City of Arvada Fourth Quarter 2022 Financial Report

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FINANCIAL REPORT FOURTH QUARTER 2022

COMMUNITY AND ECONOMIC DEVELOPMENT

INFRASTRUCTURE

ORGANIZATIONAL AND SERVICE EFFECTIVENESS SAFE COMMUNITY

Contributors:

Bryan Archer, Director of Finance

Deb Nielson, Deputy Director of Finance

Chris Kelly, Budget Analyst

Carolyn Ewing, Budget Analyst

Rocky Sheppard, Budget Analyst

Vesta Weinhauer, Controller

Carolyn Ivey, Accounting Supervisor

Natasha Galston, Grant Accountant

Jenna Belec, Finance Program Coordinator

Steve Milke, Bun Heng, Print Shop

2022 Fourth Quarter Financial Report

The Financial Report for the City of Arvada provides an unaudited overview of the major funds and how their revenues and expenditures performed in comparison to budget. This is not meant to be a complete accounting, but rather a quick look at the highlights.

The overall economy continues to be in a state of confusion. There are many economic factors that historically point to a recession and others that reflect a very strong and stable environment. This creates uncertainty, which both the business industry and the stock market do not like.

The 2-year and 10-year yields have been inverted since July and at the end of December, were approximately 75 basis points apart. This is an unusually large negative gap and the widest since late 1981 when the economy was pushed into a deep recession. The inversion has led to a recession every time except once since 1955 and that was in 1966. Recent history points to a recession.

Additional factors that show the economy is under pressure: credit card debt, auto loan debt and student loan debt are at their highest levels ever; inflation, while slowing down, still increased at 6.5% annually for 2022; and personal savings rates are the lowest in history, sitting at 3.4%. The last time this rate was this low was 2007 at 3.6%, right before the “Great Recession”.

While all these factors point towards a recession, the following factors represent a strong economy.

GDP (Gross Domestic Product) ended the year 2.1% higher than 2021, just a little above the expected number of 2.0%, due to a strong second half of the year. Expectations for GDP in 2023 range from 0% to 1.4% annual growth.

Unemployment ticked down in the 4th quarter ending the year at 3.5%, the lowest number since 1953, with an increased number of workers re-entering the job market. Over 10.7 million jobs have been added in the past two years. Job openings continue to outpace the number of people looking for work, as there were two available jobs for every one unemployed individual at the end of 2022.

Consumer spending, while slowing in November and December, was still strong for 2022. This will be a key metric to follow over the next couple of years as it accounts for more than 2/3rds of the overall economy.

The Federal Reserve, trying to slow down the runaway train known as inflation, raised interest rates seven times in 2022 from .25%-.50% to 4.25%-4.50% – the fastest increase ever. They have continued this practice in 2023, raising rates 25 basis points at both the February and March2023 meetings.

The State of Colorado operates on a fiscal year, running from July through June. Projected GDP is 1.5% for the year, just a little above the federal level. State unemployment ended the year at 3.3%, down from 4.2% the year before and the lowest number since February 2020. The state economist lists future headwinds as: inflation, interest rates, public policy, fiscal policy, international conflict, immigration policy, lower fertility rates and employment weaknesses. The economist lists economic drivers as: a highly skilled workforce, advanced technologies and strong federal based industries.

The City’s overall revenues ended the year strong with the General Fund growing 8.1% over 2021 and exceeding the revised budget by 7.7%. Taking inflation into consideration, the increase was 1.2%. Growth was concentrated in two major categories, Sales Tax and Building revenues.

Sales Tax ended a very strong year up 9.6% over the prior year and exceeded the revised budget by $860,000. The largest categories of growth were: power generators 52.9%, local messengers/delivery 42.5%, limited service restaurants 23.5%, merchant wholesalers 17.8%, grocery stores 8.7% and internet retailers 6.9%. Categories that experienced a pullback from 2021 were: wireless communications (15.4%), computer (12.5%) and hardware stores (4.7%).

Building revenues were up 85.6% over 2021 and exceeded the revised budget by just under $4 million. This was attributed to a couple of large projects located in Olde Town that started in 2022. Building revenues are budgeted conservatively each year at the cost to operate the program. Any additional revenues over these costs are considered one-time and are applied to one-time expenditures.

Auto Use, General Use and HUTF revenues were flat to down for the year and all three came in under budget. These categories will be reviewed during the 2023-2024 revised budget process to see if additional adjustments need to be made.

The City’s overall expenditures grew by 14.0% over 2021 but were under the revised budget by 4.7%. The largest areas of growth were: one-time transfers for street maintenance, parks and replacement of the City’s ERP system; the implementation of the statewide mandated body-worn

camera program and overall inflationary increases. Adjusting for the one-time expenditures, the year over growth would 7.1% or in-line with inflation.

The Water and Wastewater Funds issued $100 million dollars ($50 million each) of revenue bonds in December. These bonds will be used for some much needed capital projects. Overall user fees continue to be strong with a diverse base of customers. Tap fees received a one-time boost due to the same projects in Olde Town that supported the increase in building revenues. Rate adjustments to user fees were implemented in January of 2023 and adjustments will be made to system development charges in July of 2023 to help pay for the bond issues.

The golf courses & restaurants built upon their strong 2021 with another good year. Overall rounds were up 7.6% and overall golf revenues were up 7.3%, demonstrating an increase in per player revenue. Advanced tee time fees along with variable pricing helped to create the jump. Restaurant revenues grew 23.7% over 2021 as customers returned in droves. The restaurant was challenged with staying open throughout the year as staffing was very difficult. Changes were made to operating hours and service levels to maximum available staff. The timing of the revenue increases could not have come soon enough as the debt service for the new restaurant and clubhouse began in 2022.

One capital project focus area is discussed this quarter –Holistic Health and Fitness Park. Please take the opportunity to review the write-up on this very unique joint project.

The citizens of Arvada passed Ballot Issue 3F in November of 2018, approving a sales and use tax bond to fund the widening of Ralston Road from Yukon to Garrison and the widening and creation of an underpass on 72nd Avenue from Kipling to Ward. Please see the project detail pages (pages 25-26) in the document for detailed updates.

The City ended 2022 financially secure. Reserves are strong in each of the major funds and the 10-year model is balanced. There are still some very significant ongoing pressures including homelessness, staffing levels, inflation, the current political environment, large CIP projects and long term financial resiliency but the City is well positioned to continue to deliver superior services to everyone in our community.

