Budget Message

Budget Message

Fiscal Year 2023-2024

Honorable Mayor and Members of the Town Council:

It is our pleasure to present the Fiscal Year 2023-2024 Town of Corte Madera Proposed Budget and Work plan for your consideration. It represents staff’s best effort at projecting revenues and expenditures for the coming year, within the guidelines set by Council.

The Town’s largest revenue sources continue to be property tax and sales tax. Property tax and sales tax each account for approximately one third of the Town’s General Fund revenue. Additionally, the local .75% Corte Madera sales tax override will fund approximately $8 million in capital projects, as well as $185,000 for senior and youth programs, and approximately $299,000 in disaster preparedness. The local sales tax, known as Measure F, is presented as a separate fund.

Based on the most recent information available, staff estimates that secured property taxes, the Town’s largest source of property tax, will increase by 5% and total property taxes will increase by 3.9%, or $322,908.

With respect to sales tax, the Town’s sales tax consultant has projected that the Town’s 1% share of the sales tax will decrease by approximately $318,000, or 3.9%, compared to the amount anticipated for 2022-2023.

Regarding the Measure F Corte Madera sales tax, this revenue is expected to increase by approximately $174,083, or 4.1%, compared to the revenue budgeted for 2022-2023.

Also included in the 2023-2024 budget is revenue in the amount of $1,500,265 that the Town will receive from Sanitary District No 2 of Marin County for work performed by Town employees on behalf of the Sanitary District.

The Transfer In in the amount of $189,627 in 2023-2024 represents reimbursement from the Corte Madera Sales Tax fund for salaries relating to Project Management and Code Enforcement.

Overall, General Fund revenue is expected to be stable and to decrease by $97,192, or less than one half of 1%, as compared to the estimated revenue for 2022-2023.

• Salaries are projected to increase by $750,453 or 17%, compared to the previous year’s revised budget. The increase includes scheduled step increases, as well as a previously approved 3% increase to the overall salary schedule. The majority of the increase can be attributed to the fact that the Town Manager has also functioned as the Community Development Director for most of 2022-2023, something that is not expected to continue in 2023-2024, as well as to the fact that the Chief Building Official position has been filled by an outside contractor since October 2022. Additionally, a Senior Engineer/ Project Manager position has been vacant since January 2023. The Town anticipates filling all of these positions in 2023-2024 resulting in an increase in salary expenditures. The budget also includes an additional Project Manager position, and Superintendent of Public Works position (currently vacant).

• Expenditures for Other Benefits have increased by $193,653, or 20% compared to the 2022-2023 revised budget. Other benefits primarily includes payroll taxes, which are driven by salaries, as well as health insurance costs. A 5%, or approximately $45,000 increase to health insurance rates is included for 2023-2024. The actual rates for the 2024 calendar year are not known at this time. The additional positions noted above will also result in additional health insurance costs.

• A payment of $970,555 for repayment of Pension Obligation Bonds (POB) is included. In April 2021, the Town issued POBs in order to reduce its approximately $18.8 million CalPERS unfunded pension liability payments. As of June 30, 2021, the most recent CalPERS actuarial valuation available, the Town did not have an unfunded liability with CalPERS. The Town’s CalPERS was actually overfunded as of June 2021 due to strong investment returns in the 2020-2021 fiscal year. For the 2022-2023 fiscal year, the Town’s savings from the issuance of pension obligation bonds was estimated to be approximately $638,000, which will be deposited into a trust established for Other Post Employment Benefits (OPEB). As a result of the overfunding, the Town will not be required to make a payment for unfunded CalPERS liability in the 2023-2024 fiscal year, and has included a $600,000 deposit to the OPEB trust account. The Town does expect to have a liability as of June 30, 2022 due to investment losses in the 2021-2022 fiscal year. The Town currently holds a pension reserve of $2 million and also established a pension stabilization trust that can only be used for retirement expenditures. The balance of the pension stabilization trust as of April 30, 2023 was $3,456,930.

• Fire Department expenditures have increased by $217,494, or 4%. Excluding a one time additional payment of $257,485 to pay for a Central Marin Fire Authority deficit in 2021-2022 incurred due to workers’ comp injuries and absences due to COVID, the Town’s payment to Central Marin Fire has increased by 9.2%. The increase is mainly due to salary schedule increases of 2 to 3%, depending on bargaining group, and step increases included in the approved Memoranda of Understanding (MOU), as well as one time costs associated with a change in the dispatch contract, repairs needed to ambulance equipment, rising insurance costs and the need to replace a pick-up truck.

• Police Department expenditures have increased by $139,619, or 3.5%.

