DISCUSSION
General Fund Revenues
The General Fund revenues are projected to total $167.2 million in FY 2023-24 and $171.6 million in FY 2024-25. The City’s top three revenues sources are Property Tax, Sales Tax – including Measure O, and Hotel Visitor’s Tax. These tax revenues represent approximately 87%, or $146.2 million, of the General Fund revenues. As such, the stability of these sources is critical in funding the City’s essential programs and services. Although there is an increased economic uncertainty due to global supply chain disruptions, record rates of inflation and the threat of a mild recession, the City’s current financial position is stable and staff anticipates the revenues to trend favorably and be within the budget estimates for the next two years. While we remain hopeful and optimistic about these revenue trends, staff will continue to monitor the revenues and any adverse fluctuations in expected trends.
Sales tax, including Measure O revenues are projected at $60.3 million and $61.8 million in FY 2023-24 and FY 2024-25, respectively. The State of California’s Department of Tax and Fee Administration (CDTFA) disburses monies to counties and cities on a quarterly basis with advances paid monthly. The sales tax is assessed on gross receipts from retail sales of tangible goods at a rate of 7.75%. An additional 1% of transaction tax is collected with the passage of the Measure O in the City. Effective April 1, 2019, the distribution of the tax is as follows: 6.75% to other governmental agencies and 2.0% to the City of Garden Grove – 1% for Bradley-Burns and 1% for Measure O.
Property taxes continue to remain strong and staff is projecting a stable outlook for the next two years, at $60.9 million for FY2023-24 and $62.6 million for FY2024-25. The County of Orange administers the disbursement of monies to cities. Out of the property taxes that are generated in Garden Grove, the City receives approximately 11% and the remaining 89% goes to other taxing entities (i.e., County, Schools District, Special Districts and the former Redevelopment Agencies).
The Sales Tax, Measure O and Property Tax are budgeted based on projections provided by the City’s consultant along with historical trend analysis.
The City’s third largest tax revenue source is the Hotel Visitor’s Tax. Hotels throughout the City have rebounded and are now generating a strong recovery from the pandemic. Staff anticipate that this current year’s Hotel Visitor’s Tax will surpass its pre-COVID level. For FY2023-24 and FY2024-25, staff project the Hotel Visitor’s Tax revenue to be $25.0 million and $25.8 million, respectively.
The City’s other general fund sources, such as various fee-based services, citations, franchise fees, business license, interest income and reimbursements total $21.0 million for FY 2023-24 and $21.5 million for FY 2024-25.
Table 1 below summarizes the City's General Fund revenues.
Table 1 - General Fund Revenue
General Fund Expenditures
The proposed General Fund budget is balanced and totals $168.9 million for FY 2023-24 and $174.3 million for FY 2024-25. The General Fund represents the largest component of the City’s budget, and is the main operating fund for the City. The General Fund accounts for sources and uses of resources in the provision of activities, programs and services deemed necessary and desirable by the community. The General Fund supports the City’s basic services and essential functions including public safety; recreational, cultural and social services; the maintenance and improvements of the City’s infrastructure; the planning and development of the City; and City administration. The proposed General Fund budget includes funding for all salaries and benefits, contracts, commodities, other expenditures (such as contributions to internal service funds and debt service payments), transfers to other funds, and capital improvement.
Table 2 summarizes General Fund expenditures by Department and function.
Table 2 - General Fund Expenditures
The proposed General Fund budget also includes $13.1 million ($7.3 million in FY 23-24 & $5.8 million in FY 24-25) in new funding that will enhance the programs and services provided to our community. These new funding initiatives include:
- Addition of 17 full-time positions to strategically address Council priorities
- Contractual funding for Be Well OC, which provides mobile mental health services
- Flood control channel repair and improvements
- Funding to supplement building, code enforcement and planning services
- Funding for economic development, engineering services, construction management and grant development
- Replacement of critical police equipment
- Enhancements to the City’s public facilities and infrastructure
- Upgrades and enhancements in information technology
- Continuation of the City’s Pavement Management Acceleration Program
- Traffic and parking enforcement
- Additional funding for tree, streets, and flood control channel maintenance
- Resources for the sidewalk, curb and gutter cleanup program
Capital Improvement Plan
The Capital Improvement Plan (CIP) budget includes funding for arterial and residential street rehabilitation, public facilities/infrastructure, traffic improvements, parks, water, and sewer improvements. These projects are primarily funded by gas taxes, development impact fees, grants, and enterprise funds. The proposed five-year CIP totals $169 million with close to $100 million in projects transpiring over the next two fiscal years. The proposed CIP budget for FY 2023-24 is estimated at $67.7 million and $30.2 million for FY 2024-25. Included in the proposed biennial CIP budget is funding for arterial street rehabilitation and residential overlay plan; traffic signal upgrades at 10 intersections; several park equipment upgrades; the rehabilitation of the Navigation Center and the Purcell building; improvements at the Magnolia Reservoirs and Booster pump station; construction of well 19 and water main replacements including hydrants, meters and valves; and, funding is proposed to continue sewer main replacements throughout the City.
Other Funds
Water: The Water Enterprise Fund’s proposed budget for FY 2023-24 total $58.6 million and $52.8 million for FY 2024-25. The budget includes the continued implementation of the Water Master Plan, capital improvement funding and additional commodity water charges as a result of new PFOA/PFOS regulations. The proposed revenue figures in the Water Budget do not include any rate adjustments. Staff is currently carrying out a Water Rate study and will bring the recommendations for Council consideration in Fall of 2023.
Housing Authority: The Housing Authority’s proposed budget for FY 2023-24 is $49.6 million and $51.9 million for FY 2024-25. The budget includes funding from the Department of Housing and Urban Development for the Mainstream Vouchers Program and Housing Assistance Program portability. The authority provides rent subsidies for over 2,500 low-income families and provides several outreach activities to tenants and landlords and conduct annual and special inspections of properties.
Other Governmental Funds are comprised primarily of federal, state and county grants for specialized programs, such as the CDBG, CalHOME, AQMD, etc. and funds used to fund the CIP projects such as Gas Tax, Citywide Park Fees, Measure M, etc. The proposed biennial budget includes appropriations for these funds as well as other funds that are specifically listed in the attached resolution.
Internal Service Funds consist of the Fleet, IT, Worker’s Compensation, General Liability and Building Rehabilitation funds (listed in the attached resolution). The Internal Service funds account for the acquisition of goods and services provided by one City department to other City departments on a cost-reimbursement basis. The proposed budget for Internal Service Funds is $28.4 million in FY 2023-24 and $28.8 million in FY 2024-25.
User Fees
When developing the budget, staff is mindful in ensuring the fiscal health of our fee structure. It is important to adjust the City’s fees to be in line with the cost of providing those services. Certain Community Services’ fees have not been adjusted in over ten years. Additionally, the proposed fee structure standardizes all classifications so they are consistent across all sections of the schedule. This will ensure all facilities and rentals operate under the same set of regulations and rate structure.
All proposed fee increases were based on two factors. First was the actual costs for providing the program, including labor, contractor, materials and supplies. The second factor was the rates of neighboring cities. This was achieved through a survey of multiple cities in Orange County that were comparable to Garden Grove. The proposed new rates are in the low to mid-range of the comparable cities.
Attached to the Resolution is the proposed User Fee Schedule for the Community Services Department.