GENERAL FUND

General Fund Overview

The General Fund pays for the City’s basic services. This includes police, planning, transportation, street light maintenance and costs, building activity and general administration. In addition, the General Fund also provides for the following:

• Operational support to the Parks Fund

• General Debt Service payments

• Transfer to the Capital Improvements Fund for new parks, transportation and other infrastructure projects

• Grant support to the Arvada Center

The following table provides a comparison of budgeted cash balances, revenues and expenditures to actual amounts.

• The 2022 beginning fund balance was $61,007,000.

• $10,605,330 of the fund balance is dedicated to projects not completed in 2021, one-time items and new requests.

• The 2024-2032 ten-year financial plan requires the use of $27,498,550 to balance. A new 10-year plan was presented to City Council and approved with the 2-year budget cycle.

Revenue Highlights

• Overall revenues increased $9,287,741 or 8.1% over 2021 and exceeded the revised budget by 7.7%.

• Franchise fees saw an increase of $300,572 or 10.3% over 2021 which is due to increased tax collections from Xcel Energy.

• Property tax saw an increase of $747,171 and is discussed in more detail in the “Property Tax” section.

• Sales tax saw an increase of $6,412,248 and is discussed in more detail in the “Sales Tax” section.

• General use tax saw a decrease of $29,510 and is discussed in more detail in the “Use Tax” section.

• Building Use Tax and Permits saw an increase of $3,820,509 Building Use Tax is discussed in more detail in the “Use Tax” section.

• Court fines and fees saw a decrease of $232,486 or 21.5% from

2021.

Sales Tax

• Sales tax was up 9.6% and exceeded budget by $860,292.

• The following categories are up over the same time in 2021: grocery stores 8.7%, merchant wholesalers 17.8%, internet retailers 6.9%, limited service restaurants 23.5%, power generators 52.9%, and local messengers/delivery 42.5%.

• The following categories are down from the same time in 2021: hardware stores (4.7%), wireless communications (15.4%), and electronic computer (12.5%).

Use Tax

Building Use Tax

• Building use tax increased 85.6% from 2021.

• 2022 collections exceeded the budget by $3,898,682, due to some large commercial projects.

• Inflation also attributes to the growth in building use tax with higher construction costs.

Auto Use Tax

• Auto use tax collections increased 1.7% compared to 2021.

• Collections did come in under budget by $329,413.

• The nation continues to see a shortage in new cars and the price of used cars is elevated, so auto use tax has continued to increase.

General Use Tax

• General use tax decreased 2.7% from 2021.

• 2022 collections exceeded the budget by $6,815.

Sales Tax Collections

Use Tax Collections

PROPERTY TAX COLLECTIONS

Property Tax

• The City’s property tax rate is 4.31 mills per $1,000 of assessed valuation.

• 2022 property tax is based on the mill which is placed on the assessed valuation from 2021.

• Property tax collections increased 9.9% over 2021 and exceeded budget by $219,130 as the assessed valuation increased.

Intergovernmental Revenues

Highway Users Tax Fund (HUTF)

• The City’s share of state-collected gas tax revenue is up 4.5% compared to 2021. Although this revenue source increased in 2022, it has still not recovered to pre-pandemic levels.

• 2022 collections were below the budget by $151,324.

• Road and Bridge funds, the City’s share of property tax collected by Jefferson County and Adams County and dedicated to the maintenance of roads and bridges was up 14.0% from 2021 and exceeded budget by $235,644.

INTERGOVERNMENTAL REVENUES

Expenditure Highlights

• Overall expenditures increased $14,196,250 or 14.0% over 2021 but were under budget by 4.7%.

• Services and charges increased $944,715 or 8.0% over 2021.

• Supplies and expenses saw an increase of $2,119,193 or 33.0% over 2021. This is primarily due to contributions to the computer replacement and maintenance fund to support additional costs associated with technology.

• Contracts saw an increase of $1,317,118 or 25.6% over 2021. This is due to contracts related to the new body worn camera program in the Police Department and grants to Colorado Homeless Families and the Arvada Chamber of Commerce.

• Transfer to other funds increased $9,308,127 or 37.8% over 2021. This is due to an additional transfer to the Streets Maintenance fund of $3,500,000, and additional transfer to the Capital Improvement Fund due to increased sales tax, and a transfer to the Computer Fund of $3,000,000 to replace the City’s ERP system.

• Personnel saw a decrease of $1,974,642 or 4.2% from 2021 due to vacancies primarily in the Police Department.

Salary and Benefit

• Salaries & Wages is under budget due to the turnover of police officers in the Police Department and also from positions in the Streets Maintenance Department remaining vacant for longer than usual. Vacancies took longer to fill due to a lack of qualified candidates applying for the job postings.

• Overtime expenditures were greater than the budget due to the needs in the Police and Streets Maintenance programs. To maintain the necessary level of coverage for these departments, the existing employees covered the position shortages.

• Other expenditures are over budget due to bonuses paid for recognition of employee’s contributions and efforts that went beyond their expected duties.

Street Maintenance Fund

Overview

The Street Maintenance Fund accounts for costs associated with street maintenance, repair and replacement including: concrete work, crack sealing, chip sealing, seal coating, reconstruction, milling and overlay. Revenues are derived from the City’s General Fund and the Highway Users Tax Fund which is the City’s share of state-collected gas tax revenue.

Revenue Highlights

• Revenues consist of a transfer from the General Fund, payments from participants in the 50/50 Sidewalk Replacement program and street degradation fees.

Expenditure Highlights

• The 2022 Pavement Management Program as built maps, attached hereto and incorporated herein by reference, identifies areas addressed in 2022 with compliant ADA curb ramps, mill and overlay, hot chip seal, slurry seal and crack seal.

Pavement Maintenance 2022 ADA Curb Ramp and Concrete Replacement Program: Along with addressing ADA upgrades in areas which are scheduled to receive alterations in the streets, the Pavement Management Team selects priority areas. Priority areas are identified as high traffic areas such as schools. The area identified for 2022 was Meiklejohn Elementary located in the Five Parks neighborhood. Fifty-five (55) ADA Curb Ramps were replaced.

