City of Diamond Bar Budget

Fiscal Year 22/23


CITY MANAGER'S BUDGET MESSAGE


June 7, 2022


Honorable Mayor and Council Members

City of Diamond Bar


RE: City Manager's Recommended Budget for Fiscal Year 2022/2023


Presented for your consideration and approval, is the City's Annual Operating Budget and Capital Improvement Program for Fiscal Year (FY) 2022/2023.


The COVID-19 global pandemic continued to be a devastating worldwide health crisis impacting the United States, including California, Los Angeles County and Diamond Bar. Conditions have continually improved following the significant surge in cases fueled by the Omicron variant in January/February 2022. While not totally eradicated, there is optimism that as more persons are vaccinated and boosted, new cases, hospitalizations and related deaths will remain low and community spread will be held in check to allow for the State, County and City to restore programs and services to pre-pandemic levels.


On March 11, 2021 the President signed the American Rescue Plan Act (ARPA) which is a $1.9 trillion relief package to mitigate the continuing effects of the COVID-19 pandemic. Of that amount, approximately $64 billion has been allocated to provide direct and flexible financial resources for every city and town in the nation. The City of Diamond Bar anticipates receiving a total of just over $6.8 million in ARPA funds. These funds may be used for a broad range of purposes including the replacement of lost revenue, restoration of City programs and services, COVID-19 expenses not otherwise reimbursed, and projects that help build resiliency and financial stability for the residents and businesses of the City.


In January 2022, the U.S. Treasury issued a final rule that provides for municipalities to attribute up to $10 million to be used on governmental services. The City received the first installment of ARPA funds of just over $3.4 million in June 2021, which was categorized under this "standard allowance" to replace lost revenue, restore many City programs and services, and to balance the FY 2021/22 Budget. The City anticipates receiving the second installment of approximately $3.4 million in July 2022 which also falls within the "standard allowance" and has been programmed into the FY 2022/23 Budget for general governmental services to help build resiliency and financial stability for the City, thus generating additional one-time General Fund resources.

As a result, the proposed FY 2022/2023 Budget provides a positive outlook and continues to restore many City programs and services, advance deferred maintenance and Capital Improvement Projects, and focuses on key initiatives consistent with the City's Long-Term Financial Stability Report and Strategic Plan. However, the City remains cautious given the pressure on rising costs driven by a competitive labor market, higher fuel prices and the possibility that the recent steep rise in inflation may lead to a recession.


The proposed Budget reflects the following estimated resources and expenditures:

The above estimates include approximately $3.4 million in one-time General Fund resources resulting from the ARPA funds that the City will receive as mentioned above.


The proposed Capital Improvement Program totals $9.36 million in new projects for FY 2022/2023 and includes many of the projects that were identified for the one-time General Fund offset related to ARPA funding.

2021-2024 Strategic Plan

Adopted by the City Council on April 7, 2020, the 2021-2024 Diamond Bar Strategic Plan remains an aspirational guide to reaching the City Council's desired outcomes for the community and builds upon past success.


The Strategic Plan includes the Vision Statement; "Celebrating Our Roots, Building a Thriving Future" and establishes the following Core Values:


  • Community & Livability
  • Transparency & Accountability
  • Service & Professionalism

To meet these Core Values, the plan sets Goals, Strategies, and Key Initiatives.


Goals are high-level aspirations that advance the Vision and Core Values. There are three overarching Goals that include:


  1. Responsible Stewardship of Public Resources
  2. Open, Engaged and Responsive Government
  3. Safe, Sustainable and Healthy Community

Key Initiatives highlight some of the specific work plan items proposed to achieve the Goals and Strategies. The Key Initiatives included in the Strategic Plan are but a few of the many work plan items set forth by the City Council in the annual budget. Some of the noteworthy Key Initiatives completed during FY 2021/2022 include:


Responsible Stewardship of Public Resources
  • Completed the Prop 218 balloting process in both Landscape Assessment Districts 39 and 41 where the property owners voted in favor of maintaining the Districts with increased assessments thereby ensuring they will remain solvent and reduce reliance on General Fund resources.
  • Established a list of priority projects to utilize the one-time source of funds provided through the American Rescue Plan Act.
  • Developed functional requirements, solicited proposals and engaged in the vendor selection process for a new Enterprise Land Management and Permitting System.
  • Secured grant funding for a feasibility study to address storm water runoff at a future park site on Sunset Crossing Road.

