Jessica Matson, Legislative & Information Services Director/City Clerk
Sheridan Bohlken, Recreation Services Director
Other Key Staff Involved in the Budget Process:
Kevin Waddy, Information Technology Manager
Megan Schotborgh Accounting Manager
Shannon Sweeney, City Engineer
Theresa Wren, Capital Projects Manager
Dan Kies, Public Works Manager
Shane Taylor, Utilities Manager
Aleah Bergam, Management Analyst
Reader’s Guide
This is an overview of the structure of the FY2025-27 Biennial Budget, designed to help readers understand the annual budget process. To focus on what is achieved through spending, the budget includes funding levels and expected program outcomes, taking into consideration the current economic situation.
INTRODUCTION TO ARROYO GRANDE
A brief introduction to the City Council and Council-Manager form of government, the district map of Arroyo Grande, and details on services, structure, and organization chart The introduction also includes a community profile with history, geographic and regional context, and demographics
BUDGET SUMMARY
Overview of the City’s budget process, financial policies, funding sources, department budget updates, and the 10-year Capital Improvement Program (CIP).
• City Manager’s Budget Message
The City Manager’s address to the Mayor and City Council to highlight budget development priorities and any significant changes from the prior year adopted budget.
• Guide to the Budget
An overview of the budget process that explains budget purpose, the development of the base budget, and the final adoption and appropriation of the budget, budget basics, budget reporting, budget amendments, and fund structure.
• Financial Planning
An overview of key financial policies that govern the City’s approach to debt management, maintenance of fund balances, long-term financial planning, and other financial responsibilities.
• Budget Overview
A summary of all major and non-major funds.
• Department Budget Overview
An overview of each department’s purpose and structure, significant accomplishments, performance measures, department work plans, authorized personnel, including an organizational chart, and FY 2025-27 Biennial Budget.
• Debt Service Overview
An overview of the City’s debt management with outstanding debt service requirements and a debt payment schedule.
• Capital Improvement Program (CIP) Overview
An overview of the City’s 10-Year CIP plan, sources of funding, budgeted expenditures, project timelines, and project descriptions by program, project, and fund.
APPENDIX
Included in the appendix is a copy of the City Council adopted Budget and GANN Appropriation Resolutions, the GANN Appropriation Limits, a list of funds by number, and a glossary of terms.
GOVERNMENT FINANCE OFFICERS ASSOCIATION (GFOA)
DISTINGUISHED BUDGET PRESENTATION AWARD
The Government Finance Officers Association of the United States and Canada (GFOA) presented a Distinguished Budget Presentation Award to the City of Arroyo Grande, California for its Biennial Budget covering the period beginning July 1, 2023, and ending June 30, 2025
This award reflects the City’s commitment to meeting the highest standards in government budgeting. In order to receive this award, a governmental unit must publish a budget document that meets program criteria as a policy document, as an operations guide, as a financial plan, and as a communications device.
The City of Arroyo Grande is confident that the City’s Fiscal Year 202527 Biennial Budget continues to meet the GFOA’s rigorous criteria. Accordingly, this budget document will be submitted to the GFOA for review and consideration.
CALIFORNIA SOCIETY OF MUNICIPAL FINANCE OFFICERS (CSMFO) OPERATING BUDGET MERITORIOUS AWARD
The California Society of Municipal Finance Officers (CSMFO) presented an Operating Budget Meritorious Award to the City of Arroyo Grande, California for the City’s Fiscal Year 2023-25 Biennial Budget.
The City of Arroyo Grande is confident that the City’s Fiscal Year 2025-27 Biennial Budget will continue to conform to award requirements. Accordingly, this budget document will be sent to CSMFO.
INTRODUCTION TO ARROYO GRANDE
CITY STRUCTURE
City Structure
MAYOR AND CITY COUNCIL
GOVERNMENT STRUCTURE
The City of Arroyo Grande is a general law city and operates under the Council-Manager form of government, with a five-member City Council elected by district for four-year overlapping terms. The Council is elected on a non-partisan basis, and Council members must live in the district they represent. The mayor is elected at-large for a two-year term and is the presiding officer of the Council. The City Council is responsible for, among other things, passing ordinances, adopting the budget, appointing committees, and hiring the City Manager and City Attorney.
City Structure
DISTRICT MAPS
CITY BOARDS AND COMMISSIONS
City Boards and Commissions are the underpinnings of the Arroyo Grande community – they are how the community navigates the daily and weekly decisions that make Arroyo Grande run smoothly to become the kind of community desired by City stakeholders. Boards and Commissions may forward matters to the City Council, as appropriate. Membership on City Boards and Commissions are voluntary positions. Members, with the exception of the Downtown Parking Advisory Board (DPAB) and Tourism Business Improvement District (TBID) Board must be registered voters of Arroyo Grande. Applicants for the DPAB shall have a business within the Arroyo Grande City Parking and Business Improvement Area. The TBID Board shall consist of five (5) members, with a preference that at least three (3) members shall be owners of lodging businesses within the Arroyo Grande TBID, or others with knowledge of tourism and/or the lodging industry. Members of each respective Commission/Board/Committee shall serve for a term ending the January 31st following the expiration of the term of the respective appointing Mayor or Council Member, as applicable.
City Structure
Members of each respective Commission/Committee/Board may be removed prior to expiration of their term by a majority vote of the Council. The following is a list of current City Boards and Commissions:
• Planning Commission
• Downtown Parking Advisory Board
• Architectural Review Committee
• Tourism Business Improvement District (TBID) Board
• Community Service Grant Program (CSGP) Committee
• Citizen Sales Tax Oversight Committee (CSTOC)
CITY DEPARTMENTS
The City Municipal Code (Chapter 2. Administration and Personnel) provides the basis for the departmental structure of the City and establishes that the City Manager be appointed by the City Council to manage the affairs of the City. The City’s Municipal code establishes the administrative organizational structure of the City under the control and direction of the City Manager. The City’s use of resources is budgeted in eight departments City Manager’s Office, Administrative Services, Legislative and Information Services, Community Development, Police, Public Works, Fire (JPA), and Recreation Services.
FULL - SERVICE CITY
The City of Arroyo Grande is considered a full-service city, meaning that all or most municipal services are provided by the City, as opposed to being contracted out to third-party providers. Some services commonly contracted out by municipalities include public safety and utility services; however, only fire services, sanitation treatment, and solid waste disposal are contracted out by the City of Arroyo Grande.
COMMUNITY PROFILE
Community Profile
OVERVIEW
The City of Arroyo Grande is a dynamic and historic community located along California’s Central Coast, approximately two miles inland from the Pacific Ocean in San Luis Obispo County. With a population of just over 18,000 residents, Arroyo Grande combines the charm of a small town with the amenities of a modern city. Known for its agricultural productivity, wine region designation, and strong community identity, the City continues to thrive as a regional hub for tourism, retail, and cultural activity.