• Transfers to Other Funds are included in the amount of $1,885,000. $1.1 million of this amount is a transfer to the Equipment Fund, largely vehicle replacement for Public Works, including a sweeper estimated to cost $310,000 and a vacuum truck estimated to cost $600,000. The Equipment Fund will also pay for technology, furniture and fixtures, and cyber security for the new Town Hall. Also included in Transfers to Other Funds is $600,000 to the Insurance Fund to pay for claims and premiums associated with workers’ compensation, property and liability insurance. $185,000 to the Recreation Fund is also included. The goal of the Recreation Fund is to be self supporting. In 2019-2020, the total General Fund subsidy to the Recreation Fund was $596,838; in 2020-2021 the total subsidy was $517,725 and in 2021-2022 the total subsidy was $229,293. The Recreation Fund ended fiscal year 2021-2022 with an ending fund balance of $75,765.

The overall decrease to estimated expenditures and transfers out is $6,762,345 compared to the 2022-2023 revised budget. The decrease is due mainly to expenditures associated with Town Hall construction of approximately $7.6 million in 2022-2023. These expenditures were made from the proceeds of Certificates of Participation issued in May 2021.

The Town Council approved a reserve policy in April 2021 which includes a goal of a 20% General Fund reserve. This reserve is calculated as a percent of total operating expenditures and transfers out.

As of June 30, 2024 the estimated ending balance of the General Fund is $13,851,448. This includes $3,456,930 held in the pension stabilization trust. After deducting $1,410,787 for the deficit in the Park Madera Center Fund, the components of the estimated ending balance are $4,775,958 as 20% reserve, $2 million in pension reserve and $2,206,773 as unallocated ending balance.

In addition to the General Fund reserves, the Corte Madera Sales Tax Fund holds an emergency reserve of $2.5 million, and Sanitary District No. 2 holds a reserve of $2.5 million for sewer projects.

As noted above, the Town has issued pension obligation bonds in order to reduce its CalPERS unfunded liability of approximately $18.8 million. This total includes liability for miscellaneous employees, as well for Fire Department employees prior to March 25, 2019. As of March 25, 2019, Fire Department employees are employed by Central Marin Fire Authority, a JPA of which the Town of Corte Madera and City of Larkspur are members. The CalPERS liability for service on or after March 25, 2019 is the responsibility of Central Marin Fire Authority. As mentioned above, no unfunded liability payment will be required for 2023-2024, but the Town does expect to resume payments in future years. At the time of the issuance of the POBs, savings were estimated to be $12.4 million over 15 years. After the 2022-2023 investment returns are known, staff plans to meet with pension advisers in order to receive an update on the Town’s liability and overall savings from the POBs.

Pension Stabilization 115 Trust:

The trust was established in order to control volatility related to CalPERS required payments for unfunded liability. As of April 30, 2023, the balance in the trust is approximately $3.456 million. The balance in the trust can be used only for costs related to retirement. Debt service payments for pension obligation bonds cannot be made from this trust account.

2013 Pension Reform:

On January 1, 2013, the Public Employee Pension Reform Act (PEPRA) went into effect. This State law applies to employees hired after January 1, 2013 who are new to CalPERS. These employees are termed PEPRA members and employees that were enrolled in PERS (without significant separation) prior to January 1, 2013 are now referred to as classic members. PEPRA miscellaneous members will be enrolled in a 2% at 62 plan and PEPRA safety members (Fire and Police) will be enrolled in a 2.7% at 57 plan. PEPRA members are required to pay half the normal cost of their plans. Effective July 1, 2023, the employee contribution for miscellaneous PEPRA employees will increase from 7.25% to 8.25%. Approximately two thirds of the Town’s miscellaneous employees who are enrolled in the CalPERS retirement system are PEPRA members. The town does not employ any safety employees.

Negotiated Pension Reform with Labor Groups:

The 2013 pension reform law put in place a rule which allows that employers can impose Classic employees to pay more toward the Normal CalPERS pension costs, if not collectively bargained by January 1, 2018. The maximum that can be imposed for miscellaneous employees is 8% and 12% for safety employees.

In past years, the Town has met the pension reform goal and has exceeded it by negotiating the following cost sharing pension reforms with the Town labor groups (additional 5.5% or 4.5% of salary, depending on bargaining group, for miscellaneous classic employees and 9% of salary for safety classic employees). The intent of the Town reforms are to share the normal cost portion of pension costs with current employees on a 50/50 cost sharing plan. All Classic employees pay more than 50% of the normal PERS cost.

Classic PERS Employees pay the following toward CalPERS normal cost:

Town Manager and Department Heads - Employees pay 13.5% of salary toward CalPERS cost

Mid-Management/Miscellaneous - Employees pay 13.5% of salary toward CalPERS cost

SEIU/Public Works Maintenance - Employees pay 12.5% of salary toward CalPERS cost

The labor group for Corte Madera Fire agreed to reform their 3%@50 retirement formula to 3%@55 as Central Marin Fire Authority employees. This will have long-term savings impacts to the Town.

Measure B was a .50% local sales tax override. It has allowed the Town to maintain and improve its infrastructure. The Town Council has determined that expenditures should be prioritized in the following areas: Fire Prevention; Flood Control; Streets and Potholes; Safe Routes to School; Senior and Youth Programs; Disaster Preparedness; and Town infrastructure.

