City Council - Regular Meeting

Hello, my name is Eric Sonstegaard, City of Oxnard resident and one of two assistant city managers for our beautiful City of Oxnard. I have the distinct pleasure to share this budget preview with you for the City of Oxnard fiscal year 2026-2027. Before we get started on this slide I want to give you just a little roadmap for where we're going to go and what we will discuss in this presentation. we're going to talk a little bit about the various internal and external factors that go into our budget outlook for the next 12 months. We will talk a little bit about the city council's five year priorities. And finally, we will be covering the preliminary recommendations that staff will be making to city council on June 1st for the fiscal year 2026-2027 budget. So on this slide, on the left hand side, you kind of get a little snapshot of where we are today. So you're going to see presented on June 1st, a structurally balanced general fund budget with approximately $247 million in projected general fund revenues, The budget maintains the 16.6% reserve policy that the City Council has committed to over the last several years. City continues to invest in public safety, street maintenance, park maintenance, and community services. We'll talk a little bit about our improved financial position and our enhanced credit ratings. And then what you will see in the budget is a lot of the available funding will be recommended to be used for one time expenses and that's a good segue to the right side of this slide just talking a little bit about some of the challenges that are ahead for us. The measure of one half half set sales tax is set to sunset at the end of 2028 so that will project to be a loss of approximately $21 million in annual revenue for the city. Certainly, everyone is aware of the rising costs of energy, particularly petroleum and gasoline. We're feeling that at the gas pump every day. Labor, goods, and services continue to increase in an inflationary state. The city continues to have increasing infrastructure needs. We have decades of deferred maintenance, and we will talk a little bit about that during the capital improvement. program slide. And then the city of Oxnard is certainly not immune to what's going on around it, both at the state, federal, and global level. There's certainly a turbulent world political order, particularly with the war in the Middle East, and those things have trickle-down effects on us here in Oxnard.

So continuing with

Kind of a snapshot for the upcoming budget. As I discussed earlier, the projected or proposed budget will have $247 million in general fund revenues. We will recommend $245 million in general fund expenditures. Some of those expenditures will include some new mandatory expenses, and there's a slide that we will discuss some of those expenses. During the budget process, we ask our department heads and staff to bring to us the needs and requests of each of their individual departments. And we received over $16 million in requests. And these are really just baseline needs that our departments have identified as you know, really needing. But as you'll see, the city simply does not have the funds to cover all of those needs. And so that is where some of the decisions that the city council will make in the coming weeks will come into play. City has approximately $42 million in CIP needs. These are just non utility needs. These do not include our water, wastewater, water or environmental resources. On the right hand side of the slide are some of the funds that are available. We have approximately $12.7 million in available general fund balance. This is a one-time amount. This is akin to the money that is kind of left over in your checking account at the end of the month. This was money that was budgeted for FY 2025-2026, and as we get near the end of that fiscal year, we are projecting that this will be the amount of money that is left in the general fund. We'll talk a little bit about Measure O, the half-cent sales tax, and talk about the approximately $14 million that are available that staff recommends the City Council authorize for one-time expenses only. And then finally, you might remember that last year, the city of Oxnard and the city council chose to put aside approximately $15 million in what was called a recession protection fund. That fund still remains and is a fund of money that can be used for whatever the city council deems that they would like to use it for. So the proposed budget is structurally balanced. And, as you will see staff recommends that the available fund balance be used only for one time expenses, as there are a lot of like unknown things that are going to come down the pipe over the next couple of years.

The city of oxnard.

