Budget Message for 2020-21 Fiscal year

I present to you the FY 2020/2021 Operating and Capital Improvement Program Budget for the City of Rosemead. As we all know, we are living in historical times with a COVID-19 Virus crisis that has never occurred in our lifetimes or in the City of Rosemead’s lifetime. The product of this virus is not only sickness and death to some of our residents, but an unprecedented time of economic uncertainty and adversity that hasn’t been seen since the 1930’s.

In this environment, staff has developed a budget that: 1) attempts to minimize the negative effects of the current financial situation keeping expenses as low as possible; 2) keeps the City prepared for a better financial future; 3) navigates the uncertainty in terms of delivery quality city services and programs to the residents; 4) provides economic stimulus and certain breaks to the City’s business community, and, 5) protects the long-term policies and direction of the City Council.

To these ends, and to be totally transparent, the Proposed FY 2020-21 Budget has no surplus.  Actually, it proposes a combination of shifting certain costs to non-general fund special revenues, eliminating a total of 4 budgeted but vacant full-time positions, better utilizing part-time staff to save dollars and only increasing operational expense increases to under 1% of what was appropriated last fiscal year (FY 19-20). But, unfortunately even with all of these measures, the proposed budget’s revenues are severely impacted by the national and state financial environment and will require the City to use up to approximately $1,700,000 in General Fund Reserves to balance the FY 2020-21 General Fund budget. Staff acknowledges this is a “worst case” scenario and we all hope things get better. This is the first time the City of Rosemead has had to face this situation in many years.

Past staffs and Councils have carefully implemented financial policies and have approved budgets that prepared the City for these types of financial circumstances. This was not because of luck, it’s because staff and the City Council understood the importance of general fund reserves and approved policies and budgets that allowed the City to save and grow the Reserves until a rainy day. We are in that rainy day.

I want to reiterate that FY 19-20 and the proposed FY 20-21 budget revenue shortfalls are not caused by any action on the part of staff, Council, residents or City businesses. It’s not caused by economic market failures or bad fiscal policies like the 2007-2009 recession or even a terrorist disaster like the 2011-12 recession.  Its’ cause is a biological pandemic that has engulfed the United States and most of the world and ground the United States economy into a severe recession.

In an effort to protect people and save lives, the State of California and the County of Los Angeles has implemented emergency measures that, as a consequence, closed many local businesses including hotels, dine-in restaurants, small businesses and required most consumers to stay at home. These practices, while saving lives, brought the economic vitality Rosemead and the State were sharing to a virtual halt.

The result has been a significant loss of City general fund revenues in FY 19-20 (an projected almost $3.8M or a 18%-20% decrease over the approved budget) and is continuing into FY 20-21 with an estimated general fund revenue loss of $2.2M from a normal year’s revenue estimate. The General Fund FY 19-20 Estimated and FY 2020/21 Proposed general fund revenue and expenditures are summarized as follows:

Table 1

Projected FY 19-20 vs Proposed FY 2020/21 General Fund Comparisons

 

 

FY 19-20 Projected Budget

FY 20-21 Proposed Budget

REVENUES

21,264,900

21,866,200

EXPENDITURES

24,022,300

24,743,150

General Fund CIP

445,000

0

Surplus/(Deficit)

3,757,000

2,876,950

In FY 20-21 the budget is further exasperated by cost increases not under the control of the City. This includes an approximately $500,000 increase in our Law Enforcement Contract with the County of Los Angeles Sherriff’s office, cost increases of approx. $233,000 in Insurance premium costs, multi-year contract services increase, and the general cost increases associated with inflation and contract cost increases. 

The proposed FY 20-21 budget does contain some good news for the General Fund.  These include: 1) achieving a CalPERS Annual Assessment savings of approx. $483,000 for FY 20-21; 2) acquisition of State and Federal grants (including CDBG) of approx. $5,000,000 to fund capital projects, CDGB and other projects; 3) the movement of certain general fund expenditures to special revenues funds of over $250,000 thus saving the general fund those dollars, and 4) a decrease of 4 budgeted full time employees due to work load efficiencies and more efficient use of part-time positions.

Even in these economic times, staff has developed a Proposed FY 20-21  Budget that: 1) continues many of the Strategic Plan goals set by the Council in their last Strategic planning effort; 2) continues to provide the basic services that residents and businesses rely on from the City; 3) keeps City staff, residents, businesses and visitors safe and protected during this health crisis; 4) continues to improve and maintain the public infrastructure and aesthetics of the community through the City’s CIP projects, and 5) allows the City to stay in a position to take advantage of the future improving financial environment (be it during the end of FY 20-21 or in FY 21-22).

Staff firmly believes the Proposed FY 20-21 Budget will enable Rosemead to continue its quality of life as a welcoming and thriving community that honors tradition, unites in diversity and works for a bright future.

It is my sincere pleasure and honor to serve as your City Manager. Under the leadership of the City Council, I look forward, in an increasingly challenging year, to a healthy, safe, and improving fiscal year.

View 2020-21 Fiscal Year Budget