As of October 2018, Measure F replaced Measure B. This is a .75% local sales tax that was approved by the voters. As of June 30, 2023 the balance in the fund is estimated to be approximately $8.4 million.

The Proposed budget FY 2023-2024 identifies $9,184,950 of expenditures and improvements in the following areas:

• Fire Prevention/Disaster Preparedness $ 299,209

• Flood Control $2,180,000

• Infrastructure projects $5,124,645

• Senior and Youth Programs $ 185,000

• Town Hall Construction and Temporary Offices $ 736,000

• Debt Service $ 470,469 see below

• Transfer to Other Funds $ 189,627

Town Hall Construction Project

The Town has entered into a Certificate Purchase Agreement to sell Certificates of Participation (COP) in order to finance part of the costs of the planned Town Hall construction. The total cost of the Town Hall construction is estimated at $12,127,000, plus $856,440 in construction management services and $488,560 for furniture and technology equipment, for a grand total of $13,472,000. Approximately $8 million of this amount is expected to be spent in 2022-2023, mainly from the proceeds of the Certificates of Participation in the amount of $7,626,692 issued in 2021. $4,432,646 is included in the 2023-2024 Town Capital Projects budget. This fund has been funded from the unassigned ending balance in 2020-2021 and 2021-2022. $500,000 for construction management has been included in the Measure F Sales Tax budget for 2023-2024, and the remaining amount for furniture and technology has been included in the 2023-2024 Equipment Fund budget.

In addition to the costs noted above, the Town expects to incur $236,000 in expenditures for temporary offices due to Town Hall construction. These costs will be paid from Measure F funds.

Total capital expenditures for the Town are budgeted at $16,160,999. This includes the Town Hall construction and construction management fees totaling $4,932,646 mentioned above, in addition to the other Measure F expenditures listed above. This also includes $932,952 in Parks and Recreation projects which will be paid for by a combination of grants, Measure A Parks revenue, the Recreation Capital Fund and the Park in Lieu Fund. Grants and revenue from Transportation Authority of Marin will pay $1,127,806 toward capital projects, Street Impact Fees will pay approximately $206,000 toward capital projects, and Gasoline Taxes will pay approximately $820,000 toward capital projects.

The Tamalpais Overcrossing project is included in the 2023-2024 budget. The Town expects to contribute $3 million toward this project. $2.4 million will be paid from Measure F revenue and $600,000 from the Town Capital Projects fund.

The anticipated beginning net position of the Sanitary District Fund for FY 2023-2024 is approximately $36.753 million. Of this amount, $30.5 million is invested in capital assets and $2.5 million has been designated as an emergency reserve, leaving an unrestricted portion of approximately $3.753 million. Revenue, which is primarily derived from property tax and Sanitary District User Fees, is estimated to be $7,358,470. Annual operating costs for this fiscal year, including Grant and Loan Programs, as well as depreciation totaling $1,600,000, are $6,586,877. CMSA debt service payments are $664,825 for the 2023-2024 fiscal year. In addition, staff is proposing $5.9 million in sewer capital projects for this fiscal year.

The unrestricted portion of the anticipated net position as of June 30, 2024 is $360,342 The $2.5 million reserve will remain intact and an ending net position is estimated to be $36,860,342. Staff plans to study additional funding mechanisms, such as Certificates of Participation, in order to fund additional capital projects. In addition, a rate study of the Sanitary District User Fees is in progress. Sanitary District User Fees have not increased since 2009-2010. Staff will report to the Sanitary District Board about additional funding sources.

The proposed 2023-2024 budget represents a fiscally prudent operating budget that includes an aggressive capital improvement plan to address the Town’s most pressing needs, while maintaining a staffing structure that provides the highest quality of service. The Town’s staff remains committed to providing excellent community services to the residents of Corte Madera.

We would like to take this opportunity to thank the Town staff for their commitment to Corte Madera and their hard work, and sound budget stewardship throughout this fiscal year. Our employees continue to meet the challenges every day. This budget is a result of a tremendous amount of effort by our Department Heads. We want to thank them for their hard work and diligence with public funds.

Special recognition goes to Stacie Charlebois and Donna Carnegie, Finance Department staff, for their diligence in accounting for the Town's revenues and expenditures, and for making many improvements to the Town’s processes.

We would also like to recognize and thank our Director of Public Works R.J. Suokko and his team for their comprehensive work product and diligence with the Capital Improvement Program. They are truly the first line of defense in protecting our Town’s infrastructure.

Finally, we thank the Town Council, the Finance Sub-Committee, Fred Casissa, Community Members Jim Andrews, Annette Disano, Larry Reed, Karl Spurzem and the Sales Tax Oversight Committee, Karen Gerbosi, Jean Greenbaum, Chris McBride and Karl Spurzem for their review, comments and good counsel during the budget preparation process.

It is a tremendous privilege and pleasure to serve the Town Council and the community. We look forward to the challenges ahead.

Respectfully submitted,

Daria Carrillo Adam Wolff

Finance Director Town Manager