recently conducted a community survey called Join the Conversation in the months of April and May and some of the final survey results are listed here. Community members were asked to rank some of their priorities and you can see on the slide that some of the things that our community ranked as their highest priorities included programs to address homelessness, anti-gang and anti-drug programs, and providing more free and low-cost activities for families, children and youth. As a part of this community survey, there was an open-ended comment section at the end of the survey which allowed our community members to provide written comments about anything they wanted the city council to know about. And you can see the results here on this slide. There was overwhelming sentiment for addressing roads, streets, and alleys, our homelessness issue, and parking within our neighborhoods. These were the three most frequently mentioned comments when asked about suggestions for additional service priorities. At the April 30th City Council meeting, the City Council engaged in a priority setting session to update their five-year priorities. The revised priorities are listed here and i'll briefly touch on some of the new priorities for 2026 to 2030 you can see those readily identified in the slide in. In yellow highlight, but I will go over some of them in the quality of life section City Council prioritize maintaining youth development and wellness programs this they also included maintaining senior wellness programs. They talked about not only building an aquatic center in South Oxnard, but having the mayor pursue open hours for public use of high school swimming pools. There was a lot of public input on the Carnegie Art Museum. And so the city council prioritized completing NAGPRA compliance process in order to open the Carnegie Art Museum. and to continue the Performing Arts Center with the Council's direction about the two contracts for Sterling Venue Ventures, an OPAC nonprofit. In the economic development category, City Council wanted to continue to prioritize training and preparing youth and adults for employment at local businesses through the Oxnard Employee Pathways. Not only revitalizing the winemey saviors pleasant valley channel islands corridor, but the city's building at saviors and channel islands boulevard. And they wanted to prioritize making improvements to Dell stole CDM which would include lighting field and CD. In the public safety category City Council wanted to add an additional priority of the potential for establishing a park ranger program and then they wanted to. Add specific language on the last item stating that completing the building out of a modern disaster preparedness program to prepare the city for response and recovery from earthquakes flooding and other disasters and create climate resilience. In the fourth category of infrastructure and natural resources, there was an emphasis put on incorporating bike infrastructure, as well as making upgrades to park bathrooms. And in the fifth category of organizational effectiveness, the City Council wanted our information technology staff to prioritize not only strengthening the city's cybersecurity, but placing an emphasis on data protection. The City of Oxnard has prioritized adhering to the seven key financial principles that you see here on the slide this can certainly improve our bond and overall credit rating which can help us achieve some of the city council priorities that we had discussed on the previous slide and so i will go over just a couple of the high points on this slide the one on the left talking about maintaining fund balance the city council has continued to do this and and will do that in the fiscal year 2026 2027 proposed budget It will be the third year in a row that we have met the city council's policy of having 16.6% of operating expenses in our reserves. So that's fantastic for the city. You talked a little bit about financial performance and one of the principles is that our year end results would be within 10% of the budget and we have met that in consecutive years. There's just been increased transparency through monthly financial reports to the City Council as well as our financial transparency portal on the City of Oxnard's website. We talk about management and particularly stable management. City management has focused on meeting the goals of the City Council's five-year priorities. We have seen a stability in the senior leadership in the city of Oxnard. The city manager, as well as many of the department directors, have been here for many years, and that lends to a great amount of continuity and stability as we lead large-scale projects. And then finally, management has been extremely proactive in planning for the sunset of the Measure 0 half-cent sales tax initiative. On the right-hand side, discussing cybersecurity, it has continued to be a high priority for not only the City Council, but our Information Technology Department. And they have made a lot of strides in not only developing sound cyber policies, but implementing technology that allows us to feel safe about the data and our information systems here in the City of Oxnard. We talked previously about the City of Oxnard's financial credit ratings, and this slide talks a little bit about the city's issuer credit rating rising to AA-, which is the highest rating in nearly two decades. The city has earned 11 credit rating hikes over the last five years. Improving our credit rating is very important because it lowers the cost to finance infrastructure for the community. Kind of similar to you or community members personal credit rating, you simply get better rates for loans when you improve your credit. So we are in a much better position today financially than we were five years ago. So we'll briefly go back in history just to give you a little timeline on our budget outlook here in the city of Oxnard. I want to remind everyone that it wasn't too long ago, you know, five or six years ago, that we were facing a $9.2 million structural deficit. The city council had to make some difficult