The City’s mission is to be the best place possible for everyone who lives, works, and visits. It strives to achieve this mission by providing efficient and responsive government services
GEOGRAPHIC AND REGIONAL CONTEXT
Arroyo Grande is situated in a fertile valley carved by the Arroyo Grande Creek and is bordered by the cities of Pismo Beach and Grover Beach, along with the unincorporated community of Oceano. The City is part of the "Five Cities" area, a coastal cluster that also includes Shell Beach. This region enjoys a temperate climate, scenic coastal landscapes, and a collaborative regional economy centered on tourism, agriculture, and small business.
HISTORY AND INCORPORATION
Arroyo Grande was officially incorporated on July 10, 1911. However, its historical roots extend back much further, beginning with the Chumash people who originally inhabited the region. During the Mexican land grant era, the area became part of Rancho Arroyo Grande, later purchased and settled by Francis Ziba Branch and his family. The city developed as a hub for agriculture and commerce in the late 19th century, aided by the construction of a railroad depot in 1882. Today, Arroyo Grande honors its history through preservation of landmarks like the historic Swinging Bridge and the Santa Manuela Schoolhouse.
ECONOMIC CHARACTERISTICS
Arroyo Grande’s economy is supported by a diverse mix of sectors, including agriculture, retail, tourism, and professional services. The city's historic Village area serves as a focal point for community events, small businesses, restaurants, and artisan shops, attracting both residents and visitors. As part of the broader Five Cities area, Arroyo Grande benefits from strong regional visitation and a tourism-based economy that drives local revenue through transient occupancy and sales taxes.
Community Profile
COMMUNITY IDENTITY AND QUALITY OF LIFE
Arroyo Grande is recognized for its small-town feel, scenic beauty, and commitment to preserving its cultural and architectural legacy. Community character is reflected in historic features such as the Swinging Bridge, the Santa Manuela Schoolhouse, and preserved buildings in the Village. The city offers a high quality of life, with well-maintained parks, walking trails, and community services. Residents enjoy a safe, familyfriendly environment with access to excellent schools, healthcare, and recreational opportunities.
CITY RECREATION AREAS & PROGRAMS
The City provides several parks with picnic, barbecue, and playground areas. Strother Community Park, located along the bank of the Arroyo Grande Creek, is ideal for reunions, picnics, and barbecues. Elm Street Park has tennis, pickleball, and playground equipment for all ages. Heritage Square Park, connected to the Village area by the historic Swinging Bridge, is a favorite place for tourists and locals to enjoy lunchtime.
The Hart-Collett Memorial Park, the Terra De Oro Park, and the Kiwanis Park are small parks with picnic tables and benches only. Rancho Grande Park is also ideal for family gatherings or special celebrations.
The twenty-six-acre Soto Sports Complex serves the Five Cities region by providing four lighted tennis courts, baseball fields, four lighted softball fields, and two unlit ball fields. The fields are converted to soccer and football use in the fall.
Community Profile
The James Way Oak Habitat and Wildlife Preserve has equestrian and jogging/walking trails for public use. The habitat, winding along a hillside in an oak preserve, has an abundant array of wildlife.
The City offers a wide variety of recreational opportunities for local residents and visitors. From youth and adult sports leagues, and special events to classes for seniors and summer youth camps, there are programs available for nearly every age.
DEMOGRAPHICS
A city is defined by its assets, the most important being the people who live, work, and contribute within its boundaries. Arroyo Grande takes pride in its close-knit, community-oriented population, rich heritage, and strong sense of place. The City has thoughtfully managed growth while preserving its historic character and natural beauty, balancing its roots in farming and viticulture with a modern, vibrant lifestyle.
With a median single-family home sale price of approximately $758,100 as of 2023 1, Arroyo Grande attracts families seeking a high quality of life on California’s Central Coast. The city appeals to a diverse range of residents, from young families to retirees, drawn by the area’s scenic surroundings, historic charm, and a variety of housing options. The historic Village district offers a unique blend of local shops, dining, and cultural events that foster a strong community spirit.
Arroyo Grande’s economy is anchored in agriculture, tourism, small businesses, and retail, with a growing presence in viticulture recognized as part of the Arroyo Grande Valley American Viticultural Area (AVA). Employment opportunities span farming, hospitality, healthcare, professional services, and retail sectors. The City continues to support economic development efforts that enhance local job growth while maintaining its small-town character.
Education is a vital part of the community, with quality public and private schools serving students from kindergarten through high school. Additionally, residents have convenient access to nearby higher
1 Data Source: 2023 US Census Bureau, American Community Survey. Home value data includes all types of owneroccupied housing.
Community Profile
education institutions in San Luis Obispo County and along the Central Coast, providing a range of educational pathways for lifelong learning.
Arroyo Grande is a welcoming and vibrant community that honors its agricultural legacy while embracing sustainable growth, making it a desirable place to live, work, and visit on California’s beautiful Central Coast.
Community Profile
Community Profile
Community Profile
Community Profile
Arroyo Grande at a Glance
The City of Arroyo Grande was incorporated in 1911 and operates as a general-law city under the CouncilManager form of government. Nestled approximately two miles inland from the Pacific Ocean along California’s Central Coast, Arroyo Grande is part of San Luis Obispo County and the vibrant “Five Cities” region. The city is known for its rich agricultural heritage, scenic valley setting, and charming historic Village district. Arroyo Grande attracts visitors and residents alike with its mild climate, picturesque vineyards, local wineries, and a welcoming small-town atmosphere. As of January 1, 2023, the California Department of Finance estimates the City’s population at approximately 18,412 residents. While much of the city remains residential, there is ongoing development that balances growth with preservation of the community’s unique character and natural beauty.
At a Glance
Incorporation
1911
Government
Full-service, general-law city
County
San Luis Obispo County https://www.slocounty.ca.gov/
School Districts
Lucia Mar Unified School District http://www.luciamarschools.org
Location
Located on the Central Coast, approximately two miles inland from the Pacific Ocean in San Luis Obispo County, midway between Los Angeles and San Francisco
Climate
Moderate
Population 18,412
State legislature
17th Senate District
Democrat John Laird
30th Assembly District
Democrat Dawn Addis
U.S. Congress
Representative:
California's 24th Congressional District
Democrat Salud Carbajal
Organizational Chart
BUDGET SUMMARY
CITY MANAGER’S BUDGET MESSAGE
Budget Message
July 1, 2025
To the Residents of Arroyo Grande, Honorable Mayor, and Members of the City Council:
I am pleased to present the Fiscal Years (FY) 2025-27 Biennial Budget. This is the first two-year budget I have submitted as City Manager, and as was the case with budgets past, this budget reflects the unwavering commitment to strategic financial management, promoting financial stability, growing the economy, and enhancing the quality of life for all Arroyo Grande residents. The proposed budget is balanced, incorporates all City funds, funds major efforts toward implementing the City Council’s goals, includes important initiatives to upgrade the City’s infrastructure, continues to fund the high-quality services that the community has come to expect, and will invest in the future through capital improvements and maintenance activities.
