be made by the state, school districts, and local governments in California. The limit uses 1978-79 as the “base” year and is adjusted annually for population growth and cost of living factors. The purpose of the appropriations limit is to preclude state and local governments from retaining excess revenues, which are required to be redistributed back to taxpayers and schools. To date, the City has not exceeded its appropriations limit in any year. Section 7910 of the Government Code requires that the City annually adopt an appropriations limit for the coming year. The supporting documentation for the establishment of the limit must be available for public review at least 15 days prior to the adoption of the appropriations limit resolution. The required material that provides detailed information on the City’s appropriations limit has been available for public review since May 10, 2024, included in Volume I of the FY 2024/25 Recommended Budget. It is also provided as Attachment 1 to this report.
The FY 2024/25 Recommended Budget includes the annual budget for the Sunnyvale Financing Authority as well. The only appropriation for the Financing Authority is the annual debt service payment for the new Civic Center. The governing board of the Joint Powers Agency, the Sunnyvale Financing Authority, must also hold a public hearing for the Authority’s FY 2024/25 Budget.
EXISTING POLICY
In accordance with the City Charter, the California Constitution, and the California Government Code, a public hearing has been held annually for public comment on the budget and resource allocation plan and appropriations limit for the upcoming fiscal year.
Section 4.2 of the Joint Exercise of Powers Agreement Creating the Sunnyvale Finance Authority requires a public hearing of the Authority’s budget.
Council Policy 7.1.1 Fiscal -Long Range Goals and Financial Policies:
A.1.7: At least one public hearing shall be held after the City Manager’s recommended budget is presented to the Council in order to solicit public input before adoption.
A.1.8: Boards and Commissions should review the annual budget as appropriate to their area of interest and make recommendations to the City Council.
A.1.14: Final actions on study items with significant financial impacts should be withheld until they can be made in the full context of the annual budget process.
E.1.4: The Budget Stabilization Fund will be a minimum of 15% of projected revenues for the first two years of the 20-year planning period. Beyond year two, the Budget Stabilization Fund will always have a balance of at least zero.
ENVIRONMENTAL REVIEW
The action being considered does not constitute a “project” within the meaning of the California Environmental Quality Act (“CEQA”) pursuant to CEQA Guidelines section 15378(b)(4) in that it is a fiscal activity that does not involve any commitment to any specific project which may result in a potential significant impact on the environment.
DISCUSSION
The purpose of the public hearing is to provide an opportunity for the public to voice its opinions on the City’s proposed budget and the appropriations limit. Legal ads for both the FY 2024/25 Recommended Budget and the Sunnyvale Financing Authority were published in the Sunnyvale Sun on May 17, 24, and 31, 2024. The FY 2024/25 Recommended Budget and Resource Allocation Plan is scheduled for adoption on June 18, 2024.
Appropriations Limit
The appropriations limit is set on an annual basis and is dependent upon the change in population within the jurisdiction and the change in the cost of living as determined by the State. As shown in Attachment 1, the appropriations limit for FY 2024/25 is $316,649,657. Expenditures subject to the appropriations limit exclude the Redevelopment Agency’s Successor Agency activity, enterprise and internal service activity, debt service payments, and capital outlay projects purchased with tax proceeds that have a useful life of ten years or more and a value that exceeds $100,000. Non-tax revenues, such as federal and state grants, fees for service, or revenues restricted for specific purposes are also excluded from the calculation. The City will be under the allowable appropriations limit by approximately $62.7 million for FY 2024/25, which means that the City has additional capacity allowed by law of approximately $62.7 million before the limit is reached.
FY 2024/25 Recommended Budget
The FY 2024/25 Recommended Budget focuses on the operations budget, which includes an in-depth review of the City’s eleven operating departments. The Recommended Budget provides a balanced budget of $731M and includes $362.1M for City operations, $296.6M in project and equipment expenditures, and $72.3M in other expenditures (e.g., debt service, a transfer to the Employee Benefits Fund for unfunded accrued liabilities associated with pensions, etc.). Revenues total $670.7M with $60.3M to be drawn from reserves for capital projects. Further detail is provided in the FY 2024/25 Recommended Budget provided as Attachment 4.
