AGENDA TITLE:
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Receive Report and Adopt a Resolution Approving Fiscal Year 2024-25 Mid-Year Budget Adjustments; Adding One Administrative Services Director/Chief Financial Officer Position, Two New Customer Service Representative Positions, One Budget Analyst Position, Two Associate Planners and a Program Coordinator (Rental Coordinator) Position; and Reclassifying a Transit Planner Position, Human Resources Manager Position, and Information Technology Manager Position (ISD - BUD)
MEETING DATE:
April 2, 2025
PREPARED BY:
Jennelle Baker, Budget Manager
recommendation
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RECOMMENDED ACTION:
Receive a Report and Adopt a Resolution Approving Fiscal Year 2024-25 Mid-Year Budget Adjustments; Adding One Administrative Services Director/Chief Financial Officer Position, Two New Customer Service Representative Positions, One Budget Analyst Position, Two Associate Planners and a Program Coordinator (Rental Coordinator) Position; and Reclassifying a Transit Planner Position, Human Resources Manager Position, and Information Technology Manager Position.
SUMMARY:
Each year, the City of Lodi prepares a Mid-Year Budget update recommending changes in appropriations to continue operations and projects during the year. At a Special Meeting on April 1, 2025, staff provided an informational presentation to the City Council on the proposed changes to the Fiscal Year 2024-25 Budget. The report below summarizes where we began the fiscal year with the adopted budget, discusses a number of revisions that were made and then provides detail about recommended changes. The recommended updates to the Fiscal Year 2024-25 Budget include updates to revenue estimates based on best available information.
There are several changes to expenditures that include public safety overtime and capital expenditures. General Fund appropriation increases are offset by transfers in from other funds for appropriate cost allocation. The mid-year budget adjustments are recommended to ensure the efficient stewardship of public resources and make prudent investments in the future of Lodi. Staff recommends additional positions and position changes to address significant internal control issues disclosed in prior City Council meetings. Restoring internal controls and addressing existing deficiencies will provide improved stewardship. Investments in Lodi’s future include the allocation of funds to prepare a comprehensive General Plan update and the addition of two Planner positions in Community Development to accommodate anticipated growth.
The recommended changes are built into the City’s updated Long-Range Financial Forecast, which shows that the City General Fund remains balanced through 2034.
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BACKGROUND INFORMATION:
The City Council adopted the Fiscal Year 2024-25 Budget on June 20, 2024 (Resolution 2024-113). The Budget sets the priorities for funding services within the City of Lodi for the fiscal year. The General Fund adopted Budget for FY 2-24-25 was balanced at $83,606,240 estimated revenue and expenses with a Citywide budget of $286,876,515 estimated revenue and $276,676,890 estimated expenses. However, the adopted budget forecast an ongoing structural deficit of more than $6 million over the ensuing five years.
The 2023-24 audit is now finalized, the unrestricted fund balance on June 30, 2024 is expected to increase by $2.36 million. Of this amount, $1 million was already included in the presentation of the Long-Range Financial Forecast that Council received on February 26, 2025. The increase of $1.36 million is included in the updated Long-Range Financial Forecast. Although the City Treasurer has the authority to redirect these funds to the Pension Trust, this action will be considered later as part of a review of the Annual Comprehensive Financial Report. No action is recommended for the ending fund balance at this time. The fiscal year 2023-24 audit was completed and final numbers were submitted to the State Controller by the extended due date of March 31, 2025. The Annual Comprehensive Financial Report will be compiled and presented to Council in the coming weeks.
This information from the adopted budget is shown in Table 1:
After the adoption of the budget, several revisions are made in accordance with the approved Budget and Fiscal Policies. These adjustments include items in progress from the previous fiscal year that “roll forward” to continue work and Council approved adjustments that occurred earlier in the fiscal year.
The current fiscal year 2024-25 General Fund revised revenue budget is $90,032,933. This is due to two items. The first item is an increase of $6.42 million for the carryover of remaining American Rescue Plan Act (ARPA) Capital revenue. The ARPA funds are one-time funds approved on March 2, 2022, (Resolution 2022-63). Remaining funds can be re-appropriated per the Budget and Fiscal Policies until project completion. The second item is an additional $5,000, representing an appropriation of a donation from the Lodi Fire Foundation (Resolution 2024-191 approved on November 20, 2024).