2022 Program Summary

• Four (4) concrete contracts

• Neighborhoods Completed -12

• Pending Completion – 0

• Curb Ramps Completed - 968

• Curb Ramps Pending Completion - 0

• Average Cost/Ramp - $6,500

• 2022 ADA Curb Ramp and Concrete Replacement Program Completed November 10, 2022

In 2022, along with the ADA and Concrete Replacement, 6,655 LF of Valley Pans were removed and in preparation for Mill and Overlay in Rainbow Ridge. This work was completed at the beginning of July, 2022.

Pavement Maintenance 2022 Mill and Overlay Program: 2022 Program Summary

• Two (2) Asphalt Contracts

• Areas Completed - 11

• Areas Completed internally – 1

• Areas moved to 2023 – Due to lack of Funding - 5

• 2022 Mill and Overlay Lane Miles Completed – 31.3

• Estimated Average Cost per Lane Mile - $142,425.82

• 2022 Mill and Overlay Program Completed October 31, 2022

Pavement Maintenance 2022 Hot Chip, Slurry Seal and Crack Seal Program: 2022 Program Summary:

• One (1) Contract

• Lane Miles Completed with Slurry Seal - 8.8

• Lane Miles Completed with Hot Chip Seal – 6.2

• Lane Miles completed with Crack Seal – 201

• 2022 Hot Chip, Crack and Slurry Seal Program Completed November 23, 2022

The Pavement Management Team is committed to improving our accessibility and roadways throughout the City. As well as making significant progress with the 2022 Pavement Maintenance Program (PMP), the Pavement Management Team has and continues to collaborate to build and improve processes and procedures. Fourth Quarter examples include:

• ADA compliance. Collaborating with internal teams to develop and implement a standardized process when addressing non-compliant curb ramps which are included in the 2022 PMP

• Road Matrix. Utilizing software to assist with determining pavement maintenance applications and priorities

• Communication. Continuous collaboration with internal teams to review, update and implement standardized communication internally and externally

Challenges

• Poor subgrade conditions found during repaving. Unforeseen additional costs were incurred. However, by addressing and correcting before repaving, the result will significantly extend the service life of the streets. However, it impacted the proposed areas projected to be completed in 2022 as it relates to available funding.

• Instability in the petroleum industry. The instability in the petroleum industry has triggered significant increases in petroleum products which play a critical role in manufacturing, delivery and placement of asphalt products. This adjustment impacted the proposed areas projected to be completed in 2022 as it relates to available funding.

• ADA Curb Ramp Removal and Replacement. Additional unforeseen removal and replacement of concrete in order to meet ADA curb ramp compliance. This triggers additional costs which impacted the funding needed to complete the ADA curb ramps scheduled for completion in 2022 in preparation for mill and overlay.

Parks Fund Overview

The Parks Fund accounts for costs associated with the acquisition, design, development, maintenance and beautification of parks, open space and trails within the City. Revenues are derived from the City’s General Fund, Grants Fund, Apex and Jefferson County Open Space funds.

Revenue Highlights

• Overall revenues for Parks increased $2,376,968 or 21.8% over 2021.

• Jefferson County Open Space revenue increased $669,925 or 10.9% over 2021.

• In January 2022, the Parks Department transitioned athletic field programming from the APEX Recreation District to the Parks Department. This new revenue source has contributed $784,838 to the overall revenue increase.

Expenditure Highlights

• Overall expenditures increased by 22.3% or $2,271,409 over 2021.

• The purchase of vehicles and equipment for athletic field programming and additional parks maintenance workers, which were added

to increase safety while performing parks maintenance, contributed to this increase.

• The addition of athletic field programming has added $858,545 in expenses to the Parks fund. Even with this increase, Fund 14 is showing a net gain in 2022 of $789,574

Special Revenue Funds Overview

Special Revenue Funds account for revenues that are to be used for specific purposes. The following funds are considered special revenue funds:

• Tax Increment Funds

• Community Development

• Housing

Tax Increment Funds

Overview

There are two tax increment funds which account for the voter-approved sales tax increases to fund expanded police services. The first accounts for the .21 cent sales and use tax and the second accounts for the .25 cent sales and use tax. Sources include sales tax, general use tax, auto use tax, building use and interest income. Since the tax increment is in addition to the City’s 3% sales tax, revenue trends in the tax increment fund will closely follow those in the general fund.

Revenue Highlights

• Sales Tax and Audit revenue is up 15.0% from sales growth in online shopping and grocery stores. A portion of the sales tax increase is also from 6.5% inflation.

• Use Tax exceeded the budget by 39.5% due to new construction. While inflation contributed to the increase in revenue, Building Use Tax exceeded budget due to large commercial projects starting in 2022.

Expenditure Highlights

• Ongoing expenditures are under budget due to police officer vacancies. Police departments across the country are experiencing a decrease in people who want to be police officers and there is a significant increase in officers who are resigning and retiring. The Arvada Police Department is no exception. The climate for law enforcement is making recruitment and retention very difficult.

Community Development Overview

The Community Development Fund accounts for all entitlements, revenues and expenditures of the Community Development Block Grants (CDBG) program and the Home Rehabilitation program and Essential Home Repairs program.

Revenue Highlights

• Overall revenues decreased $1,060,625 or 51.5% from 2021 and were down 8.9% as compared to the budget.

• The main reason for the decrease in revenue is the completion of the Emergency Rent Assistance (ERA) program, which was funded by Grant revenue $1,167,699 in 2021. In addition, repayment amounts decreased 41.8% compared to last year, or $201,550. Interest rates increased in 2022, which has caused the slowdown of Deferred Loan repayments compared to 2021.

Expenditure Highlights

• Overall expenditures decreased $946,467 which is a 51.6% decrease from 2021 and were down 31.1% as compared to the budget.

• The decrease is mainly due to the completion of the Emergency Rental Assistance program as mentioned above.

• Ongoing Expenditures increased by $181,713 or 212.4% compared to last year due to increased homelessness assistance in 2022. CDBG Program spending (Essential Home Repairs, Emergency Housing, Subgrants) increased in 2022 by $73,784 or 22.2%.

This difference is due to the timing of Subgrant payouts in 2022 compared to 2021. Other costs have decreased by $34,265 or 13.9% due to changes to EHRP program and staffing.

• Six essential home repair projects were completed during 2022 compared to 8 in 2021. There were 50 people on the waitlist as of 12/31/22.

Arvada Housing Authority

Overview

The Authority administers funds received for rent subsidy to low/moderate income households under Section 8 of the U.S. Housing Assistance Payment Program.

