Menifee City Council hears sobering 2020-2021 fiscal year budget predictions

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COVID-19 weighs heavy on budgets; no police department cuts seen

Menifee City Council received sobering proposed budget information for 2020-2021 in a workshop Wednesday, May 13, and subsequent city council meeting Thursday, May 14. Deep revenue losses were projected due to the COVID-19 pandemic and the threat of a Measure DD repeal in the November elections.

Rochelle Clayton, Menifee deputy city manager, conducted a preliminary 2020-2021 fiscal year budget and capital improvement plan presentation for the council at the workshop and showed the council how the COVID-19 related closures and stay-at-home orders could seriously affect the city’s initial proposed general fund budget and planned capital improvements.

City halts work on initial budget.

Before Clayton’s presentation, city manager Armando Villa said, “We almost had the final budget prepared in April but had to put the breaks on and adjust down the revenues because of the shutdown (COVID-19 orders).”

He said the staff will show the impacts of the coronavirus, but the city was able to keep business going in the city.

“We have not slowed down,” Villa said.

Clayton said the new fiscal year budget assumptions prepared by herself; Wendy Preece, deputy finance director, and Margarita Cornejo beginning in January and finalized in April was seriously modified with anticipated losses in sales and property taxes, transient fees and promised state revenues due to the coronavirus pandemic.

She said the city’s projected general fund revenue for the next fiscal year, before the pandemic, was projected at $53,327,140 and the original Measure DD revenue projected at $11,771,000 for a total of $65,098,140, but the revenue was reduced by $5,411,566 in anticipated losses. The assumption leaves the proposed general fund budget for the 2020-2021 fiscal year at $59,686,875.

VLF fee return in doubt.

The preliminary budget presumes the city may not receive its annual vehicle license fees from the state this year because of the state’s predicted $54 billion deficit due to the coronavirus. The vehicle license fees collected by the state and returned to the city this year may exceed nearly $7 million. In the past, the state has kept those fees to balance its own deficit budget.

The other factor concerning the council was an initiative to repeal Measure DD that will be on the November ballot that if passed by the majority of voters could cost the city millions of dollars in the years to come. The ramifications of that possibility were made in the special council meeting Thursday.

No cuts to new police department.

In the preliminary budget presentation, it was noted that even with the potential loss of revenues the city will still be required to present a “balanced budget” for the 2020-2021 fiscal year. Because of the predicted revenue losses, the council heard that the reduced general fund budget will require a hiring freeze and program cuts across the board in most departments. The one exception is the needed Measure DD funding for the city’s new police department that will take over citywide law enforcement from the Riverside County Sheriff July 1.

Those suggested cuts, according to the staff and HdL Financial consultants, would require more department reorganization to identify savings and efficiencies; past reorganization of finance and human resources; hiring freeze on noncritical positions; workflow evaluation and restructure in 12 positions with $1.5 million in savings with no impact to the Police Department; defer noncritical projects and programs; Smart City initiatives and system upgrades and expansion plans on hold – new City Hall, Maintenance Ops Center.

It also will require deferring capital projects without critical impacts and review of the Animal Control contracts.

Capital Improvement Programs delayed.

The city’s proposed and ambitious Capital Improvement Plan budget was revised and set at $2,059,400. The presumed revenue losses will delay or defer 21 planned CIPs for the next two fiscal years, according to the report. The CIP, that now derives most of its revenue from Measure DD,  is used to leverage other multi-million dollar state and federal grants for projects such as the Holland Road Overpass, the Bradley Bridge, Murrieta Road AC Resurfacing, Scott and Menifee Road sidewalks, Hillpoint Community Street resurfacing and McCall Boulevard improvements from Encanto to Antelope Roads.

Reserve cuts to be made if necessary.

The report also reviewed the city’s more recent Economic Uncertainty Reserve amounting to $5.9 million as a potential CIP funding source in the future if the COVID-19 continues. The staff worked the preliminary budget trying to avoid using that reserve cash for this fiscal year. It will allow the city to reevaluate the actual economic impacts of COVID-19 at midyear and allocate those funds “if absolutely necessary.”

The proposed budget also did not include $3 million set aside for the renewal of its Waste Management contract, but recommends taking out $450,000 from it to use for the improvements of the Central Park Amphitheater.

The council took the workshop report under advisement and adjourned until the May 14 special meeting.

Measure DD repeal impacts heard.

In the May 14 special meeting, the council heard a report about how the Measure DD citizen initiative repeal that will appear on the November ballot might impact the residents if it passed.

Staff made it clear that whatever happens in the state budget plans, it may take away the California Vehicle License Fee funds and other revenues from the city because of its COVID-19 losses, the Measure DD 1% sales tax collected stays local cannot be taken away from Menifee since it was voted on by the residents.

“Measure DD funds are required to remain local and are not subject to state takeaways. An independent Citizen Oversight Committee provides review of Measure DD budgets and uses, and makes recommendations to the City Council to ensure the funds are utilized as identified in the measure by the voters. Measure DD funds pay for critical city services, including public safety (Police and Fire services), currently and in the future, infrastructure needs,” according to the report. “If the repeal is enacted, and the estimated annual $12 million in Measure DD funding was eliminated from the city’s budget, it would have far reaching effects on city services given the current fiscal uncertainty and unanticipated revenue loss caused by the COVID-19 crisis.”

Federal emergency funding doubtful.

“The federal government has not yet provided aid directly to local agencies (other than cities over 500,000), and the state of California’s $54 billion budget shortfall means it is unlikely that the city will receive significant relief from the state, and that existing city funding is at risk from being taken from the state again like VLF to close state budget gaps,” according to the report.

City Manager Armando Villa said, “Measure DD funding has helped fortify the city’s financial position. Tough choices will need to be made in the city, if Measure DD is ultimately repealed especially at a time when we need to continue addressing public safety and economic development amid the COVID-19 crises.”

Animal Control combines contracted services.

The proposed city animal control budget was another issue brought up by the council. In years past, the city has contracted with Animal Friends of the Valley for its field services and with Riverside County Animal Control for sheltering services. An item on the agenda brought a discussion on whether or not the city should continue its contracts with both AFV and the county shelter in San Jacinto or contract with one or the other service for both services and shelter.

Following that discussion, the city opted to go with AFV for both services, with or without the AFV Joint Powers Agreement with other surrounding cities and provide residents with the best guaranteed services at the lowest cost. The cost savings has yet to be determined depending on negotiations with the JPA. The council was concerned with the status and continued funding of the San Jacinto County Animal Shelter, since the county is also facing a huge budget deficit because of the coronavirus.

For more information or to read the Measure DD impact report or questions, visit http://www.cityofmenifee.us.

Tony Ault can be reached by email at tault@reedermedia.com.