The original and revised fiscal year General Fund 2024-25 revenue budget is shown below:
The current revised expense budget is $91,681,233, an increase of approximately $8.1 million. The revisions consist of:
• Carryover of remaining American Rescue Plan Act (ARPA) Capital expense in the amount of $6,421,693. The ARPA funds are one-time funds approved on March 2, 2022, (Resolution 2022-63) and are allowed per the Budget and Fiscal Policies to carry forward until project completion;
• Carryover of $100,000 in one-time funds for the Economic Development Strategic Plan approved June 5, 2024 under Resolution 2024-112 budgeted within the City Manager - Economic Development budget;
• Carryover of $750,000 in one-time funds for the Downtown Specific Plan budgeted within the Non-Departmental budget;
• Carryover of $702,300 for the Assistance to Firefighters Grant award for paramedic training and overtime (Resolution 2023-02 approved on January 4, 2023);
• Appropriation of funds for a donation of $5,000 from the Lodi Fire Foundation in accordance of Resolution 2024-191 approved on November 20, 2024;
• Carryover of $78,000 for ARMIS Essential Asset Vulnerability Management in the Internal Services - Information Technology budget (Resolution 2024-77 approved on May 15, 2024); and
• Carryover of $18,000 for security cameras at Hutchins Street Square budgeted in the Internal Services - Information Technology budget (Resolution 2024-75 approved on May 15, 2024).
Other budget revisions were made under the City Manager’s Budget and Fiscal Policies authority between General Fund accounts to cover contractor costs with Baker Tilly and to move postage costs from Non-Departmental to Internal Services - Revenue where the current contract is managed.
The original and revised fiscal year 2024-25 expense budget is shown in Table 3 below:
Indirect Cost Allocation
Cost allocations are included in the fiscal year 2024-25 mid-year recommended budget projection. Cost allocation was not done at mid-year in past years, even when allowable expenses were incurred. When appropriate cost allocation is not included, the General Fund bares a disproportionate share of the cost of enterprise and other activities.
Cities conduct cost allocation to fairly distribute indirect costs across programs, ensuring financial transparency, budget efficiency, and maximum reimbursement from grants. Indirect costs consist of services shared by all departments and include functions such as Human Resources, Payroll, Information Technology and much more. While the City’s current plan provides for cost allocation during the annual budget process, it is equally important for mid-year appropriations to be cost allocated to prevent budget imbalances and ensure accurate cost distribution. When cost allocation is not applied, the General Fund subsidizes the Enterprise Funds by absorbing actual costs of doing business that are directly attributable to other funds and places additional strain on the City General Fund. The current average Citywide cost allocation is 31% General Fund and 69% all other funds, and the proposed adjustments account for these allocation percentages.
Mid-Year Budget
The review this year was delayed due to the lack of closed and audited numbers from the prior fiscal year. Below is a discussion of the recommended budget adjustments and staffing changes. The FY 2023-24 is now closed and the audit is complete.
Mid-Year General Fund Revenues
General Fund revenues are currently estimated to exceed the original projection by $2.53 million, primarily due to interest income that was not included in the original adopted budget, an increase in property tax revenue, and a one-time true-up of the lease agreement rent with the Judicial Council of California for the 215 West Elm Street Lodi Branch Court. The latest projections from HdL, the City’s sales tax consultant, indicate a decrease of $1.2 million in sales taxes revenue compared to the 2023 fourth quarter HdL projection originally used for budget adoption.
The revised budget estimated General Fund revenue at $90,032,933. The mid-year revenue projection is $92,566,211, representing an increase in revenue of $2.53 million. The Table 4 below shows General Fund revenue projections for the categories with mid-year adjustments compared to the revised budget.
Mid-Year General Fund Expenditures
The overall General Fund expenses are projected to be $1.15 million higher than the current revised budget of $91,681,233, for a total General Fund appropriation of $92,831,052. This increase is offset by a transfer in from other funds of $597,868 for allowable cost allocation for a net General Fund impact of $551,951. The expenditure increases are due primarily to Public Safety Overtime and new recommended positions. A large portion of the increase is due to the Fire Department sending staff out on Strike Team assignments to assist other governmental agencies where the cost is fully-reimbursable. The table below shows the General Fund expenditure projections by department. The Mid-Year Projection column incorporates the recommended adjustments. The new positions are detailed below in Table 10a.
Mid-Year General Fund Capital
One General Fund Capital project contract was awarded on March 6, 2025 for Citywide Space Planning and Architectural Services in the amount of $179,824 and had a budgeted amount of $250,000. The savings from this project are recommended to be set aside in the General Fund balance. The Risk Division will seek proposals for a City-Wide Facility Safety Assessment. This assessment is important to ensure that buildings are safe for the City employees and community members. When the professional services agreement for these services is brought forward for approval, Council will be asked to appropriate these and likely additional funds for that purpose. The reduction to the Capital project is shown in Table 6.
