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1 City of Pleasanton Mid-Term Budget Update • FY 2022/23 MEMORANDUMMEMORANDUM Date:Date: May 31, 2022 To:To: Honorable Mayor and City Council From:From: Brian Dolan, Interim City Manager Subject:Subject: FY 2022/23 Mid-Term Update –Operating Budget & Capital Improvement Program This document provides updated budget estimates for FY 2022/23, which is the second year of the FY 2021/22 & FY 2022/23 Biennial Budget, originally adopted by City Council in June 2021. Updated estimates are based on staff’s assessment of current financial conditions as we enter the second year of the two-year budget. The Mid-Term Budget Update document is intended to provide the Council with the information necessary to ensure that the second year of the budget is balanced, while adequately addressing the City Council’s priorities and the needs of the community. BUDGET APPROACH AND STRATEGYBUDGET APPROACH AND STRATEGY One of City Council and City Manager’s goals is to continue to maintain fiscal sustainability. Staff’s approach to the Mid-Term Budget Update was to ensure that ongoing operating revenues will be sufficient to cover operating expenses, as well as provide adequate allocations to the Repair and Replacement Program (R&R) and Capital Improvement Program (CIP) and maintaining operating reserves. While the City continues to experience the ongoing impact of COVID-19, normal operations have resumed in most areas. Staff is cautiously optimistic that recovery from the revenue impact of COVID-19 will occur in FY 2023/24 and have adjusted the FY 2022/23 revenues accordingly. The Mid-Term Budget update includes adjustments to some revenue and expenditure categories based on staff analysis of current economic trends and programmatic needs to provide services to our residents. The General Fund revenues have an overall increase of 4.2 percent, which reflects the latest estimates for property tax, sales tax, Transient Occupancy Tax (TOT), business license and re-establishment of several recreation programs. The sales tax and business license increases are based on the near return to pre- COVID-19 business activity and spending levels as experienced in the current year. It is anticipated that while recreation programs will return to full operations by FY 2022/23, there is still a limited availability of staffing to manage these programs. Therefore, the revenue projections for recreation programs are built conservatively to reflect the anticipated recreational staffing shortages.