Item 19 - Early Direction for the Fiscal Year 2024-25 Budget (continued from the meeting on 3-19-2024)

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Early Direction for the Fiscal Year 2024-25 Budget April 2, 2024 Page 10 4 1 5 8 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. The existing systems were implemented roughly 20 years ago, and were simply upgrades of the previous mainframe versions. The City recently received ERP system proposals and is in the process of evaluation. Although it is too soon to identify a specific amount, the latest estimate is $7.65 million. Additional funding may be necessary to purchase the system, implement it, and provide training. Equipment Replacement Fund The City has a large fleet of vehicles used to provide services to the public, comprised of both owned and leased vehicles. On December 19, the City Council approved renewal agreements with Enterprise Fleet Management for leased vehicles used in both the Police Department and the Planning & Building Agency (PBA). There are a total of 18 leased vehicles used in PBA, all with lease terms that end during FY 2024-25. When vehicles are held for the full useful life of the vehicle, leasing becomes a more expensive option than purchasing. The estimated cost to purchase 18 new vehicles for PBA is approximately $1 million, due to the new state law requiring a mix of electric vehicles in the fleet. To minimize long-term costs, shall staff include a one-time spending allocation in the proposed FY 2024-25 budget to purchase replacement vehicles for PBA? RESTRICTED FUNDS Cannabis Public Benefit Fund Two-thirds of Cannabis Tax revenue related to adult-use and supply activities is transferred to the Cannabis Public Benefit Fund each year pursuant to Santa Ana