Open, Engaged and Responsive Government

  • In response to alleged violations of the California Voters Rights Act and threatened litigation, the transition from at-large elections to district-based elections was approved by the City Council commencing with the November 2022 elections.
  • Continued to deliver essential City services throughout the COVID-19 pandemic with a wide range of on-line and in-person programs and services in building, planning, engineering, recreation, transit passes, public meetings, and more.
  • Completed a strategic organizational wide needs assessment and developed the Employer of Choice framework as a forward-thinking approach to create and maintain a high-performing organization and respond to the shift in workplace norms brought on by COVID-19.
  • Launched a new weekly e-newsletter sharing the latest City Hall news, programs and project updates with the public.

Safe, Sustainable and Healthy Community

  • Adopted and submitted the Draft Housing Element Update to the State Department of Housing and Community Development.
  • Completed an update to the City's Hazard Mitigation Plan.
  • Continued advocacy efforts for the 57/60 Confluence Project in securing regional, state and federal resources.
  • Completed engineering design for the 57/60 Confluence Project Mainline Improvements (Phase 3).
  • Commenced construction for the renovation of the Diamond Bar Golf Course to accommodate the necessary right-of-way for the 57/60 Mainline Improvements (Phase 3)
  • Continued construction of the Grand/Golden Springs Intersection Improvements (57/60 Confluence Project Phase 2A).

FY 2022/2023 BUDGET SUMMARY

Estimated General Fund Resources - $31,940,212

The following highlighted items have been incorporated into the revenue estimates:
  • Property Taxes - Property tax revenue is projected to increase by 3.4% to $6.2 million. Property Tax in Lieu of Vehicle License Fees (VLF) is projected to increase 4.4% to $7.2 million. These revenue resources have not been impacted by the COVID-19 pandemic.

  • Sales Tax - Sales tax revenue continue to show signs of improvement and is projected to increase by 6.0% to $5.8 million. This amount is partially driven by strong demand for restaurants and hotels, higher fuel prices which are expected to remain high through most of the year, and an increase in the City's share of the County Sales Tax Pool which allocates taxes collected from online sales. This amount also exceeds pre-COVID levels.

  • Transient Occupancy Tax (TOT) - With the reopening of the of the economy to travel and gatherings, Transient Occupancy Tax is projected to increase by 40% to $1.3 million. This amount is also above pre-COVID-19 levels.

  • Gas Tax - Transfer In - Gas tax revenue transferred to the General Fund from the Gas Tax Fund will remain flat at $1.05 million. These funds are used to reimburse the General Fund for as-needed street maintenance not already included in the annual Capital Improvement program.

  • Current Service Charges - With the reopening of the economy and the return of the ability to hold larger gatherings, and recreations programs, revenue from all sources of service charges are estimated to increase included:
    • Building Permit Activity - Increased by 15.7% to $1.47 million
    • Facility Rentals - Increased by 119.7% to $759,250
    • Recreation Programs - Increased 27.8% to $591,955

Estimated General Fund Appropriations - $31,459,080

The following highlighted items have been incorporated into the expenditure estimates:

Public Safety
  • Law Enforcement - The FY 2022/2023 Los Angeles County Sheriff's Department contract amount is approximately $7.77 million, representing the single largest line item and approximately 23.2% of proposed General Fund expenditures. The contract amount includes a contract rate increase of 1.45% plus a Liability Trust Fund (LTF) surcharge of 11% on each contracted position.
    • The Law Enforcement Reserve Fund includes funding for up to $100,000 for as-needed special assignments and suppression patrols which have proven to be a cost-effective approach to reducing crime and responding to specific public safety issues throughout the year.

  • Crossing Guard Services - The City provides Crossing Guard Services at seven (7) elementary schools and two (2) middle schools with a total of 17 guards. The total budget for crossing guard services is $280,000 which is a $56,535 increase over the previous year's budgeted amount.

