Item 32 - Provide Direction for FY 2021-22 Budget

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Provide Direction for FY21-22 Budget March 16, 2021 Page 7 roadway maintenance to satisfy the MOE. In light of the ongoing pandemic, OCTA is currently considering some form of MOE relief for cities in FY 2021-22. The FY20-21 MOE relief formula adopted by OCTA did not help the City of Santa Ana. If the OCTA MOE increases for Santa Ana, the increase will be included in the draft FY 2021-22 budget. Additional Demands on the General Fund There are additional demands for General Fund money, as described below. Once the City is ready to add savings from pension debt refinancing to the FY 2021-22 budget, staff may recommend additional spending from this list. • Internal Service Fund Charges: Some departments/divisions provide internal services to other departments (e.g. Building Maintenance), and account for costs of the service in a separate internal service fund. The funding source for these centralized service costs is charged to departments for their proportional use of the service. Departments pay the charges from their budgets, many of which are in the General Fund. Therefore, when costs to provide internal service increase, the result is an increase to General Fund expenditures. In prior years, internal service charges were sufficient for operations, and over time, the internal service funds accumulated fund balances from unspent allocations. As the General Fund budget constricted, internal service departments/divisions relied on their accumulated fund balances instead of increasing the charges to the General Fund. At least three internal service funds have completely exhausted accumulated money from prior years, and must increase charges to the General Fund to continue providing service. Additional analysis is required, and the City Manager needs to vet department budget requests. However, at this time, we believe there is a need to increase internal service charges to the General Fund by approximately $2 million. • Santa Ana Regional Transit Center (SARTC): The FY 2020-21 budget included a one-time $1.1 million General Fund subsidy for SARTC. With the Midyear Budget Update, staff reported an estimated negative fund balance of $2.2 million at June 30, 2021, as well as an ongoing budget deficit for SARTC. It is common for government to subsidize public transit centers as they provide external benefits such as stimulating economic development and reducing traffic congestion. For example, the City of Anaheim subsidizes its transit center with transfers from its convention and sports complexes. Although the City is exploring ways to increase tenant occupancy and lease revenue, the draft FY 2021-22 budget will likely include a proposed ongoing subsidy for operations. However, SARTC also needs a one-time General Fund subsidy to cure the negative fund balance.