Process for Creating City Goals
In preparation for this two-year budget, the City Council actively involved the community in shaping our direction through the Community Priorities Survey. This four-question survey was posted on the City website and promoted on social media channels. The survey enabled community members to provide input regarding their thoughts on the top priorities for the City over the next 2-3 years. A summary of the responses was reviewed by the Council before establishing five (5) major Council goals for staff to prioritize for the upcoming biennial budget. This set of priorities has been used by staff to create work plans for the proposed biennial budget. The Council Goals have been used as a foundation for recommending where to allocate scarce City resources.
The five major goals are:
• Complete the General Plan Update
• Redevelop the East Grand Avenue Corridor (Halcyon Road to Elm Street)
• Pursue New Revenue Sources
• Implement Road and Sidewalk Improvements
• Achieve Water Resilience
How FY 2025-27 City Goals Compare to the FY 2023-25 Council Goals
The FY 2025-26 & FY 2026-27 Council Goals build upon the success of the FY 2023-24 & FY 2024-25 Council goals from the last two-year budget. Similar to the last two-year budget, the Council continues to focus on providing resources toward funding, infrastructure, and the general plan update. A major factor in helping address the funding goal was the passage of Measure E-24, a local 1% sales tax approved by the City's voters in November 2024. Measure E-24’s intent is to fund city services, such as fixing potholes, maintaining city streets, sidewalks, parks, aging infrastructure, and community facilities; providing local fire protection, police, and 9-1-1 emergency services; cleaning up litter/graffiti, and addressing homelessness. This goal will continue into the FY 2025-27 biennial budget with the consideration of cannabis as a means for economic development and consideration of modifications to Transient Occupancy Tax (TOT). The former fire services goal was achieved as of January 1, 2025, with the updated Joint Powers Authority Agreement with Grover Beach and the contract with the County of San Luis Obispo to provide fire service to the community of Oceano. The infrastructure goal will continue from the last two-year budget, with the addition of specific projects identified: Redevelop the East Grant Avenue Corridor and Implement Road and Sidewalk Improvements. A new goal was added for FY 2025-27: Achieve Water Resilience. This new goal supports regional efforts to address the ongoing Lopez Litigation and by pursuing a ballot measure in November 2026, to potentially allow the City to purchase State Water outside of declared water emergencies
Budget Message
How the City Plans to Accomplish
the FY 2025-27
City Goals
The Adopted Budget strategically allocates resources to projects that align with our five Council Goals. Each initiative reflects a deep understanding of community needs, is strengthened by collaborative partnerships, and is made possible by the City’s strong financial position. These efforts are focused on preserving and enhancing the quality of life for both current residents and future generations. Looking ahead, the future is bright for Arroyo Grande its residents and visitors alike thanks to strategic investments that will deliver lasting, positive impacts.
Financial Overview
The overall financial goals for the FY 2025-27 budget period is to have a fiscally sound two-year budget, enhance current service levels, and address critical capital projects. The FY 2025-27 Adopted Budgets present a structurally balanced budget, with excess operating revenues sufficient to cover Adopted Operating Budget expenditures.
The FY 2025-26 proposed budget includes a total of $32.1 million in revenues and $35.6 million in operating and capital budget for a net of $3.5 million more expenditures than revenues. The operating budget is balanced, with a $2 million net operating surplus. The expenditures that exceed revenues are for one-time projects that the City has been anticipating. Fund balances accumulated over time offset the additional expenditures and exceed the City’s policy goal of 20% by 5.8%.
The FY 2026-27 proposed budget includes a total of $33.2 million in revenues and $35.3 million in operating and capital expenditures for a net of $2.1 million more expenditures than revenues. The operating budget is balanced, with a $64,534 net operating surplus. Fund balances accumulated over time offset the additional expenditures and are still at the City’s policy goal of 20%.
Historically, the City has adopted a rolling 5-Year Capital Improvement Program (CIP) that identifies, prioritizes, and budgets for capital infrastructure needs such as roads, water and sewer systems, parks, and facilities. While this approach has served the organization well, growing infrastructure demands and increasingly complex funding environments have highlighted the need for a longer planning horizon. This report has transitioned the CIP from a 5-Year CIP framework to a 10-Year planning horizon, a change intended to improve long-range financial planning, infrastructure forecasting, and alignment with strategic goals.
This Capital Improvement Program (CIP) outlines anticipated City infrastructure improvements for FY 202526 through FY 2034-35 and serves as a public information document to advise residents and property owners on how the City plans to address significant capital needs. The CIP is divided into nine categories – Bridges, Drainage, Parks & Play Structures, Public Facilities, Sewer, Sidewalks, Streets and Transportation, Technology, and Water. It contains information about the scope, location, and funding for these projects.
Each year, the overall goal for capital improvements and the means for accomplishing them are assessed. Every project in the plan has been considered for its financial feasibility, environmental impact, conformance with previously adopted plans, priorities established by the City Council, and ability to meet public needs.
The FY 2025-26 through FY 2034-35 CIP totals $138,128,065. It is a flexible plan that can be altered as conditions, funding, priorities, and regulations change.
Budget Message
Acknowledgements
I would like to express my sincere appreciation to the dedicated teams across all City departments from leadership to frontline staff for their collaborative efforts in developing the FY 2025-27 Biennial Budget. Their ongoing commitment to interdepartmental collaboration, community well-being, and the City’s fiscal stability has been instrumental throughout this process. This document is a true reflection of a united and dedicated team effort.
A special thank you goes to the Administrative Services Department for their outstanding support, including training, financial analysis, expert guidance, and steadfast adherence to critical deadlines.
Finally, I am deeply grateful to the City Council The overall objective is to meet the community’s needs and provide services in the most effective, efficient, and responsive manner. With the City Council’s strong leadership, strategic direction, and clear vision, we have accomplished that objective
Closing
Our commitment to making this the best place possible for everyone who lives, works, and visits Arroyo Grande is reflected in the strategic investments we are making today, investments that support a sustainable and vibrant future. Through sound financial stewardship and thoughtful community-focused initiatives, we continue to enhance the experiences of both residents and visitors. The City of Arroyo Grande is wellpositioned for continued success. I am especially encouraged by the spirit of collaboration shared by our community members, partner agencies, volunteers, business owners, nonprofit leaders, and elected officials. Together, we are creating a community where everyone can thrive. It is truly a privilege to work alongside such dedicated and inspiring individuals.
Sincerely,
MATTHEW J. DOWNING – CITY MANAGER
GUIDE TO THE BUDGET
Guide to the Budget
PURPOSE OF THE BUDGET
The City budget sets forth a strategic resource allocation plan that addresses the City Council’s Strategic Goals. The Budget is a policy document, financial plan, operations guide, and communication device all in one. Through the budget document, the City demonstrates its accountability to its residents, customers, and the community-at-large.
The City’s Budget accomplishes the following:
• Determines the quality and quantity of City programs and services;
• Details expenditure requirements and the estimated revenue available to meet these requirements;
• Connects the activities of individual City Departments to the City Council’s Strategic Goals;
• Sets targets and provides a means of measuring actual accomplishments against goals; and
• Serves as a communication device that promotes the City’s vision and direction, fiscal health and vitality, and what the public is getting for its tax dollars.