Revenue Highlights

• Overall revenues increased $268,716 or 4.3% over 2021 and 10.8% as compared to budget.

• Grants revenue increased $280,077 or 4.5% over 2021 due to increased HUD funding and the award of 5 additional vouchers for Section 8 and 10 additional vouchers for the Mainstream Program. The additional vouchers were awarded in the fall of 2022.

• There have not been transfers from the General Fund or Community Development fund for the last 2 years. This is mostly due to payroll savings as the team is short staffed.

Expenditure Highlights

• Overall expenditures increased $285,717 or 4.6% over 2021 but were 2.3% below the budget.

• Rent expenditures slightly increased by $310,518 or 5.4% in response to the general rental market increased costs and additional vouchers granted.

• The Arvada Housing Authority was serving 457 families at the end of 2022 while 440 were being served at the end of 2021. The Housing Authority also served 44 families with disabled family members through the Mainstream voucher program as of 2022 year end, compared to 34 families at the end of previous year. The waitlist was opened in 2021 and there are 536 people on it as of December 31, 2022.

Capital Improvement Projects (CIP) Fund Overview

The Capital Improvement Projects Fund accounts for capital projects for streets, traffic, and parks.

Revenue Highlights

• Transfers consist of transfers from the General Fund, Water Fund, and Grants Fund. Contributions reflect transportation tax, park development fees and lands dedicated fees that help fund eligible projects. Contributions also include development fees for transportation, traffic signals, lights and traffic impact fees. Contributions in 2022 decreased due to some large contributions received in 2021 for some developments.

• Grants and recovered costs are reimbursements from other agencies that have shared in the cost of a project. The reduction in 2022 is due to a grant received in 2021 for the Stanley Lake Library trailhead and reimbursement from the Arvada Urban Renewal Authority for the No. 04 trolley park.

Expenditure Highlights

• Administration expenditures are related to: improvements to the KATV control room, ADA compliance at City Hall and the Arvada Center and the replacement of the roof in the kiln room at the Arvada Center.

• Technology expenditures are related to the fiber conduit boring project.

• Streets expenditures are related to the streets

master plan and guardrail rebuilds.

• Traffic expenditures are related to the traffic signal rebuilds, school safety, pavement marking program, CIP and the Alkire Street trail.Park expenditures are for athletic field irrigation controllers, Arvada Center sign replacement, improvements for the Sabell’s development and improvements for various parks and playgrounds.

CAPITAL IMPROVEMENTS PROJECTS FUND

Project Updates

Holistic Health and Fitness Park:

In 2017, the Arvada City Council passed Resolution R17-038 authorizing an Agreement between the City of Arvada and DHM Design Corporation for architectural landscape design services for the Holistic Health and Fitness Park. The Holistic Health & Fitness Park is a collaborative public park endeavor aimed to meet an increasing population’s recreation demand in the Arvada Ridge Transit Area and support Red Rocks Community College’s curriculum, degrees and certificates - such as Holistic Health, Reflexology, Yoga, and Rehabilitation - through a unique design program unlike other typical neighborhood parks. The park will fulfill community park and recreation needs identified in the:

• 2007 Arvada Transit Station Framework Plan,

• 2009 Pedestrian and Bicycle Access Plan,

• 2016 Arvada Parks, Trails and Open Space Master Plan

The site consists of two parcels totaling approximately 8.5 acres combined:

• 5470 Miller Street, owned by City of Arvada

• 5420 Miller Street, owned by the State Board for Community Colleges and Occupational Education, represented by Red Rocks Community College (RRCC)

Initially presented in concept to RRCC Staff and Foundation in early 2016, RRCC is supportive of the shared land use. In July of 2022, RRCC and the City of Arvada entered into a no-cost, 100-year lease agreement through July of 2122, paving the way for the construction of the park and shared land use. Another critical step in achieving the realization of this new park was obtaining the utility easement to relocate the existing above-ground utility to below-ground through a utility boring. RRCC is also a fullyinvolved project partner with staff and students having previously invested in the design process in visioning this truly unique outdoor health and wellness center. Anchored by the Arvada Ridge Transit Station, medium to high density residential development, and the public health sciences campus, the new park site will broaden and democratize access to healthy opportunities and provide an outlet for residents, as well as students, to champion their own health through outdoor-based healing modalities.

Beyond typical park amenities such as irrigation, grading, and accessible routes, the new park will include a number of other new amenities within Phase I, including two plazas with shade shelters, an intergenerational natural play area, activity lawn, exercise stairs, interactive art, educational obelisks, labyrinth, yoga/qi gong outdoor classroom, bike racks, benches, trash receptacles, therapeutic and sensory gardens, safety lighting, three entry plazas, a refexology path, a compass rose/astronomy plaza, natural stone retaining walls, 1,200 linear feet of 10-foot wide concrete paths, and 400 linear feet of soft surface trail.

The Park is the crowning piece of a larger vision to connect people to art and health on a daily basis. When built, the park will provide an outlet for diverse groups – ranging from the general public, health practitioners, faculty, students, and visitors – to champion their own health. The construction package for this project is on schedule to go to bid to general contractors and landscape contractors in April 2022. Arvada Parks & Urban Design is excited to begin the work on this park and realize the vision that has been a long time coming for the residents of Arvada.

Parks & Urban Design has already identifed the capital improvement funding necessary for Phase I of the design and construction of Holistic Health and Fitness Park.

Water Fund Overview

The Water Fund accounts for all activities within the scope of the water utility operations including administration, operations, capital water projects, financing and related debt service and billing and collection.

Revenue Highlights

• Water Charges revenue is in-line with the budget.

• Tap Fees revenue is over budget due to the HS Arvada Olde Town Ventures new construction project on the east side of Arvada. The payment for 252 residential units and 2 commercial units was received all at once.

• Other revenue is over budget due to a large payment received from Canyon Pines

Metropolitan District for the pump station construction project.

Expenditure Highlights

• Ongoing expenditures are under budget from two items, residual disposal charges and software upgrades. The water

treatment plant sludge amounts vary year

to year and this year there was not as much sludge for disposal as calculated. Computer software upgrade costs came in lower than anticipated.

• Capital expenditures are under budget due to delays in the large valve replacement projects. The slow response times from vendors did not allow the projects to proceed as planned.

Wastewater Fund

Overview

The Wastewater Fund accounts for all activities necessary in the collection, transmission and disposal of sewage and wastewater.

