Item 26 - Early Direction for the Fiscal Year 2024-25 Budget

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Early Direction for the Fiscal Year 2024-25 Budget March 19, 2024 Page 9 4 1 3 1 Tet Festival $95,000 $75,000 Zoo Events $10,000 $36,000 Shakespeare $10,000 $10,000 Santa Ana Fun Run $70,000 $85,000 Pacific Symphony $0 $10,000 Totals $1,581,640 $900,000 $1,605,700 Staff welcomes City Council direction regarding the City Events budget. INTERNAL SERVICE FUNDS During the 2023 budget process, staff shared concerns with the City Council regarding the fiscal health of internal service funds. These funds provide a centralized service and charge departments for use of the services (e.g. Building Maintenance). Over the last several years, the City has taken steps to solve long-term issues for each fund. Most recently on December 19, City Council approved a one-time $2.9 million subsidy for the Engineering Division. There are four potential forthcoming requests for internal service funds, discussed below. Central Stores Due to just-in-time availability from resource vendors, the use of Central Stores has decreased over the years. With decreased usage, the City has lost economies of scale and there is no longer a cost benefit of maintaining a Central Stores. At this point, there is only a need to keep specialized water operations equipment on hand. Therefore, staff is preparing to close the Central Stores internal service fund by the end of the current fiscal year and transfer the remaining inventory and staffing to the Water Enterprise. In preparation for the closure, the City recently ended its relationship with Shamrock Supply Company for consignment inventory. Account reconciliations indicate that a one-time subsidy ranging from $500,000 to $800,000 will be necessary to close the fund. Once the fund is closed, gas and diesel sales will move to the Corporate Yard fund. Corporate Yard In recent past, the City’s Corporate Yard has been underutilized, and has not been able to charge enough usage fees to cover its costs. In addition, the Corporate Yard recently incurred significant costs to mitigate hazardous waste. Therefore, we expect to request a one-time subsidy ranging from $500,000 to $700,000 to make the fund whole. Going forward, Public Works is exploring potential use from other governmental agencies to increase revenue for the Corporate Yard; and as noted above, the operation will benefit from fuel sales. Information Technology The Information Technology internal service fund has an estimated spendable fund balance of $12 million to be used for a variety of system upgrade projects, including a new land management system and a new Enterprise Resource Planning (ERP) system. A new ERP system would serve Accounting, Payroll, Human Resources, and Cashiering.