Additionally, the budget provides the legal authority for expenditures and a means for control of municipal operations throughout the fiscal year. Accordingly, the City Charter mandates that a budget be adopted prior to the beginning of the fiscal year.
The budget process furnishes departments with an opportunity to justify departmental work programs, to propose changes in services, and to recommend revisions in organizational structure and work methods. It also enables the City Manager to review these aspects and make appropriate recommendations to the City Council.
Presentation of the budget to the City Council provides an opportunity to explain municipal programs and organizational structures. It also allows the Council to judge the adequacy of the proposed operating programs, to determine basic organizational and personnel staffing patterns, and to establish the level of municipal services to be provided with the available resources. In order to accomplish these objectives, the budget must combine an explanation of anticipated financial resources for the ensuing fiscal year with proposed expenditures, supported by sufficient information on the proposed programs and activities to assess the appropriateness of the recommended levels of services.
THE OPERATING BUDGET, CAPITAL BUDGET, AND CAPITAL IMPROVEMENT PROGRAM
The budget document contains information about both the City’s operating and capital budgets. The operating budget details the funding for the day-to-day operations and obligations of the City for a specific fiscal year such as personnel costs, vendors and contractors, utilities, building maintenance, and debt payments. The capital budget details planned expenditures for the same fiscal year to construct, maintain, or improve City facilities such as fire and police stations, libraries and museums, parks, recreation centers, streets, sewers, and electric and water infrastructure.
Guide to the Budget
The Capital Improvement Program (CIP) is a separate ten-year planning document that details planned capital expenditures. Capital projects range from road maintenance or construction to the renovation of municipal buildings, recreation centers and play structures, and water main and sewer system replacement. The CIP relates capital project needs to the financial sources that will support their realization and the timeframe in which both the financing and work will take place. Often spanning multiple years, capital improvement projects typically carry considerable future impact. Because of the more long-term nature of the CIP and the complex nature of capital project financing, the CIP is presented in a separate document. However, the first two years of the CIP are integrally related to the Biennial Budget document, and therefore a summary of the CIP is provided in the Capital Improvement Program Overview section of this budget, beginning on page 167
BUDGET PROCESS
The City of Arroyo Grande’s fiscal year begins July 1 and concludes on June 30. In accordance with fundamental democratic principles, the City embraces the notion and practice of citizen participation, especially in key planning and resource allocation activities. Therefore, the development of the budget process begins early in the prior fiscal year to ensure adequate planning and community input into that planning. Engagement with City leadership, commissions and the community occur throughout the process.
At the beginning of budget development, the City initiated community engagement with online surveys to gather input from residents and business owners. A Community Priorities Survey assessed residents' satisfaction and priorities. This feedback informed resource allocation decisions for the upcoming budget.
Guide to the Budget
DEVELOPMENT OF THE BUDGET PROCESS
Every two years, staff and Council prepare a Biennial Budget document, which commits government resources and services to accomplish the City’s mission of making Arroyo Grande the best place possible for everyone who lives, works, and visits here. To develop the biennial budget for Fiscal Years 2025-27. The 5-step process and timeline tat was used for this budget cycle is depicted below
Step 1: On December 9, 2024, an Arroyo Grande Community Priorities Survey was published. This 4question online survey was posted on the City website and promoted on social media channels. The survey was open for one month and closed on January 15, 2025. The survey allowed community members to provide input regarding their thoughts on what the top priorities should be for the City over the next 2-3 years. The survey included a combination of multiple-choice and short-response questions. A summary of the responses is included in Attachment 2 of Item 4: City Council Goal Setting Workshop, at the February 10, 2025, Special Council Meeting.
Guide to the Budget
Step 2: At the February 10, 2025, Special Council Meeting, Council established 5 major goals for staff to prioritize for the upcoming biennial budget cycle. The goals were determined based on the results of the community survey and input from the public and staff. This set of priorities will be used by staff to create work plans and a proposed biennial budget.
Step 3: Following completion of the study session, staff developed a proposed budget by implementing the following steps:
• January 28, 2025 - Financial Forecast
o Staff presented a 5-year financial forecast with budget assumptions, challenges, goals, and strategies. January 28, 2025, Council Meeting – 11.a Five-Year Financial Forecast
• Spring 2025 - Staff Develop Work Plans
o The budget process begins in the Finance Department, with the preparation of baseline revenue and expenditure assumptions. Baseline expenditures include personnel assumptions, with a comprehensive assessment of the impact of current or anticipated employee Memorandums of Understanding (MOU) which govern employee costs such as benefits and cost of living adjustments. Other known costs, such as debt obligations and self-insurance funding requirements are also projected, to arrive at a baseline budget.
o City departments attend a budget kickoff meeting where they receive the budget development calendar, a summary of the baseline budget, and direction on balancing measures, if applicable. The baseline budget represents the amount of funding available to maintain programs and current service levels and make progress towards achieving the City’s major goals. Departments define budgetary needs in relation to services, programs, and related strategic goals. Departments also identify capital projects and funding sources for those projects during this time. Internal review of department budget submissions takes place, with executive leadership recommending adjustments and providing guidance on the budget submissions of each City department.
o Staff will finalize operating and Capital Improvement Plan (CIP) preliminary budgets that reflect the established major City goals and the financial forecast.
• May 13, 2025 - Review of CIP
o Staff presented a 10-Year CIP for review and input from the City Council and by the Planning Commission for determination of consistency with the General Plan. May 13, 2025 Council Meeting – 11.c Ten Year Capital Improvement Program, Measure E-24 Local Sales Tax Fund Expenditure Program, and Measure O-06 Local Sales Tax Fund Expenditure Program
Step 4: The proposed operating budgets, work plans, and CIP were incorporated into a proposed FY 202527 Biennial Budget for discussion and consideration by the Council on May 27, 2025. May 27, 2025 Council Meeting – 11.a Review Preliminary FY 2025-27 Biennial Operating Budget
Step 5: Adoption of the FY 2025-27 Biennial Budget occurred on June 10, 2025, with funds appropriated on July 1, 2025. June 10, 2025 – Council Meeting 10.a Fiscal Year 2025-27 Biennial Budget
Guide to the Budget
MID - CYCLE BUDGET UPDATE/QUARTERLY REPORTS
The City Manager presents a Mid-Cycle Budget Update in June of the second year of a biennial budget cycle. This update includes necessary adjustments to the operating budget and personnel detail that have been identified by staff since the adoption of the Biennial Budget. For all budgets adopted, whether annual or biennial, quarterly fiscal updates are presented to the City Council to keep City leadership and the public apprised of the City’s financial condition throughout the budget period. The quarterly updates include recommended budget adjustments and fiscal strategies as needed to respond to the current fiscal state of the City.
ADJUSTMENTS TO THE ADOPTED BUDGET
The City Council may amend or supplement the adopted budget with the majority vote of at least three members to authorize the transfer of unused balances appropriated to one department or fund to another department or fund or to appropriate available funds not included in the budget. The City Manager is legally authorized to transfer budgeted amounts between divisions and accounts within the same department and fund over the course of a fiscal year. Through City Council adoption of the budget resolution (page 205), the Director of Administrative Services/City Treasurer may authorize interfund transfers as required provided funds are available, or as authorized by the City Council through the adoption of the budget. City Council approval is required for all transfers from unappropriated fund balances or fund balance contingency reserves.
