BIB_2024

Budget in Brief FY 2024 - 2025

City of Chino Hills City Council

Cynthia Moran, Mayor Art Bennett, Vice Mayor

Brian Johsz, Council Member Ray Marquez, Council Member Peter J. Rogers, Council Member

Budget in Brief At the June 11, 2024 City Council Meeting, the City of Chino Hills adopted its Annual Operating and Capital Improvement Program budget for the Fiscal Year (FY) 2024-25, which runs from July 1, 2024, through June 30, 2025. While the budget is balanced, this did not come without hard work and some difficult financial decisions. This “Budget in Brief” provides highlights of the City of Chino Hills’ FY 2024-25 budget, the City’s economic outlook, and the use of City funds to preserve the Chino Hills quality of life and provide essential public services. To view the full budget, visit www.chinohills.org/Budget. The City’s budget is the framework and financial plan the City Council uses to establish programs and services provided by the City and to allocate funds necessary to carry out those programs. The City Manager is responsible for ensuring the City remains fiscally responsible and that the Council is presented with a balanced annual budget for consideration and decision-making. The budget process begins in January for the next fiscal year with the City Manager directing staff to prepare budgets based on City Council policy direction and goals, and the City Council adopts the budget in June of each year. Budget Process Much of the City’s revenue is restricted and must be spent for specific purposes such as water, sewer, and landscaping, or projects budgeted through the Capital Improvement Program. The City’s main fund is the General Fund, which primarily comes from taxes, and accounts for all revenue not required to be placed in another fund. General City services, including police services, are paid for by the General Fund. Financial Structure Overview

Balancing the Budget

Before being presented to the City Council, this year’s budget began in January with a $3.1 million estimated General Fund operating deficit. The City’s operating budget covers the day-to-day operations and obligations of the City including law enforcement, and general City services. While the annual budget takes into consideration a variety of assumptions related to projected revenues and forecasted expenditures, strategic maintenance deferrals and service level adjustments were required to achieve a balanced budget. These include: • Cutting the Public Works budget by $1.5 million, and significant cuts across most departments • Reducing water and landscaping maintenance of City-owned open space and trees by $1 million • Delaying infrastructure improvements, non-essential facility repairs, and roadway projects General Fund revenues pay for police services, building and planning services, recreation programs and special events, and infrastructure maintenance and repairs. The City’s General Fund budget is projected to be balanced, with estimated revenues totaling $55.3 million, and estimated expenditures totaling $55.3 million. General Fund revenues primarily come from taxes, which make up 58% of the $55.3 million. General Fund Budget

Investing in Community Services

This year’s General Fund budget includes a $6.6 million investment in the City’s Community Services fund to provide special events and recreation programs residents and families enjoy at minimal to no cost. Each year, the City Council chooses to subsidize these programs and events from the City’s General Fund. These include signature special events and recreational programs that bring the community together like the Independence Celebration, Tree Lighting Ceremony, Easter Egg-Citement, Trick-or-Treat, and programs like Concerts in the Park, Mobile Recreation, Aquatics, Tiny Tots, Summer Day Camp, and Pee-Wee Sports.

Importance of General Fund Reserves

Much of the City’s revenue is restricted and must be spent for specific purposes such as water, sewer, and landscaping or projects budgeted through the Capital Improvement Program. General City services, including police services, are paid for by the General Fund. While the City’s budget includes our General Fund unrestricted reserve of $33.3 million, which acts as a rainy-day fund for unforeseen circumstances, we must use these funds wisely as we never know when we might need them. For example, in the past the City spent nearly $5 million out of the City’s General Fund to battle Southern California Edison (SCE) and compel the California Public Utilities Commission to force SCE to underground power lines in Chino Hills, and $310k more to protect the 2,400-acre Tres Hermanos Ranch property from a massive solar facility project.

While these funds are crucial to fund public services and unforeseen circumstances, relying on them to fund an operating deficit is not a feasible or sustainable approach to maintaining a healthy City organization.

Looking to the Future

Like many organizations, inflation is affecting costs. We must face the fact that General Fund expenditures will outpace our anticipated revenues in future years. Balancing this year’s budget presented several challenges including: • Decline in Sales Tax Revenue: The continuous rising cost of living has led people to cut back spending on dining out and shopping, choosing instead to stay home or opt for less expensive options. This reduction in consumer activity directly impacts the City’s sales tax revenue. • Decline in Gas Tax Revenue: With more drivers switching to fuel-efficient vehicles and being forced to cut gas expenses amid enormously high gas prices, there has been a decrease in gas tax revenue. This means less funding available for maintaining roads and transportation systems. • Ongoing Lighting and Landscaping (L&L) Deficit: The revenue received from L&L funds have remained fixed since 1996, requiring the City to spend $3.1 million this year to subsidize the costs. This subsidy includes funding for playground equipment replacements and landscape area maintenance. • Increased Costs: Inflation is impacting all costs including increases in police services, maintaining aging infrastructure, contracts, and energy. The costs to deliver essential public services continues to rise while revenues are declining.

In five years, it is estimated that the City’s General Fund reserves will decrease by about half due to the challenges mentioned above. While revenues will increase moderately, they do not increase at the same rate as operating expenditures, and the costs in the areas the City subsidizes. For example, the subsidy for the L&L District is expected to increase and will cumulatively total $18.1 million over the next five years, further burdening the City’s critical services and hindering our capacity to fund necessary upkeep and enhancements. City’s General Fund Five-Year Outlook

Maintaining the Chino Hills Quality of Life

Maintaining the Chino Hills quality of life, commitment to safety, and providing essential services are always the top priorities for the City. Last year the City Council and Executive team identified five goals to guide decision making in the future:

1. Budget 2.Housing 3.Infrastructure and Transportation 4.Quality of Life 5.Staffing

The Council also tasked staff with the immediate priorities of pursuing opportunities to cut costs, raise revenue, and address the underfunded L&Ls. This year’s budget implements the Council’s goals, priorities, and policy direction. In the long-term as the City ages, there is a clear need to look for additional sources of locally controlled revenue to ensure our ability to address essential public services while continuing to do all the City can do to cut and manage costs. To learn more about the City’s budget, visit www.chinohills.org/Budget.