Electric Utility
The Electric Utility (EU) projects an overall expenditure decrease of $3.29 million, primarily related to power supply cost reductions, offset by labor cost increases which include the recently approved salary changes as a result of successful contract negotiations with IBEW. Power supply costs were impacted by more favorable hydrological conditions, combined with lower and less volatile market energy prices. The net decrease in EU’s operating expenses is $2.85 million combined with a net decrease of $437,105 in capital projects (Table 7 below) representing the total EU expenditure decrease of $3.29 million. The Capital request forms are attached.
Public Works
Staff recommends an increase of $424,000 in capital projects as indicated in Table 8 below. Funding for these projects is derived from fund balance from Water PCE/TCE and Streets. The Capital request forms are attached:
Additional Mid-Year Adjustments
Enterprise and Special Funds are recommended to be adjusted according to the list below. Community Development recommends an appropriation increase of $1,838,816 to fund a Comprehensive General Plan update and two new planner positions. Fire is allocating funds from the Equipment Replacement Fund for new treadmills, and Police are allocating funds from the Vehicle Replacement Fund for outfitting of a new vehicle. EU appropriations are included in their overall budget changes mentioned above and will be used to fund its share of the recommended new positions, in accordance with the citywide cost allocation plan for services received by EU from the various Administrative Services Divisions. The recommended adjustments include appropriate proportional funding in accordance with the cost allocation plan for CDD, Library, PRCS, Streets, Transit, Wastewater, and the Water Utility.
Community Development
The City successfully negotiated a favorable tax sharing agreement with the County of San Joaquin and received approval for its Housing Element. These efforts led to renewed opportunity for annexations to accommodate future growth and development. Related to these efforts, long-term planning focused on two areas of growth and specific land uses, a residentially-based plan for the area south of Harney Lane and an economic development focused jobs-based Industrial and Business Park Plan within our newly expanded 850-acre, Sphere of Influence (SOI) on the eastside of the City.
These long-term efforts coupled with the current Downtown Specific Plan and a potential Westside annexation created an overwhelming justification to complete an updated Comprehensive General Plan Amendment under one CEQA umbrella. The last General Plan Amendment was published in 2010, this proposed effort would be slated for publication by summer of 2027.
Personnel Adjustments
Staff recommends the addition of nine full-time positions, the deletion of two existing vacant positions, and the reclassification of one position. In the Table 10a and 10b below, the removal of the Human Resources Manager position is not showing any savings for this year as the appropriations have been used to fund the contract with MRG for Human Resources operational assistance.
• Add one Human Resources Deputy Director - This position will oversee all Human Resources activities and actively participate in union negotiations. This position will assume high-level responsibilities previously held by the Assistant City Manager/Internal Services Director. On February 11, 2025, the City Council received a presentation on the assessment of Human Resources. The assessment identified significant issues including non-existent and out-of-date policies, inefficient procedures and a lack of capacity. A recommendation was made to make Human Resources a separate department of the City and create a Human Resources Director and other positions to support the new department. Although a separate department would benefit the City and improve services for employees, the existing fiscal constraints and competing priorities do not allow for a department. The mid-year recommendation was reduced to reallocate the HR Manager to an HR Deputy Director at an incremental increase of $12,309 (salary only). Upgrading the HR function will help ensure the City is able to attain the high-level expertise needed to have updated policies and procedures that comply with state and federal laws and provide better stewardship for employees. The proposed annual salary for the new position is as follows:
• Deletion of one Human Resource Manager - The Human Resource Deputy Director will take the place of this position.
• Add one Information Technology Deputy Director - This position will oversee all Information Systems activities and will assume high-level responsibilities previously held by the Assistant City Manager/Internal Services Director in IT. The reallocation of the IT Manager to an IT Deputy Director at an incremental increase of $9,947 (salary only) will help ensure the City is able to attain the high level of expertise needed to conduct strategic planning and provide the consistent operation of technology that is the foundation of municipal operations. The proposed annual salary for the new position is as follows:
• Deletion of one Information Technology Manager - The Information Technology Deputy Director will take the place of this position.
• Add one Administrative Services Director/Chief Financial Officer - This position will oversee all Internal Services and Finance divisions including Revenue, Budget, Accounting, Human Resources, and Information Technology. This position will assume many of high-level responsibilities previously held by the Assistant City Manager/Internal Services Director. On February 11, 2025 Council received a presentation on observations of the operations of the various Finance Divisions. Several very serious concerns were discussed that date back multiple years.