BASIS OF BUDGETING
The modified accrual basis of accounting is used by all General, Special Revenue, Debt Service, and Capital Projects Funds. This means that revenues are recognized when they become both measurable and available. Measurable means the amount of the transaction can be determined, and available means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. Expenditures are recorded when liabilities are incurred, except that principal and interest payments on long-term debt are recognized as expenditures when due. The full accrual basis of accounting is utilized by all Enterprise and Internal Service Funds. This means that revenues are recorded when earned and that expenses are recorded at the time liabilities are incurred.
The City’s basis for budgeting is consistent with accounting principles generally accepted in the United States of America and with the City’s financial statements as presented in the Annual Comprehensive Financial Report (ACFR). Exceptions are as follows:
• Capital expenditures within the Enterprise Funds are recorded as assets on an accounting basis but are shown as expenditures on a budgetary basis.
• Depreciation of capital assets and amortization of various deferred charges are recorded on an accounting basis only. These charges are not reflected in the budget document.
Guide to the Budget
• Continued/Carryover appropriations represent previously budgeted funds unexpended at the end of the applicable budget period. Carryover requests approved by the City Council are added to the City’s current budget period but are not included in the budget document or original budget submission to the City Council.
• Certain funding, such as grant funding, is not included in the budget document; these items are appropriated as needed throughout the fiscal year with approval from the City Council.
Fund Structure
BUDGETARY FUND BALANCE
In a governmental agency, fund balance is considered in two separate, but intrinsically related, settings: budgetary fund balance and Annual Comprehensive Financial Report (ACFR) fund balance. Budgetary fund balance is a prospective calculation of ending fund balance based on estimated revenues and expenditures, whereas ACFR fund balance is a retrospective calculation based on the difference between fiscal year end assets and liabilities, and deferred inflows or outflows of resources. Following the financial audit of the active fiscal year, budgetary ending fund balance is reconciled to ACFR fund balance, accounting for actual fiscal year performance and any differences in the budgetary versus accounting basis of reporting.
ACFR fund balance may be classified in one of five classifications defined in GASB Statement 54: Fund Balance Reporting and Governmental Fund Type Definitions as described below:
• Non-spendable Fund Balance: Cannot be spent due to form or must be maintained intact legally or contractually.
• Restricted Fund Balance: Subject to externally enforceable limitations by law, enabling legislation, or limitations imposed by creditors or grantors.
• Committed Fund Balance: May only be used for specific purposes due to formal action of the City Council through adoption of a resolution prior to the end of the fiscal year.
• Assigned Fund Balance: Reflects the City’s intended use of resources.
• Unassigned Fund Balance: The residual classification that includes all spendable amounts not contained in the other classifications.
For the purposes of budgetary fund balance, the last three classifications listed above (Committed, Assigned, and Unassigned) are generally not legally restricted by external parties or forces.
FUND STRUCTURE
The City records financial activity in six fund types as guided by generally accepted accounting principles (GAAP): General Fund, Special Revenue Funds, Debt Service Funds, Enterprise Funds, Private Purpose Funds, and Agency (Fiduciary) Funds. Within each fund type are multiple funds that relate to a city department or multiple city departments.
General Fund
The General Fund is the government’s primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund. The General Fund is generally used to account for functions of the City that are principally supported by taxes and intergovernmental revenues. The General Fund budget provides the majority of services commonly associated with local city government (e.g. public safety, recreation, community development, general government, and public works).
Measure O-06 Sales Tax Fund
The Measure O-06 Fund is a component of the General Fund and is used to separately account for and report the use of Measure O-06 revenue derived from a local 1/2% sales tax approved by the City's voters in November 2006.
Fund Structure
Measure E-24 Sales Tax Fund
The Measure E-24 Fund is a component of the General Fund and is used to separately account for and report the use of Measure E-24 revenue derived from a local 1% sales tax approved by the City's voters in November 2024.
Special Revenue Fund
Special Revenue Funds are used to account for specific monies that are legally restricted for use for a particular purpose. Miscellaneous grants and other restricted funding are recorded as Grants of within a Restricted Programs fund. Grants are budgeted by individual Council action, whereas restricted funding, if recurring, guaranteed, and predictable, is budgeted in the City’s budget.
• Developer Impact Fees are collected from developers for the expansion of the existing City service in order to serve future development, the budget includes 9 Special Revenue Funds:
o Fire Protection Fund: impact fees collected from developers for the expansion of the existing fire station in order to serve future development.
o Police Protection Fund: impact fees collected from developers for the expansion of the existing police facility in order to serve future development.
o Park Development (Quimby) Fund: This fund accounts for the receipts of park-in-lieu fees (Quimby) and grant revenues that are used for construction, park acquisition, and development of park facilities.
o Recreation Community Center Fund: impact fees collected from developers and used for recreation facilities in order to maintain the adopted level of service of recreation/community center facilities of 542 square feet per thousand population.
o Park Improvement Fund: Impact fees collected from developers for park improvements are to be used to maintain the adopted level of service for neighborhood and community parks of 4.0 acres per thousand population. This fund accounts for the receipt and use of these monies.
o Traffic Signalization Fund: impact fees collected from developers and used for the future cost of traffic signals.
o Traffic Circulation Fund: developer traffic mitigation measure fees charged as a result of an environmental review.
o Transportation Facility Fund: impact fees (AB1600 fees) paid to protect the public health, safety, and welfare by maintaining the existing level of public services for existing and future residents within the City of Arroyo Grande.
o Drainage Facility Fund: impact fees paid by development and are restricted to improving drainage within the City.
• The Community Development Department budget includes three Special Revenue Funds:
o In-Lieu Affordable Housing Fund: This fund accounts for monies paid by developers in meeting the City's mandatory affordable housing requirements.
o In-Lieu Underground Utility Fund: This fund accounts for monies paid by developers in meeting the City's underground utility requirements.
o Community Development Block Grant (CDBG) Fund: This program is a flexible program that provides the City with resources to address a wide range of unique community development needs.
• The Police Department budget includes one Special Revenue Fund:
Fund Structure
o State COPS Block Grant Fund: This fund accounts for the receipt and use of monies from the State of California restricted to the purchase of police equipment and technology for crime prevention.
• The Public Works Department’s budget includes seven Special Revenue Funds:
o Three Landscape Maintenance District Funds account for and report on the activities of landscape maintenance districts.
o The Special Gas Tax Fund is used to account for the construction and maintenance of city streets funded by the City’s share of State gasoline taxes.
o Transportation Fund: This revenue source is provided by the San Luis Obispo County of Government’s (SLOCOG) Local Transportation Fund (LTF). The annual appropriation is restricted to transportation systems, including transit, pedestrian, street and road maintenance.
o Water Neutralization Fund: The City requires development projects that increase total water consumption in the City to “neutralize” that demand by reducing water consumption in existing development by an equivalent amount or by paying a fee in-lieu of performing water consumption reductions. This fund accounts for the amount collected from developers and is used towards the City’s water conservation efforts.
o Water Availability Fund: Pursuant to the provisions of Section 38743 of the Government Code, water availability charges is a “special charge” which is levied to each parcel of property not served with city water. These charges are restricted for the sole purpose of expanding water supply such as a desalination plant, recycled water, a scalping plant, etc.