Revenue Highlights

• Tap Fee revenue is over budget due to the HS Arvada Olde Town Ventures new construction project which has 252 residential units and 2 commercial units. The payment for the wastewater and water tap fees received near the end of the 2022 was for all units.

• Other Revenue is over budget due to a large payment received from Jefferson Center Metropolitan District (JCMD) for the Alkire Lift Station project not expected to be received in 2022.

Expenditure Highlights

• Metro District expenditures are over budget due to a price increase by Denver Metro Water Recovery. Their exact costs are unknown from year-to-year and only realized once the bill is received.

• Capital expenditures and Major Capital Maintenance expenditures are under budget due to projects being delayed for supply chain issues and project management turnover. Additionally, the Wastewater program’s manager retired so new projects were delayed until the new manager could realign the projects to their priorities.

Stormwater Fund

Overview

The Stormwater Fund accounts for all activities necessary to maintain a stormwater management plan.

Revenue Highlights

• Total Revenues are in-line with the budget.

• Other revenue was under budget due to no recovered costs received from the stormwater rate study audit.

Expenditure Highlights

• Ongoing expenditures are under budget due to Stormwater program staff turnover and vendor staffing issues as well. This resulted in operating projects being delayed.

• Capital expenditures are under budget due to personnel issues. Project management turnover slowed the progress of capital projects.

ENTERPRISE FUNDS

Golf Fund

The Golf Course Fund accounts for all revenues and expenses of the Lake Arbor and West Woods Golf Courses, including food service operations.

Revenue Highlights

• Overall revenues increased in 2022 $335,137 or 4.8% over 2021.

• Golf course revenue increased 7.3% or $337,236 over 2021. Golf rounds played at both courses had a minimal increase of .7% over 2021.

• Restaurant revenue increased $461,495 or 23.7% over 2021.

• People are feeling more comfortable going out, and the restaurants are finally able to accommodate guests at full capacity. Also, tournaments and smaller social events have resumed.

Expenditure Highlights

• Overall expenditures increased $808,861 or 12.4% over 2021.

• Golf Course expenditures increased $240,035 or 9.4% due to the increase in golf rounds played which results in higher support costs.

• Restaurant expenditures increased $187,353 or 9.9% due to the increased food and labor costs.

• Overall through 2022, Fund 43 has made a profit of $409,912.

Golf Rounds by Type - January - Decemeber

Solid Waste Fund

Overview

In 2020, the Arvada City Council approved a new waste and recycling program. The City entered into an agreement with a single trash company to provide waste and recycling collection for residents. The trash and recycling services started in July 2021.

Revenue Highlights

• Charges & Fees revenue is under budget due to a lower number of households signing up for trash and recycling services than previously anticipated.

Expenditure Highlights

Operating expenditures are under budget due to the lower than expected number of program participants for trash and recycle services. Part of the Republic Services charge is based on the number of participating households.

Internal Service Funds Overview

There are five Internal Service Funds – Insurance Fund (Risk Management), Computer Fund, Print Services Fund, Vehicles Fund and Building Fund. Internal Service Funds charge internal programs and departments for use of goods and services. The Funds then pay for all associated costs of things such as purchasing insurance, vehicle purchases and maintenance, computer purchases and maintenance, and buildings maintenance.

Insurance Fund

The Insurance Fund, administered by the Risk

Management Program of the City Attorney’s Office, accounts for the City’s self-insurance against loss. It is funded with contributions by all City departments and programs based on their levels and types of exposure. The Fund is also used for loss prevention programs, the protection of City personnel and the

preservation of City property and assets.

*Per GASB Statement 10, an additional $2,518,436 in cash is currently held in the Risk Management fund to cover potentially incurred liabilities as of the beginning of the year. This figure was reached by the

Revenue Highlights

EXPENDITURES

• Overall revenues increased $274,641 or 11.7% from 2021 and exceeded the 2022 budget by 1.5%.

• The increase in revenues was primarily due to increases in contributions from other funds when compared to 2021.

Expenditure Highlights

• Overall expenditures decreased $158,090 or 4.7% from 2021 and were 4.6% below the budget.

• However, a year-end adjustment to record potential incurred liabilities has not been received from the actuary and has not been included in 2022 expenditures.

• Property damage claims increased $383,796 or 75.4% over 2021. Property insurance premiums saw a higher than expected increase along with a few big claims like the Arvada Center fire and vandalism at Stenger Soccer Complex.

• Liability costs increased $183,404 or 37.2% over 2021 due to payments of large claims that resulted from the two water main breaks in 2022.

• Workers compensation claims increased $107,271.40 or 19.0% over 2021 due to an increase in the medical cost and the number of claims paid.

• Professional Services increased by $87,441 or 113.1% over 2021 primarily due to homeless camps clean-up costs.

Computer Fund

Overview

The Computer Fund provides resources for both ongoing maintenance and replacement of the City’s computers, network hardware, and other electronic infrastructure. It is funded with contributions by all City departments based on their levels of use of this technology.

Revenue Highlights

• Total Revenues are in-line with the budget.

Expenditure Highlights

• Maintenance expenditures are under budget due to cost savings and cost avoidance. Oracle software support was procured at a lower cost through a third-party vendor resulting in cost savings. The Journal Tech software upgrade was planned for 2021 which would have resulted in a higher annual maintenance cost. Since the project was not implemented, the new cost was not incurred.

• Replacement expenditures are under budget due to three large projects not occurring in 2022 – the Server Storage replacement project, the Phone System replacement project, and the Enterprise Resource Planning (ERP) replacement project. The Server Storage project and the Phone System project were delayed due to staffing issues and the need to further review the project requirements. The ERP project will begin in 2023. It will be a very large effort so the project scope and vendor selection tasks are crucial to the project’s success.

Vehicle Fund

Overview

The Vehicles Fund provides resources for the maintenance and replacement of City vehicles and heavy equipment. It is funded with contributions by all City departments based on their vehicle inventory and use.

Revenue Highlights

• Overall revenues increased 3.8% from 2021. The increase in revenue is largely due to transfers from other departments for the purchase of new vehicles not included in the annual replacement contributions or increases in purchase costs related to inflation.