  • Animal Control - The City has contracted with the Inland Valley Humane Society (IVHS) for animal control and licensing services since incorporation. The IVHS contract includes the total gross cost, with ALL licensing revenue collected to be credited to the City. The net contract cost is the amount included in the annual operating budget. It is anticipated that the contract will be based on a total gross cost of $499,200 which is a 4% or $19,200 increase over the past year. Based on the anticipated licensing revenue, the overall net cost for animal control services is expected to be $384,200 which is a 2.7% or $10,800 decrease from the previous year.

Personnel Costs:
  • "Human Capital Investment Program" - Each year, the City Council adopts the Compensation and Benefits Plan for the upcoming fiscal year which includes cost of living adjustments, and employee positions with associated salary ranges and benefits. Regionally speaking, the city is experiencing a considerably volatile and evolving human resources environment. To remain an "Employer of Choice" in the region the City must continue to reinvest in its personnel (i.e. human capital) in a manner similar to its capital projects and infrastructure. To identify and prioritize investment in organizational staffing and organizational structure, and to maintain, enhance and expand City programs, the City has developed a focused effort, led by members of the City Manager's executive team, referred to as the Human Capital Investment Program (HCIP).

  • Cost-of-Living Adjustment - The City's Personnel Rules and Regulations specify that the City Manager may request that the City Council authorize a Cost-of-Living Adjustment (COLA) for employees based on the March-to-March rates of the federal Consumer Price Index (CPI) for Wage Earners and Clerical Workers in Los Angeles/Orange Counties. This year's CPI calculation sharply rose in March 2022 to 8.67%. In order to avoid real wage losses and remain an "Employer of Choice" in the surrounding Los Angeles, Orange, Riverside and San Bernardino counties, it is recommended that the salary schedules for all benefitted classifications of employment including all executive positions, such as Department Directors, Assistant City Manager and City Manager, be increased by 5% in July 2022 and again by 3% in January 2023. A $50 per month increase to the Benefit Allotment is also recommended for all benefitted classifications of employment including the executive positions and members of the City Council to help keep up with corresponding health premium rate increases. The annual cost of the COLA and Benefit Allotment increase is approximately $497,107.

  • Departmental Reorganizations - The City Council, through its Strategic Plan, has made the development of a high-performing organization with a positive, value-based culture that attracts and retains talent a priority. It is the duty and responsibility of the City Manager to periodically review departmental operations and staffing structures, and conduct long-term organizational and succession planning for the efficient and cost-effective delivery of services to the public. To continue to be known as an "Employer of Choice" in the region and improve customer experience, a series of reclassifications and new positions are recommended. To recognize increased responsibilities of certain positions, it is recommended that two existing full-time employees be reclassified from Administrative Assistant to Administrative Coordinator, that a full-time Senior Office Specialist be reclassified to Administrative Assistant and one Senior Maintenance Worker be reclassified to a Facilities and Asset Maintenance Technician. The fully burdened cost (salary plus benefits) to implement the four reclassifications is $25,225.
    • Additionally, to enhance the customer service experience, increase productivity and accuracy, and to create business process efficiency, it is recommended that a full-time benefitted Accounting Technician and Permit Technician be added. It is also recommended that a full-time benefitted Neighborhood Improvement Officer be added so that a more proactive approach to code enforcement efforts can be attained as well as provide opportunity for as-needed weekend coverage. All three of these new positions will be FLSA non-exempt. The City budgets for new positions conservatively at the top step of the salary range; therefore, the approximate cost, including benefits, to fill all three positions in FY 2022/23 is budgeted at $249,932.
    • It should be noted that excluding the aforementioned increases to personnel, the total General Fund budget for full-time benefitted staff in FY 2022/23 would be $163,000 less than the prior year. This is due to retirements of long-tenured staff as well as reduced retirement costs related to the recruitment of new employees, and reflects the long-term trend towards stable personnel costs for the City.