• The Recreation Services Department budget includes one Special Revenue Fund:
o Tourism Business Improvement District (TBID) Fund: The purpose of the Tourism Business Improvement District (TBID) is to provide projects, programs and activities that benefit lodging businesses located and operating within the City of Arroyo Grande. A two percent (2%) assessment is levied on all lodging businesses of the rent charged by the operator per occupied room per night for all transient occupancies. Revenue collected is used to promote the lodging industry within the City.
• Other Special Revenue Funds include:
o Public Access Television Fund: This fund accounts for fees collected from Charter Communications that are restricted for support of public, education, and government access programming and equipment.
Enterprise Funds
The City’s enterprise funds are a type of proprietary fund used to manage services delivered to the public on a user-fee basis, operating much like a private business. These funds are self supporting; revenues come primarily from service charges, and they cover both operating expenses and capital costs. The City has 5 Enterprise Funds: Sewer, Sewer Facility, Water, Lopez, and Water Facility.
Agency Funds
The City’s agency funds are used to account for assets held temporarily on behalf of others such as the Successor Agency to RDA, Downtown Parking, and the Sanitation Distribution funds. They are not City revenues and are excluded from government-wide financial reporting of expenses or fund balances.
Fund Structure
Fund Structure
GOVERNMENTAL FUND TYPES
General Fund – is the general operating fund of the City and accounts for all unrestricted financial resources except those required to be accounted for in another fund.
Special Revenue Funds – to account for the proceeds of specific revenue sources (other than special assessments, expendable trusts, or capital projects) that are restricted by law or administrative action to expenditures for specific purposes.
Debt Service Funds – to account for the accumulation of resources for and the payment of interest and principal on general long-term debt and related costs. The City currently does not have general long-term debt that would be obligated to use a debt service fund.
Capital Project Funds – to account for financial resources segregated for the acquisition of major capital projects or facilities (other than those financed by proprietary fund types).
PROPRIETARY FUND TYPES
Enterprise Funds – to account for operations in a manner similar to private business enterprises, where the intent is to have the costs (expenses, including depreciation) of providing goods or services to the general public to be financed or recovered primarily through user charges.
FIDUCIARY FUND TYPES
Agency Funds – to account for assets held by the City as trustee or agent for individuals, private organizations, or other governmental units, and/or other funds. These funds are custodial in nature (assets correspond with liabilities) and do not involve measurement of results of o
FINANCIAL POLICIES
Financial Policies
A Fiscal Policy is an adopted guideline that establishes goals for the allocation of public resources in the manner best suited to the efficient provision of services to residents and visitors within the City. While not all of the goals may be achievable in the current year, the existence of such goals will serve to guide the City Council in its decision-making.
The budget document is a policy statement and financial plan that allocates City resources, such as personnel, materials, and equipment, in tangible ways to achieve the general goal of a balanced community. It is, therefore, prudent for the City Council to have adopted a Fiscal Policy to guide staff through the budget-development process. The Fiscal Policy is a guideline, not an absolute. The Policy describes goals the Council seeks to achieve to secure fiscal solvency, superior levels of customer service, and maximum cost efficiency. The Policy components are as follows:
FISCAL MANAGEMENT
• Maintain safety and liquidity while maximizing investment revenue.
• Utilize grants and subsidies from other sources when possible and cost-effective.
• Charge fees for services that reflect the cost of providing such services.
• Review fees annually, establish actual costs, adjust existing fees, and establish new fees as needed.
• Recover costs when possible for facility use, planning and building services, code enforcement, community events and administrative costs.
• Develop short and long-term financial plans.
• Develop fiscal models to reflect development and planning policies to ensure resources are adequate to provide service needs.
• Maintain a PERS Retirement Fund in which the City funds retirement costs on an annual basis at no lower than the projected long-term average rates in order to eliminate the fluctuations in PERS costs and provide long-term stability.
NEW SERVICES
Add new services only when a need has been identified and when adequate staffing and funding sources have been provided.
PUBLIC SAFETY
Provide funding to maintain the safety of the citizens of Arroyo Grande at a level that ensures that Arroyo Grande maintains its position as one of the safest cities in San Luis Obispo County.
FACILITIES
• Plan for new facilities only if operations and maintenance costs for those new facilities will not negatively impact the operating budget.
Financial Policies
• Provide adequate routine maintenance each year to avoid the cost of deferred maintenance.
OPERATIONAL EFFICIENCIES
• Provide City services in the most cost-effective manner.
• Provide staffing levels that allow employees to respond promptly to service requests from the public.
• Utilize consultants and temporary help for special projects or peak workload periods.
• Utilize community expertise on a voluntary basis as appropriate.
• Ensure that fee-supported services are staffed appropriately to render the services for which customers have paid.
• Work through regional agencies to share costs for local and mandated programs whenever possible.
EMPLOYEE DEVELOPMENT
Attract and retain competent employees for the City workforce by compensating employees fairly, providing adequate training opportunities, ensuring safe working conditions, and maintaining a professional work environment.
ECONOMIC DEVELOPMENT
• Promote a mix of businesses that contribute to a balanced community, develop programs to enhance and retain existing businesses, and pursue new developments and businesses that add to but do not detract from the City’s economic base.
• Maximize opportunities for the existing business community, thereby increasing existing sources of revenue to meet the increasing demands for service.
RETIREE MEDICAL
Pre-fund retiree medical benefit costs.
Financial Policies
DESCRIPTION OF FUNDS
Fund Accounting Systems
The City uses funds and account groups to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain City functions or activities.
A fund is an accounting entity with a self-balancing set of accounts established to record the financial position and results of operations of a specific governmental activity. An account group is a financial reporting device designed to provide accountability for certain assets and liabilities that are not recorded in the funds because they do not directly affect net expendable available resources. The City maintains the following fund types and account groups:
TYPES OF FUNDS
Governmental Fund Types
General Fund – the general operating fund of the City and accounts for all unrestricted financial resources except those required to be accounted for in another fund.
Special Revenue Funds – to account for the proceeds of specific revenue sources (other than special assessments, expendable trusts, or capital projects) that are restricted by law or administrative action to expenditures for specific purposes.
Debt Service Funds – to account for the accumulation of resources for and the payment of, interest and principal on general long-term debt and related costs. The City currently does not have general long term debt that would be obligated to use a debt service fund.
Capital Project Funds – to account for financial resources segregated for the acquisition of major capital projects or facilities (other than those financed by proprietary fund types).
Proprietary Fund Types
Enterprise Funds – to account for operations in a manner similar to private business enterprises where the intent is to have the costs (expenses, including depreciation) of providing goods or services to the general public to be financed or recovered primarily through user charges.