Expenditure Highlights

• Expenditures have decreased 15.0% from 2021, this is primarily due to supply chain issues and the inability to receive all vehicles ordered in 2022. In the 4th quarter of 2022, the City purchased:

• 4 Ford F350 Super Cab Trucks

• John Deere High Lift Loader

• 2023 Chevy Bolt

• 2023 2500 Double Cab Truck

• 3 Ford F350 Utility Trucks

• John Deere Compact Track Loader

• 2022 Ford F150

These vehicles will be delivered and paid for in 2023

Print Services Fund

The Print Services Fund provides ongoing operational support for the City’s printing needs.

Revenue Highlights

• Overall revenue decreased $14,426 or 4.3% from 2021 and was 4.9% below the budget.

• Printing revenue increased $9,203 or 4.8% over 2021 due to increased print jobs.

• Copier revenue decreased $23,629 or 16.9% from 2021 due to lower use of copiers in 2022.

Expenditure Highlights

• Overall expenditures increased $5,613 or 1.8% over 2021 and were 26.7% below the budget.

• Printing expenditures increased $16,019 or 6.8% over 2021 primarily due to an increase in internal service fund charges to cover risk management, building and vehicle use.

• Copier expenses decreased $10,405 or 12.6% from 2021 due to fewer supply purchases and lower repair and maintenance expenditures.

• There was $96,000 budgeted for equipment replacement in 2022; however, the equipment will not be replaced until 2023.

Buildings Fund

The Buildings Fund provides resources for maintaining major portions of facility infrastructure as replacement becomes necessary. The primary types of infrastructure are HVAC equipment, parking lots, roofs, and carpet. It is funded with contributions by all City departments based on their facility occupancy.

Revenue Highlights

• Revenues include savings related to the Ameresco Energy Performance contract being transferred to the Buildings fund to help offset the original construction costs. Other revenues include interest on investments.

Expenditure Highlights

• Replacement spending includes condensers at the Arvada Water Treatment Plant and HVAC renovations at the Olde Wadsworth Shops. The large expenditure item in Equipment in 2021 was the final payment on the completion of the Ameresco Energy Performance contact. No equipment was purchased in 2022.

Overview:

On November 6, 2018 the citizens of Arvada approved Ballot Issue 3F to fund improvements to Ralston Road and West 72nd Avenue. Municipal bonds are commonly used by cities to fund capital improvement projects. In 2018, the City finished paying off a previous bond issue, freeing up $4.5 million in annual payments already accounted for in the City’s current budget. “Debt re-authorization” allows the money from the previous bond to be applied to a new bond whose funds will be used for these new capital improvement projects.

Ralston Road Yukon to Garrison Bond Project

Description: Ralston Road is an arterial roadway and a major east-west corridor for Arvada’s transportation network, serving 23,000 vehicle trips each day. It provides connectivity to major north-south corridors including three State Highways. The Regional Transportation District (RTD) operates five bus lines using portions of Ralston Road. The Citizens Capital Improvement Plan Committee has twice ranked Ralston Road improvements as the number one transportation priority and recommended it for funding to the City Council. The project also addresses concerns expressed in recent Arvada Citizen Surveys. The 2014 Comprehensive Plan generated transportation models indicating that the congestion, operation, and safety of Ralston Road will deteriorate with the build-out of the City, and roadways will perform at the lowest levels of services

Progress:

Roadway:

• During the fourth quarter of 2022, the contractor completed a significant amount of work on the south side of Ralston Rd. The following activities were completed on the south side of Ralston between Garrison and Carr St: Excavation of the soil, proof rolling/subgrade preparation and Geogrid placement; pouring of concrete driveways, sidewalks, curb and gutter (flatwork), and contaminated soil excavation to waste management at the Sinclair gas station site.

Drainage:

• The contractor also completed a significant amount of storm sewer and water line work on the south side between Garrison and Carr St, including manhole work, storm sewer pipe replacement and waterline connections. Currently, the contractor is working on a storm sewer and water line tie-in work on the south side of Ralston between Ammons and Yukon St.

Dry Utilities:

• Most of the dry utilities (Xcel, Comcast and Century link) work on the north side and part of the south side is done. Currently project team is coordinating with Xcel and century link for a couple of utility conflicts associated with the construction activities between Ammons to Yukon St.

Wet Utilities:

• The 15 feet deep waterline tie-in work at Allison is ongoing and anticipated to be complete by the second week of March 2023.

• Fire hydrants work is ongoing on the south side of Ralston Rd between Ammons and Yukon St. Ralston Court (Private Development):

• Waiting on pricing from Hamon for water and sanitary sewer connections to the development.

Challenges:

• Due to insufficient underground utility information the revisions and redesign of the storm sewer pipe network caused significant delays on the project.

• Contaminated soil hauling to waste management was not accounted for/anticipated in the project schedule and this also caused a significant delay to the construction.

• Due to delays, the City had to extend some of the parcels Temporary construction easements on this project which caused additional financial burden to the project budget.

• Due to severe weather in the past few months construction work has slowed down and the City continues to receive complaints from citizens and business owners about the inconvenience of the construction zone, faded striping and potholes. Contractor is constantly working on filling the potholes and re-striping the road as soon as possible. Through the City’s social media outlets, the project webpage, and direct contact with project team members, the City attempts to explain the challenges of the construction zone and upcoming work and any road closures. The project team recognizes the challenges with a construction zone and the City and Contractor teams are taking all reasonable steps to avoid as much inconvenience as possible.

• Due to school being in session the contractor is not able to close the Balsam St to work on the underground storm sewer work and asphalt removal. To avoid the inconvenience to school, the contractor is planning this work during the summer break.

Next Steps:

• Contractor is preparing the road base and planning to pave the bottom two lyfts from Garrison to Carr St around the end of April or beginning of May.

• ROW acquisition required on this project is complete.

W. 72nd Avenue Bond Project

Description: W. 72nd Avenue is an arterial parkway and a major east-west corridor for Arvada’s transportation network, serving 21,000 vehicle trips each day. It provides connectivity to major north-south corridors including three State Highways. The regional corridor not only serves all of Arvada, it provides access to Westminster and Golden/Jefferson County. The Citizens Capital Improvement Plan Committee twice ranked improvements to W. 72nd Avenue as a high priority. The project also meets concerns expressed in recent Arvada Citizen Surveys. The 2014 Comprehensive Plan generated transportation models indicating the congestion, operations, and safety of W. 72nd Avenue will deteriorate with the build-out of the City and roadways will perform at the lowest levels of service

Progress:

• Construction Package 1 - CP-1 (tree removal, utility relocation for the entire corridor, and new utilities). Xcel, Comcast, and Lumen are working to relocate utilities in the corridor. SEMA has met their contract deadline and is complete with CP-1.