cuts, including laying off over 30 employees. But the city has worked through that, including withstanding a global pandemic. Thankfully, the voters had enough confidence to give us Measure E, which helps us kind of climb our way back. And you can see in 2021 to 2023, we started to perform some of the service restorations that had gone away the previous five years. With the approval of the City Council's five-year priorities, Council approved restoration to services and programs, parkways, median streets, streets and alleys over the last four years, but funds have continued to be limited. Some of the external factors such as supply chain disruptions, We had some inflationary times during the last five years. We've certainly had our fair share of ongoing litigation on a variety of fronts. So as you get to the point where it says we are here for fiscal year 2026-2027, we are proposing a structurally balanced budget. However, state, county, and school budget cuts are certainly impacting revenues for the city. And then, as we've discussed previously, over the next two and a half years, at the end of 2028, the measure 0.5 cent sales tax sunsets, and that will mean a reduction of approximately $21 million annually for the general fund. So what does that mean for us for our outlook as we start to get into the numbers for fiscal year 2026, 2027? And I want to thank those that are still with us in this video. So on the left, it's what do we know? We do know that the measure of half-cent sales tax will sunset soon. There have been federal and state budget cuts. There have been county budget cuts. Many of you are familiar that Costco is opening a store in the neighboring city of Camarillo. So we anticipate an impact on our sales tax revenue. Costco is our single biggest brick and mortar sales tax source in the city of Oxnard. And then we discussed last year some pending state online sales tax reapportionment. And in a nutshell, what that means is The state is looking to change how sales tax from items that are received from the City of Oxnard Amazon Distribution Center are apportioned. So we could see a decline in our Amazon sales tax revenue. So those are kind of the things that we know. On the right-hand side, what keeps changing? And none of these are a surprise to anybody. Certainly the economic conditions of the country as a whole, including tariffs, inflation, global conflicts, supply chain. Clearly the immigration decisions of the federal government have had an impact on our city and specifically our labor supply. And then the City of Oxnard continues to have multiple lawsuits that we have to address that drain valuable resources in the form of legal fees. So as you can see on this slide, there are communities, many very similar to Oxnard, that are facing severe deficits that will inevitably result in a reduction in service and for some cities, even layoffs of long-time employees. We've worked very hard here in Oxnard to kind of dig out of the hole that we were in a decade ago, but these headlines, which are all from the last two months, kind of serve as a cautionary tale as to what can happen in the blink of an eye. And so these frame some of the conservative nature that we make our staff recommendations from. So the purpose of this slide is we wanted to show our community members kind of a snapshot of some of the services that have been restored over the last four to five years. We had talked a little bit about the restoration that had taken place after the pandemic. And these are services that have been restored through your local taxes. And I won't touch on all of them, but you can see that it really runs the gamut of the city departments, including police and fire, including cultural and community services, including public works, and even including housing. Where we've really seen an impact in your local tax dollars is the restoration of our streets and alleys. And these are funded in part by both Mejuri and Mejiro. You can see over $80 million invested in Oxnard streets and alleys since 2021. You can see the list of completed projects. They span South Oxnard to North Oxnard from the beach To the East side and at the bottom of the slide you can see some of the projects that are currently in progress one note to be made on the slide. The city really requires over $20 million per year, just to maintain not increase the the quality level of our streets so. Maintaining our streets is one of the most basic functions that a local government participates in and it does not come without a cost. So thanks for hanging in there with me. This is the last slide before we get into the meat and potatoes of the fiscal year 2026-2027 proposed budget. And it just talks a little bit about your local tax dollars at work and really how the budget has changed since before the Measuring Sales Tax Initiative was approved in November of 2022. Correction, 2020. Before Measure E, we had a structural deficit. We talked about that before. We reduced staffing. We had a ton of deferred maintenance. Probably just as importantly, we had critically low reserves in the city of Oxnard, depleted to about 2.2% of our operating expenses during the pandemic. And post-measure, we are very proud that we present a structurally balanced budget, that we've restored some of the services that we've previously discussed in this video, that we increase our infrastructure investment, and then just as importantly, continue to maintain that 16.6% reserve policy that really lays the foundation for a strong future for the city of Oxnard. Well, congratulations for making it this far, and so now we are going to talk a little bit about the meat and potatoes of the fiscal year 2026-2027 proposed budget. I do want you to remember for the remaining slides that many of the figures are preliminary at the time of publication of this report and this presentation. and that any substantive changes will be orally stated at the June 1st budget public hearing. On this slide, we talk a little bit about our general fund estimated preliminary revenues. The city's general fund revenue is the primary