Fiduciary Fund Types
Agency Funds – to account for assets held by the City as trustee or agent for individuals, private organizations, or other governmental units, and/or other funds. These funds are custodial in nature (assets correspond with liabilities) and do not involve measurement of results of operations.
Financial Policies
Basis of Accounting
Basis of accounting refers to when revenues and expenditures or expenses are recognized in the accounts and reported in the financial statements. Specifically, it relates to the timing of the measurements made, regardless of the nature of the measurement. All Governmental funds and Agency funds are accounted for using the modified accrual basis of accounting. Revenues are recognized when they become measurable and available as net current assets. In those funds where revenue is recognized on a modified accrual basis the following revenues may be accrued: property and sales taxes, revenue from the use of money and property, interfund transfers, unbilled service receivables and intergovernmental revenue. Licenses, permits, fines and forfeitures and similar items are, for the most part, not accrued and consequently are not recorded until received. Agency funds are purely custodial (assets equal liabilities) and thus do not involve measurement of results of operations. The assets and liabilities are accounted for on a modified accrual basis with the exception of the City’s Deferred Compensation Plan, which is accounted for on a market value basis in accordance with Statement No. 2 of the Governmental Accounting Standards Board (GASB).
Property tax revenue is recognized in the fiscal year for which the taxes have been levied providing they become available, in accordance with National Council of Governmental Accounting GASB 33. In this context, available means when receivable and due, when payment is expected within the current period, or within sixty (60) days of year end, and thus available to pay debts of the current period.
Grants, entitlements, or shared revenues recorded in governmental funds are recognized as revenue in the accounting period when they become susceptible to accrual, i.e. both measurable and available (modified accrual basis).
Expenditures are generally recognized under the modified accrual basis of accounting when the related fund liability is incurred. Principal and interest on general long-term debt is recognized when due.
All proprietary funds are accounted for using the accrual basis of accounting. Their revenues are recognized when they are earned and become measurable, expenses are recognized when they are incurred if measurable.
The City reports deferred revenue on its combined balance sheet. Deferred revenues arise when potential revenue does not meet both the “measurable” and “available” criteria for recognition in the current period. Deferred revenues also arise when the City receives resources before it has a legal claim to them, as when grant monies are received prior to the incurrence of qualifying expenditures. In subsequent periods, when both revenue recognition criteria are met, or when the City has a legal claim to the resources, the liability for deferred revenue is removed from the combined balance sheet and revenue is recognized.
Financial Policies
BUDGETARY PROCESS
The City uses the following procedures in establishing the budgetary data reflected in the financial statements: after January 1, Department Directors prepare estimates for required appropriations for the fiscal year commencing the following July 1. The departmental estimates are presented to the City Manager for review. A Preliminary Budget is prepared that includes estimated expenditures and forecasted revenues for the fiscal year. Prior to July 1, the City Manager submits a Preliminary Budget for the upcoming fiscal year to the City Council. The Preliminary Budget includes a summary of the proposed expenditures and financial resources of the City, as well as historical data for preceding fiscal periods. Public meetings are conducted to obtain citizens’ comments. The City Council adopts the budget by June 30. Budgets are legally adopted for the general, special revenue, enterprise funds, agency funds and all capital projects programs during the fiscal year ended June 30. The appropriated budget covers substantially all City expenditures. All appropriated amounts shown are as originally adopted or as amended by the City Council. During the year, supplementary appropriations may be approved. Unexpended appropriations lapse at the year-end, unless approved for carryover by the City Manager to address multi-year projects or initiatives.
Department Directors are authorized to transfer budgeted amounts within their departments, within the same fund, with the approval of the City Manager. The City Manager has authority to make transfers of appropriations between departments, provided those changes do not impact budgeted year-end fund balances. Only the City Council may authorize transfers of appropriations between funds. Formal budgetary integration is employed as a management control device during the fiscal year for all governmental funds.
ENCUMBRANCES
Encumbrances represent commitments related to unperformed contracts for goods or services. Encumbrance accounting, under which purchase orders, contracts, and other commitments for the expenditure of resources are recorded to reserve that portion of the applicable appropriation, is utilized in all funds. Encumbrances outstanding at year-end are reported as reservations of fund balances and do not constitute expenditures or liabilities because the commitments will be honored during the subsequent year. Amounts encumbered at year-end are reappropriated in the following year.
BUDGET BASIS OF ACCOUNTING
Budgets for governmental funds are adopted on a basis consistent with generally accepted accounting principles (GAAP).
CASH AND INVESTMENTS
Cash includes amounts in demand deposits. Investments, including accrued interest, are stated at fair market value.
Financial Policies
INTERFUND TRANSACTIONS
During the course of operations, numerous transactions occur between individual funds for goods provided or services rendered. These receivables and payables are classified as “due from other funds” or “due to other funds” on the balance sheet.
INVENTORIES
Inventories of materials and supplies are carried at cost on a first-in, first-out basis. The City uses the consumption method for accounting for inventories.
FIXED ASSETS
All purchased fixed assets are valued at cost where historical records are available, and at an estimated historical cost where no historical records exist. Donated fixed assets are valued at their estimated fair market value on the date received.
The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend asset lives are not capitalized. Improvements are capitalized and depreciated, as applicable, over the remaining useful lives of the related fixed assets.
In accordance with GASB 34, all Public domain (“infrastructure”) fixed assets are now capitalized. Examples of infrastructure assets are: roads, bridges, curbs and gutters, streets and sidewalks, drainage and lighting systems.
Depreciation of fixed assets is computed using the straight-line method. The estimated useful lives are as follows:
Buildings and structures
40 – 55 years
3 – 10 years
5 – 20 years
COMPENSATED ABSENCES
Vested or accumulated personal leave of employees, that is expected to be liquidated with expendable available financial resources, is reported as an expenditure and a fund liability of the governmental fund that will pay it. Amounts of vested or accumulated personal leave not expected to be liquidated with expendable available financial resources are reported in the City’s financial statements as long-term debt. No expenditure is reported for those amounts. Vested or accumulated personal leave of proprietary funds is recorded as an expense and liability of those funds as the benefits accrue to employees.
Financial Policies
PROPERTY TAXES
The San Luis Obispo County Assessor and Tax Collector perform the duties of assessing and collecting property tax, respectively. Tax levies cover the period from July 1 to June 30 of each year. All tax liens attach annually on the first day in March proceeding the fiscal year for which the taxes are levied. Taxes are levied on both real and personal property as of March 1.
Secured property taxes are levied against real property and are due and payable in two equal installments. The first installment is due on November 1 and becomes delinquent if not paid by December 10. The second installment is due on February 1 and becomes delinquent if not paid by April 10. Unsecured personal property taxes are due on July 1 each year. These taxes become delinquent if not paid by August 31.
GRANTS
Federal and state grant revenues are accrued to the extent expenditures are incurred. All such grants are subject to audit and adjustment by the grantor.