Council approved professional services agreements to help complete important Finance functions that are outstanding, and to begin to develop policies with improved controls. These services are temporary and staff lack the capacity and expertise to maintain current demands, complete overdue activities, and to make necessary improvements. A permanent resource is needed to manage these functions, ensure proper oversight, and implement lacking systems. An Administrative Services Director/Chief Financial Officer will provide the necessary leadership to plan and oversee the City’s fiduciary responsibilities, HR functions, and IT operations. The proposed annual salary for the position is as follows:
• Add one Budget Analyst - This position will assist with enhanced budget development and oversight, quarterly budget reports to Council, and mastering the 30-year forecast model for continued use. The lack of staffing in Finance over the years contributed to overburdening the General Fund and the significant issues raised at the audit and internal controls presentation to Council. On February 26, 2025, Council received a presentation on the City’s Long-Range Financial Forecast. Additional resources are needed in Finance to ensure best practices are followed.
• Add two Customer Service Representatives - The presentation on Finance divisions observations included statistics about poor customer experiences and significantly long wait times for customers trying to pay their bills. These positions are recommended to reduce in-person and phone wait times, provide faster response to email inquiries, and improve compliance with current contracts providing the citizens of Lodi a better customer service experience with the City.
• Add two Associate Planners - These new positions will expand long-range Planning capacity. Both will assist in streamlining of project applications, the review process, administration of the Municipal Code, will be proactive in developing public education tools, and will substantially increase customer service by providing enhanced public engagement at the Planning counter.
• Add one Program Coordinator (Rental Coordinator) - The new position would allow staffing capacity to add weekday room rentals to Hutchins Street Square and Parks daily schedules. The Coordinator would be able to solicit and manage an additional 2-4 rentals per week bringing in approximately $22,500-$45,000 annually. This position would help Hutchins Street Square rentals reach 2019 levels with over 2,500 room rentals annually. This full time Rental Coordinator would replace the existing part time Program Coordinator.
• Reclass Associate Transportation Planner - The incumbent has been performing higher level duties for the past year and this action will add the classification in the Transit Planner series.
Exhibit A, attached to this report, specifies the line item budget adjustments needed for all of the above recommended mid-year adjustments.
LONG-RANGE FINANCIAL FORECAST:
The mid-year budget adjustments are recommended with the value that the City will support a high quality of life and facilitate prosperity through economic development to build a solid foundation for Lodi’s future. The requested resources will improve the efficiency of the City stewardship of public resources and lead to an improved ability to invest in Lodi’s future. Efficiencies addressed in fiscal year 2024-25 include; the Library assessment, Human Resources assessment, Finance observations including Study Session report to Council, and the Long-Range Financial Forecast. Stewardship to the City that will be accomplished with the adoption of the mid-year budget are improvements in Human Resources, Finance and Accounting, utility billing and revenue services resources, and an internal control assessment. Mid-year also includes investments in our future with the addition of funding for the General Plan update, Community Development Planners, Economic Development Strategic Plan, and the Downtown specific plan (funded with one-time funds included in the revised budget).
With the recommended changes and the addition to the fund balance the Fiscal Year 2024-25 General Fund budget remains balanced. Many of the changes to revenues including the reduction in anticipated sales tax and the expenditure increases were included in the February 26, 2025 presentation of the Long-Range Financial Forecast. The presentation of the model also included a look at various additional positions, and supported the long-term fiscal sustainability of the positions being recommended for addition at this time. The model has been updated with the recommendations contained herein.
The chart above reflects the estimated fund balance increase from fiscal year 2023-24 and that the mid-year recommendations. The model maintains the General Fund at the 16% minimum level throughout the forecast. This projection includes base cost of living increases to all staff of 2% and includes labor market adjustments. The updated Long-Range Financial Forecast includes the recession predictor starting in FY27. Finally, the model includes anticipated savings beginning in FY 2025-26 based on prior study sessions and City Council guidance.
Anticipated Library Budget Adjustments
The updated Long-Range Financial Forecast includes an ongoing reduction of $100,000 per year in General Fund transfers to the Library beginning in FY 2025-26. The Library Assessment Report presented to City Council on January 28, 2025 provided multiple alternatives based on the assessment of current operations and funding. The anticipated $100,000 reduction was the minimum level of efficiency recommended in the assessment, and staff is presenting this reduction for Council consideration.
STRATEGIC VISION:
3A. Fiscal Health: Promote City's transparency & fiscal fluency.
FISCAL IMPACT:
Revenue and expenditure budget adjustments per Exhibit A to address staff recommendations.
FUNDING AVAILABLE:
The mid-year General Fund changes include a revenue appropriation increase recommendation of $2,533,278 and an expense appropriation increase of $1,188,890. Expenditure requests shown in the tables above for Public Works, Community Development, Equipment Replacement, and Vehicle Replacement will come from those relevant fund balances.