• Construction Package 2 - CP-2 (Swadley to Oak). Work includes utilities and full roadway reconstruction. 100% Plans signed/stamped were received in February 2022. CP-2 began in March 2022. Currently, CP2 is on schedule to be completed in Feb 2024. Some delays have been experienced due to dry utility companies’ failure to relocate their facilities; however they have not impacted the critical schedule. CP-2 is $22.6 million.

• Construction Package 3 - CP-3 (Oak to Kipling, including the UPRR underpass) has five components: 1) bridge structure; 2) railroad shoofly; 3) temporary vehicular bypass; 4) roadway design plans; and 5) Construction and Maintenance Agreement (C & M Agreement), which are at varying stages of review by UPRR (Union Pacific Railroad) and the City. UPRR reviews have been occurring outside the expected timelines. 60% bridge plans have been returned with comments from UPRR and have been resubmitted Feb 2023. We are expecting to hear back from UPRR in mid-March. Anticipated Notice to Proceed is Q2 of 2024.

• Project scheduling will remain fluid until there is a better understanding of the UPRR coordination and response time. Construction Package 2 underway. UPRR reviews and timelines continue to be unpredictable.

Project Challenges:

• For the underpass excavation component of CP-3, the project team is developing a plan to mitigate underpass excavation and dewatering issues and possible environmental issues. Options include discharging groundwater to the public sanitary sewer system and treating for heavy metals using a Baker Truck removal system, thus allowing discharge into the storm sewer system. A possible test hole is being considered at a City-owned property at the 72nd and UPRR intersection to better understand the dewatering method needed to waterproof the underpass excavation limits.

• Sonheim Underground Stream - The project team is assessing how the underpass may cut off underground stream flow to several properties on the south side of 72nd. A french drain is being proposed to recharge the water table in that location. Assessments are ongoing.

• UPRR has returned 60% bridge plans with comments. Plans resubmitted Feb 2023.

• The project team continues to work with dry utility contractors to get their infrastructure relocated and to keep our contractor, SEMA, moving on the roadway and utility portion of the project

Right of Way (ROW):

• 71 of the 72 parcels to be acquired have been closed. The final parcel is expected to close this month

Other Challenges:

• The Arvada’s citizens’ interest remains high in the construction progress. The City’s team of representatives continues to respond to all inquiries in a professional and timely fashion.

• Comments from our citizens range from temporary/permanent fence, traffic, signals, walls, potholes, stairs, and safety.

• The project team has made a significant effort to keep all users safe during construction.

• We have been coordinating with both schools in the area to understand typical drop-off and pick-up patterns.

• Periodically we have project team members at the major intersections to remind students/pedestrians to be safe while waiting to cross the street.

• We have lowered the speed limit through the construction zone to 25 mph.

• We have asked the Arvada Police Department to periodically enforce through the construction zone. We have seen the police department doing just that at different times over the last few months.

• We have deployed digital speed signs to inform drivers of their speed and hopefully make them aware that they should slow down.

• We have circulated pedestrian maps to show the public which sidewalks are open through the construction zone.

Next Steps:

• Continue working with the UPRR to have them review plans in a timely manner and to get the on-site visit review complete. The City to begin negotiation of the C & M (Construction and Maintenance) Agreement in late 2023.

• Continue development of a construction organizational chart to allow the City team to forecast construction staffing needs for the different construction packages. Inspections will be a combination of City staff and Owner’s Rep staff.

• Continue coordination efforts with stakeholders, including the UPRR, Xcel Energy, Jefferson County School District, and Lincoln Academy, to allow a smooth transition from design to construction.

Item to note: The project team has worked with zero injuries and zero lost work days

CHANGES

Investment Portfolio Objectives

As stated in the City’s investment policy, the primary objectives of the City’s investment activities, in priority order, is safety, liquidity and yield. Consistent with this policy, the portfolio of securities is invested in U.S. Treasuries, U.S. Agencies, local government investment pools (LGIPs), commercial paper, and corporate debt subject to rating restrictions and concentration limits which are outlined in the City’s investment policy. The City-managed investment portfolio is administered to provide sufficient liquidity to meet all reasonably anticipated operating cash needs without selling securities prior to maturity. The portfolio controlled by PFM is actively managed which means that investments may be sold prior to maturity and reinvested in order to achieve the desired duration, yield or diversification of the portfolio.

Throughout 2022, stubbornly high inflation presented unevenly rising prices, a reduction in the purchasing power of many consumers and lowered the present value of bonds which negatively affected cash flows to investors. In the early months of 2022, the effects of the pandemic began to diminish as job gains were strong with low unemployment. Supply and demand imbalances persisted, the Russian invasion of Ukraine, higher energy prices and the reopening of the economy further contributed to higher inflation. This confirmed to the Fed that high inflation was here to stay and was not transitory. During the FOMC meeting in March, the target interest rates were increased by 25 basis points (bps) followed by an additional rate hike of 50 bps in May. The CPI index peaked at 9.1% in June, which was the highest level in 40 years. To stem inflation the Fed again raised the federal funds rate 75 bps this time during the June FOMC meeting, and began taking steps to shrink their balance sheet by reducing Treasury holdings. The consumer confidence index dropped significantly as high prices of food, gas and shelter effected the most vulnerable populations. The labor market continued to face labor shortages as the market remained robust in adding jobs in excess of estimates. The year ended with job gains, modest growth in spending and production, high food and energy costs and increased price pressures. Inflation in 2022 ended at 6.5%, with an unemployment rate at 3.5%. Shelter costs continue to rise but data from the private sector indicates that home prices and rent are on the decline. The federal funds rate increased from 0.25% at the beginning of 2022, ending at 4.50% in December after a total of seven rate hikes in attempt to cool inflation. The 2- and 5-year Treasury yields ended at 4.41% and 3.99% in December up from 0.73% and 1.26% respectively in 2021.

The City’s investment portfolio has increased by $43.2 million. The majority of the increase came from robust sales tax collections in 2022 and the issuance of bonds for capital projects. Due to labor shortages and supply delays, spending for the CIP projects was impacted as well contributing to the overall growth of the investment portfolio. The allocation between different sectors of market has not seen significant changes. The relative value has been seen in Treasuries and Municipal debt, hence the greater allocation to those sectors. During 2022 no securities were called before maturity due to rate increases.