The Budget Stabilization Fund
The Budget Stabilization Fund Reserve (BSF) in the General Fund serves as the General Fund’s economic volatility and cash flow reserve. The projected BSF maintains a stable position throughout the twenty-year plan. Further, the FY 2024/25 BSF achieves the policy requirement of being at a level of at least 15% of total revenues for the first two years.
City Council Reserve Policy 7.E.1 states that beyond year two, the Budget Stabilization Fund Reserve will always have a balance of at least zero and the FY 2024/25 Recommended Budget meets this requirement. The low point of the BSF is in FY 2035/36 at $33 million. At the end of the 20-year plan, the Budget Stabilization Fund Reserve balance is projected at approximately $55 million.
Budget Supplements
For the FY 2024/25 Recommended Budget, seven budget supplements are presented for Council consideration. A complete description of each budget supplement is included in Volume I of the FY 2024/25 Recommended Budget.
May 23, 2024 Budget Workshop
Staff provided a detailed presentation on the City’s FY 2024/25 Recommended Budget at the Budget Workshop. At the workshop, Council asked for information and/or clarification on several issues. Responses or follow-up to these items will be included in the budget adoption staff report to Council on June 18, 2024.
City Council also directed staff to make bring back additional information outside of the budget process regarding additional funding for construction of an addition to the Sunnyvale Heritage Museum and to investigate funding the annual Sunnyvale Pet Parade.
Boards and Commissions Budget Review
The City’s boards and commissions have had the opportunity to review the FY 2024/25 Recommended Budget, which was made available beginning May 10. Boards and commissions wishing to make comments, suggestions, or recommendations have the opportunity to testify at the public hearing. Meeting minutes from the boards and commissions that held meetings to discuss the budget prior to submission of this report are included in Attachment 2. Recommendations to Council on the budget were voted on and are detailed in the minutes.
Sunnyvale Financing Authority Budget
The Sunnyvale Financing Authority must hold a public hearing and adopt, by resolution the FY 2024/25 budget for Debt Service related to the new Civic Center bond issuance. This totals $7,512,675.
FISCAL IMPACT
There is no fiscal impact to this public hearing. Budget adoption is scheduled for June 18, 2024.
PUBLIC CONTACT
Public contact was made by posting the Council meeting agenda on the City's official-notice bulletin board at City Hall, at the Sunnyvale Public Library and in the Department of Public Safety Lobby. In addition, the agenda and this report are available at the NOVA Workforce Services reception desk located on the first floor of City Hall at 456 W. Olive Avenue (during normal business hours), and on the City's website.
Legal ads for both the FY 2024/25 Recommended Budget and the Sunnyvale Financing Authority were published in the Sunnyvale Sun on May 17, 24, and 31, 2024. Finally, the City’s website has included the entire FY 2024/25 Recommended Budget and Resource Allocation Plan since May 10, 2024.
STAFF RECOMMENDATION
Recommendation
City Council:
Conduct a Public Hearing to obtain input from the public as required by City Charter Section 1303, the California Constitution, and the California Government Code. Council can also provide direction to staff on any issue requiring further review prior to the adoption of the FY 2024/25 Budget on June 18, 2024.
Sunnyvale Financing Authority:
Conduct a Public Hearing on the FY 2024/25 Budget. The Board can also provide direction to staff on any issue requiring further review prior to the adoption of the FY 2024/25 Budget on June 18, 2024.
Staff
Prepared by: Kurtis Mock, Acting Budget Manager
Reviewed by: Tim Kirby, Finance Director
Reviewed by: Sarah Johnson-Rios, Assistant City Manager
Approved by: Kent Steffens, City Manager
ATTACHMENTS
1. FY 2024/25 Appropriations Limit
2. Draft Board and Commission Meeting Minutes for the FY 2024/25 Recommended Budget