source for funding most of the operations that you see on a daily basis, whether it's fire, police, our parks and rec, and things of that nature. The proposed budget will be for $247 million in general fund revenues, and you can see the revenue by sources listed on the left. The city of Oxnard is obviously dependent on both property tax and sales tax revenue as the largest drivers of revenue. This slide talks about the general fund proposed expenditures, and you will see that number of $256.6 million. You might notice and wonder why that it does not match or exceeds the revenue figure from the slide previously. But this includes approximately $9.5 million in one-time projects that are being paid via available fund balance. And so the baseline structural expenses are approximately $245 million, and we will discuss that further in upcoming slides. this slide talks a little bit about where city council direction it will be needed at the public hearing on june 1st and these are some of the key budget decisions so as far as general fund supplemental requests and those are the requests that we talked about previously that we asked our departments and their staff to submit for review city council needs determine which of these department needs should be funded, which requests should be one time versus ongoing, and decide whether to spend the available general fund balance. There will be discussions on Measure O spending priorities. and reviewing some of the one-time funding recommendations from staff, which will include funding a fire academy, the purchase of a much-needed fire ladder truck, and then a series of CIP projects that we will discuss later in this presentation. And then finally, the city council will need to, again, prioritize the citywide's infrastructure needs, and that comes via the CIP process. and deciding which of those projects can be funded the recommendations will include streets and alleys facilities public safety infrastructure and parks projects so just to reiterate Some of the available funding for Council prioritization, and this is above and beyond the baseline recurring ongoing expenses that our departments have every year. The City Council can apply the funds listed here to various departmental needs or capital improvement project needs. We talked a little bit about the general fund balance. This is a one-time amount of $12.7 million that's available for the City Council. The Measure O has an available fund balance this year of approximately $14 million. And then the Recession Protection Fund that we had talked about from last year has approximately $14.9 million in it. Staff at this time is not recommending that we utilize that Recession Protection Fund, but it's certainly available if that is what the City Council chose to do. And just a reminder that the Measure O sales tax is ending soon, and so we generally are going to recommend that that money is spent on one-time expenses or one-time projects. We can't incur ongoing expenses if that revenue source is going to go away. So the first set of general fund supplemental requests that we'd like to discuss are the mandatory expenses. And things can be mandatory for a variety of reasons. They could be things set in place by the county or state for instance the first item there elections we will be having an election in november we have three incumbent city council members that are up for re-election and that costs money and so that is this one-time expense some of the vehicle related items here have to do with state mandated emission concerns, and so the city is required and mandated to come up with zero emission vehicles in a variety of different areas of their fleet. And then other items may be mandatory due to contracts that were already signed or past council actions, and that's what you have with the River Park ball field maintenance as well as the increase in the Ventura County animal shelter costs. The second slide here are general fund supplemental requests. And while these are not mandatory in nature, you know, we had discussed earlier about approximately $16 million in needs that our department had identified in a variety of different areas. And you can see here that staff is recommending that city council approve the requests on this slide that total approximately $1.95 million. They run the gamut from police vehicles to legal services to property maintenance to required and new radios for the fire department. These are the one-time expenses that staff believes are necessary to move forward in 2026 and 2027. Our next category of requests for council direction are illustrated here on this slide. You can see a variety of different expenses and requests, both one-time expenses and ongoing expenses. These total approximately $12.7 million, and if approved by city council, would be utilizing available fund balance as the potential funding source. So you can see there are things like a much needed fire engine, approximately $9.6 million in capital improvement projects that we will discuss in later CIP slides, and other requests that are ongoing expenses that cover multiple departments in the city. So now we're going to talk a little bit about the measure oh half cent sales tax, as I have stated multiple times to voter approved sales tax. That will be ending at the end of 2028 it has supported public safety infrastructure and Community services. We estimate the revenue from measure oh in fiscal year 2026 2027 to be approximately $20.2 million. There are ongoing operational costs for next year, totaling approximately $5.5 million. We will cover that in an upcoming slide. So we are proposing a one-time funding available of approximately $14 million. So in anticipation of the sunsetting of the measure of sales tax, In late 2028, the City Council adopted a weaning schedule several years ago that provided a framework for transitioning ongoing expenses that were being paid via Measure O to absorb them into the general fund. So you can see that five-year pattern here, and we continue to have things that will be transitioning to the general fund in fiscal year 2026-2027.