The City’s combined investment portfolio posted $3.8 million in interest earnings, representing an increase of almost $800,000 more than the prior year. The yield on the portfolio managed by the City increased from 1.11% to 1.46%, an increase of 35 bps. The yield on the PFM managed portfolio fell slightly to 1.29% from 1.35%, a 6 bps decrease, due to some realized losses. PFM sold securities at a loss in order to reinvest the funds at a much higher rate, which would benefit the portfolio in the long run and offset the loss on the sale in the future years. The City’s investment portfolio turnover this year was about 19% compared to last year at 25%, which means almost a quarter of the portfolio was reinvested at higher rates than the investments that matured. Based on the maturity distribution chart, about 20% will be reinvested in 2023 again ideally at increasing rates. The volatility in the market makes it difficult to predict if the portfolio will yield higher interest earnings next year.

The City benchmarks its portfolio to the trailing 12 months (TTM) of a 2-year Treasury. The city’s portfolio matched its benchmarks in 2022. The duration of the city’s portfolio was 2.28 years compared to 2.33 in the prior year. In comparison to 2021, the duration of the PFM managed portfolio also shortened in 2022 from 2.48 to 2.33 years. Deliberate steps were taken to allocate some investments into shorter maturity buckets in anticipation of the rate increases over the next few years.

In 2021 the City investment committee reviewed and updated the investment policy. One of the bigger changes was lowering the credit rating requirements for corporate and municipal debt. The current credit quality by rating category is reflected in the graph. The graph is based on the S&P rating only. A small percentage of investments with BBB+ rating have A-rating with Moody’s and Fitch agencies, which is consistent with the investment policy requirements. As displayed in market indications from the portfolio characteristics table, the City continues to add A-rated investments. This contributed to a higher yield to maturity (YTM) at cost. The credit rating of all investments in the city’s portfolio is monitored and assessed on a monthly basis to ensure the safety of the investments.

From the credit rating perspective, over 91% of the City’s portfolio is invested in securities that are rated in the AAA and AA category. A little over 8.2% is allocated to A and BBB+ rated investments. The investment policy requires a minimum of A- rating from two credit rating agencies. The Credit Quality graph is based on the S&P rating only. The 0.20% of the securities that are rated BBB+ by S&P has at least A- rating from the other two agencies, Moody’s and Fitch. The allocation to A-rated securities has grown from 21 corporate names to 24 in the third quarter, a well-diversified bucket of investments.

Investment Management Focus - 2023

CREDIT QUALITY (S&P RATING)

• The market expectation is that the Fed will continue to raise the interest rates at their 2023 meetings until inflation decreases. The City will focus on slightly extending the portfolio duration by the end of the year to take advantage of the higher rates.

• The City will continue to utilize LGIPs for its excess cash. The yields in the LGIP pools are expected to rise along with the Fed interest rates. As of 12/31/2022 the yield on the LGIPs was 4.30%.

• Short-term corporate bonds are more attractive in 2023. The City will be selective in this sector but will look to re-invest few bonds as the current corporate bonds mature.

• The supply in the municipal bonds sector will slow down with the increasing interest rates. It may be more challenging to get a significant allocation to this sector. The city will continue to look for the appropriate opportunities.

• The Federal Agencies’ spreads have been lifting especially on the callable options. With the rising interest rates the risk of securities being called before maturity is lower. The City will look to increase its allocation to callable Agencies in the shorter maturity buckets while balancing it with the bullets (noncallable) on the longer end.

Safe Community

BY 12/23, PUBLIC SAFETY STAFFING LEVELS WILL BE AT 95% FILLED

By 12/24, continue to utilize the recruitment and retention plan on a yearly basis

By 12/24, continue use of an over-hire strategy to leverage access to quality candidates and be fully staffed

By 12/20, Create performance measures documenting the amount of and reasons for offcer attrition

BY 12/25, EFFECTIVELY UTILIZE VOTER APPROVED BOND FUNDS FOR THE COMPLETION OF RALSTON ROAD PHASE 2 AND THE EXPANSION OF 72ND AVENUE

By 3/23, 85% of bond funds will be expended

By 12/24, the required 5-year bond arbitrage calculation will be completed on time

Community Survey: Traffic Signal Timing

Community and Economic Development

BY 12/23 ADOPT LAND USE OPTIONS THAT ALLOW FOR POCKET NEIGHBORHOODS

By 12/21 develop a resource plan to ensure appropriate implementation

By 12/22 propose new land development code zone districts which can accommodate pocket neighborhoods

By 6/22 complete City Council led meetings to identify potential locations and community interest in the development of pocket neighborhoods

Vibrant Community and Neighborhoods

BY 12/24, IMPLEMENT A TOOL KIT OF HOUSING MIX AND STYLE PLANS TO IMPROVE ACCESS TO QUALITY HOUSING AFFORDABLE FOR A BROAD RANGE OF INCOME LEVELS

By 12/20, complete a list of current projects under development or planning

By 12/20, complete an affordable housing assessment including incentive options and the area south of Arvada Cemetery

By 12/20, create a regional strategy to address homelessness

By 6/21, evaluate the Human Services Advisory Committee’s process for recommending funding

By 12/22, create a Housing Advisory Committee to support the City in current/future initiatives while also educating the broader community on issues of affordable housing

Community Survey: If you were looking to buy a home in Arvada and thinking in terms of being able to afford a place to live: value for tax dollar

Organizational and Service Effectiveness

Completed

Completed

Completed

Completed

Completed

BY 12/24 BASED ON LONG-TERM FINANCIAL PROJECTIONS AND UPDATED MASTER PLANS, DEVELOP FINANCIAL RESILIENCY RECOMMENDATIONS TO ENSURE ADEQUATE AND ONGOING INVESTMENT IN CITY INFRASTRUCTURE AND CORE SERVICES.

By 12/2022 using information assembled as part of the 2023-2024 budget development process and current master planning efforts, prepare a summary of long range unfunded needs by work system

By 12/2023 develop a city-wide consolidated level of service summary

By 12/2023 prepare an exhastive list of funding source opportunities for closing identifed infrastructure and core service funding gaps

Completed

3/31/22-12/29/23

2/1/23-12/29/23

YADA