  • Parks & Recreation Programs - The proposed Budget is optimistic that valuable programs, services, and events can return to the community with the ability to reinstate community services while focusing on participant and staff safety. Programs and events offered this year include summer youth day camp, full park amenities, field allocations, contract classes, picnic reservations, and Concerts-in-the-Park. Virtual programs such as BINGO, Tiny Tots, the Windmill Hunt, and "May the Fourth Be With You" continue to bring together a diverse community of all ages.
    • Based on recent community interest and as guidelines are modified, the gradual reopening of the Diamond Bar Center for rentals can also be anticipated this summer. In addition, we look forward to the return of senior activities, youth indoor sports, and other in-person activities.
    • Expenses for recreation programs and operations at the Diamond Bar Center have been increased commensurate with the anticipated activities, and with a combined budget of $3.9 million the budget has slightly surpassed pre-COVID levels of $3.5 million. Taken alone, the Recreation Department's program budget of $1.25 million for FY 2022/23 represents an increase of $152 thousand year over year. Moreover, operations at the Diamond Bar Center are budgeted at $1.48 million, an increase of $60 thousand from the prior year.
  • Lighting & Landscape Assessment Districts (LLADs) - Much work has been done over the past two years to help address the operating deficits and reduce the General Fund subsidies to the LLADs. In May 2021, LLAD 41 was formally dissolved, and in July 2021, a new Prop 218 ballot process was approved by the property owners. In January 2022, LLAD 39 was formally dissolved, and in March 2022 a new Prop 218 ballot process was approved by the property owners. The new assessments will make each of the Districts more sustainable over time without reliance on General Fund resources. The total General Fund contribution to the Districts for FY 2022/23 is budgeted at $212,000.

  • Debt Service Fund - In May 2021, the City refunded the outstanding Lease Revenue Bonds associated with the original acquisition and construction of the Diamond Bar Center. This achieved a gross savings of $1.736 million and present value savings of $1.633 million (or 20.85%) which translates to approximately $144,700 in average annual debt service savings for the remainder of the term through June 1, 2033 at an effective interest rate of 1.15%. The 2021 Bonds were rated by S&P as AA+ (top rating for this type of bond) which is a testament to the Council's conservative and prudent fiscal policies. The total debt service (principal and interest) will be $716,200 for this year.

  • Capital Improvement Fund - The FY 2022-2023 Capital Improvement Program (CIP) includes a total of $9.36 million in new projects and advances many of those projects that were previously deferred due to COVID-19. Some of the major CIP projects include:
    • Maple Hill Park Playground/Restroom Replacement and ADA Upgrades
    • Residential and Collector Street Rehab - Area 2
    • Arterial Street Rehab - Golden Springs (Brea Canyon to Grand)
    • ADA Curb Ramp Improvements - Area 3
    • LED Illuminated Street Name Sign and Highway Safety Light Replacements
    • Citywide Bus Shelter/Stop Renovations
    • Groundwater Drainage Improvements - Phase 4/5 (Copley & Moon Lake)
    • Diamond Bar Center Slope Stabilization Project
    • Diamond Bar Center AC Replacement and Air Quality Upgrades
    • Pantera Park Hard Court Rehab and LED Lighting Retrofit
    • Continued Construction of the Grand/Golden Springs Intersection Enhancement improvements
  • The CIP was reviewed for consistency with the City's General Plan at the May 10, 2022 Planning Commission Meeting.


CONCLUSION

The proposed FY 2022-2023 Operating Budget and Capital Improvement Program provides a positive outlook to restore a wide range of City programs, services and projects as the State, County and City following the impacts of COVID-19. It prioritizes the one-time use of General Fund resources on projects that help build resiliency and financial stability for the residents and businesses of the City. The strategic realignment and reinvestment in human capital will improve the customer and resident experience and respond to the changing needs of the organization.

I would like us to thank the Executive Management Team, especially Finance Director Jason Jacobsen and Senior Management Analyst Dannette Allen, for their efforts in preparing this proposed Budget. I would also like to thank all of our talented and dedicated staff for their continued and unwavering flexibility, creativity and support in the delivery of city services.

I would like to recognize the City Council for their effective fiscal leadership and commitment to serving the community. It is through the City Council's forward-thinking leadership and prudent fiscal practices, that Diamond Bar is able to deliver a commitment to service excellence and strive to achieve our vision "Celebrating Our Roots, Building a Thriving Future".

Respectfully submitted,

Daniel Fox

City Manager