I did want to provide one point of clarification.

see either myself or staff interchangeably state that the measure of sales tax ends in late 2028 or early 2029. It actually sunsets at the end of 2028, but we will receive the last sales tax revenue check in March of 2029. So that's why we kind of use both of those dates interchangeably. So I mentioned earlier about approximately $5.5 million in ongoing expenses that will still be under Measure O in the upcoming fiscal year. And I said the city had gradually shifted Measure O away from these ongoing operational costs, but there are still some that have not been weaned, and those are listed here on this slide. As I previously stated, staff is recommending the City Council approve approximately $14 million in one-time expenses for Measure O, and you can see those one-time expenses consist of approximately $8.2 million in capital improvement projects, a much-needed fire department ladder truck, And then a fire academy, a basic fire academy is something that City of Oxnard runs about every four to five years. And it will assist us in hiring, training, and retaining up to 21 new firefighters. But you can see there is a cost to that training. And so we're recommending that those costs be covered via measure out. One thing that's often lost when we talk about citywide infrastructure needs, in particular the capital improvement program, is the technology investments that the city has implemented and still needs. This slide illustrates some of the major technology investments over the last five years, and the city has come a long way in establishing a secure and productive foundation of information technology in the city. Along with the investments that have already occurred, there are still many things that the city needs that have not had funding sources identified, and some of those are listed here on this slide, and they include a citywide surveillance project, cybersecurity remediation, an investment in our library technology. And then the replacing of aging data center cooling systems and generators at some of our city facilities. So these are much needed technology investment needs that we will be exploring funding sources for in the coming years. So our capital improvement program that I've referred to many times in this slide This was presented to committee and council over the last several weeks and really addresses the citywide infrastructure needs. As you can see, there's over 250 total projects in the CIP with a proposed value of nearly $1.3 billion. But if you had seen either the tip presentations or you can read in this staff report, there is a significant gap between what the city needs and the available funding for those needs. So at the main 19th city council meeting public works director Michael wolf discussed the capital improvement program and talked about some of the infrastructure needs and what. They refer to as category four, and these are new and existing projects, some of very high priority that only have partial. funding or don't have any funding, and so some of the items on this slide here are the things that we will ask City Council to discuss and propose whether they want to fund, particularly the ones on the left-hand side having to do with neighborhood street resurfacing, citywide alleyway resurfacing and reconstruction, and arterial street resurfacing. So just a quick overview before we leave the CIP program. Oxnard's no different than many cities. We have a lot of decades-old deferred maintenance needs for infrastructure repair and replacement, and we just simply do not have the current funding sources to address all those needs. And unfortunately, delays just kind of compound the challenge of fixing some of the things we have. You can see some of the unmet needs, particularly in our enterprise utilities. We have nearly $750 million of projects needed, over $300 million having to do with transportation and drainage, over $100 million just in building needs. And as referred to earlier, nearly $30 million in IT needs. So these are some of the unmet needs that we will prepare for and tackle over the next several years. So what's next? This presentation is in preparation for our June 1st budget public hearing. that will take place at the Oxnard City Council Chambers on Tuesday, June 1st. At that meeting, staff will provide their recommendations and a presentation, much like you have sat through here today, and City Council will provide direction to staff on which items they recommend funding. Staff will then take those recommendations, prepare an adopted budget, and come back at the June 16 City Council meeting where the City Council will vote on whether to approve and adopt the fiscal year 2026-2027 operating budget and capital improvement budget. If you'd like to see the budget documents, we have a very robust finance page on our City of Oxnard website and the proposed fiscal year 2026-2027 budget will be published online. At www.oxnard.gov slash budget and I encourage everybody to look at that read the city managers budget message at the beginning of the budget book and ask any questions that you might have at either the June 1 of the June 16 meeting. So again, thank you for sitting through and caring enough about the Community that you live or work in to learn about the proposed budget for the fiscal year 2026 2027 for the city of auction art again, my name is Eric songs to guard assistant city manager. If you ever have any questions and you see me at the Oxnard City Council meeting, please come up, introduce yourself, and I'd be happy to sit down and talk with you about any questions you might have about this report or this presentation. Once again, thank you, and I hope you have a great day.