LONG-TERM OBLIGATIONS
Long-term debt is recognized as a liability of a governmental fund when due or when resources have been accumulated in the debt service fund for payment early in the following year. Other long-term obligations to be financed from expendable available financial resources are reported as a fund liability of a governmental fund. The remaining portion of such obligations is reported in the financial statements. Long-term liabilities to be financed from proprietary fund operations are accounted for in those funds.
FUND EQUITY
Contributed capital is recorded in proprietary funds that have received capital grants or contributions from developers, customers or other funds. These reserves represent those portions of fund equity not available for expenditure or that are legally segregated for a specific future use of financial resources. Fund designations are established to indicate tentative plans for the use of current financial resources in the future.
Financial Policies - Fund Balance
INTRODUCTION
This policy was adopted by the City Council on June 11, 2024 with Resolution 5371. The purpose of this document is to state the policy goals of the City of Arroyo Grandes’ General Fund reserves, and the budgeting practices that maintain such reserves. Although there is no formula that defines a completely adequate Fund Balance, a conservative approach should enable the City to finance its operations and meet unplanned expenditures without having to incur short-term debt or raise new revenues.
These policies are intended to provide guidelines for budget decisions as to the appropriate use of General Fund resources and the maintenance of adequate reserves for contingencies, emergencies, capital improvements, and other such uses as determined by the City Council. After amounts projected to be available from the year-end fund balance of the General Fund are allocated to Assigned categories, the remaining amount, referred to as the Unassigned Fund Balance, will be reserved for contingencies as further set forth below.
PURPOSE
The purpose of the Fund Balance and Reserve Policy is to ensure strong fiscal management to guide the City of Arroyo Grande’s financial planning, while continuing to provide services to the residents of the City. Additionally, the policy will: aide in reducing financial impacts of temporary revenue short falls and unpredicted one-time expenditures, such as disasters or catastrophic events; assist the City in responding to challenges of a changing economic environment; and preserve adequate reserve levels to improve or maintain the City’s credit worthiness. The Fund Balance and Reserve Policy establishes the appropriate level of reserves in the Consolidated General Fund. The policy sets conditions warranting the use of reserves and outlines the plan to replenish them if the balances fall below the levels established in this policy.
BACKGROUND
Governmental Accounting Standards Board (GASB) Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions, was implemented in FY 2010-11 with the intent of improving financial reporting by providing fund balance categories that will be more easily understood. The categories are more clearly defined to make the nature and extent of the constraints placed on a government’s fund balance more transparent. This Fund Balance and Reserve Policy establishes the procedures for reporting unrestricted fund balance in the financial statements. The policy also authorizes and directs the Administrative Services Director to prepare financial reports which accurately categorize fund balance as per GASB Statement No. 54.
Financial Policies - Fund Balance
POLICY
Fund balance is essentially the difference between the assets and liabilities reported in a governmental fund. There are five separate components of fund balance, each of which identifies the extent to which the City is bound to honor constraints on the specific purposes for which amounts can be spent.
• Non-spendable fund balance: Amounts that cannot be spent because they are either (a) not in spendable form or (b) legally or contractually required to be maintained intact.
• Restricted fund balance: To be used for specific purposes stipulated by external resource providers, constitution, or through enabling legislation
• Committed fund balance: To be used for specific purposes as established by City Council.
• Assigned fund balance: Amounts intended for a specific purpose as authorized by the City Manager, but are neither restricted nor committed.
• Unassigned fund balance: The residual amount not contained in the other classifications. The first two components listed above, non-spendable and restricted fund balances, are not addressed in this policy due to the nature of the restrictions. Examples of non-spendable fund balance include prepaid expenses, loan receivables, and inventory. Restricted fund balance is either imposed by laws or constrained by grantors, contributors, or laws or regulations of other governments. This policy is focused on financial reporting of unrestricted fund balance, which is the last three components listed above. These three components are further defined below.
These funds may be pooled for investment earning purposes only and interest earned shall be credited to each individual fund based upon the proportionate share of the revenues invested.
Committed Fund Balance
The City Council, as the City’s highest level of decision-making authority, may commit fund balance for specific purposes pursuant to constraints imposed by formal actions taken, such as an ordinance or resolution. These Committed amounts cannot be used for any other purpose unless the City Council removes or changes the specified use through the same type of formal action taken to establish the commitment. Five types of committed reserves are set aside by the City including Operating Reserve, Pension and Other Post-Employment Benefits Reserve, Information Technology Reserve, Fleet Replacement Reserve, and Facility Repairs Reserve. The intended use of each reserve and the Fund(s) in which they are held is outlined below. To develop the appropriate amount of reserves, the City considered guidance from the Government Finance Officers Association (GFOA), as well as the current economic conditions and needs of the City. Reserve balances will be reviewed at the end of each fiscal year to ensure compliance with this Policy.
• Operating Reserve – The GFOA recommends that general-purpose governments maintain reserves in the general fund of no less than two months (16.67%) of annual general fund operating revenues or annual general fund operating expenditures. The City has established an Operating Reserve in the Consolidated General Fund to mitigate financial and service delivery risk due to
Financial Policies - Fund Balance
unexpected revenue shortfalls or unanticipated critical expenditures. The purpose of this reserve is to provide budgetary stabilization and not to serve as an alternative funding source for new programs and ongoing operating expenditures. It is for one-time needs and expenditures identified in the budget and not ongoing structural challenges. The City will aim to maintain a minimum balance in the Operating Reserves equal to approximately 15%, with a goal of 20% of the City’s annual operating expenditures.
• Pension and Other Post-Employment Benefits Reserve – Funds set aside under this reserve in the Consolidated General Fund to be used to further mitigate costs associated with pensions and other post-employment benefits. These funds will be used: as a funding source for potential additional discretionary payments to pay down unfunded liability; or held in the reserve account; or placed in a City Council approved trust instrument. Funds may be used for such purposes as a supplemental funding source for unanticipated increases to the annual pension and/or other post-employment benefit costs resulting from future actuarial assumptions and investment market volatility, or to make the City’s annual payments during times of economic uncertainty as brought on by such circumstances as a recession resulting in funding gaps.
• Information Technology Reserve – This fund, established in the Consolidated General Fund, provides for information system and technology projects including communications systems, hardware, and software, which are capital in nature. Technology can change rapidly within the information systems sphere and often comes at a large cost. This reserve helps the City keep pace with changes in information technology and take advantage of improvement/efficiency opportunities in this area. This reserve will not exceed 1.0% of annual Consolidated General Fund operating expenditures.
• Fleet Replacement Reserve – The City will maintain a Fleet Replacement Reserve in the Consolidated General Fund to provide for the timely replacement of existing vehicles should they come to the end of their useful life or become inoperable. This reserve will not exceed 1.0% of annual Consolidated General Fund operating expenditures.
• Facility Repairs Reserve – This reserve is set up in the Consolidated General Fund to address any unforeseen maintenance and repairs or planned replacements within City owned facilities. This reserve will not exceed 1.0% of annual Consolidated General Fund operating expenditures.
Assigned Fund Balance
Amounts that are constrained by the City’s intent to be used for specific purposes, but are neither restricted nor committed, should be reported as assigned fund balance. This policy herby delegates the authority to assign amounts to be used for specific purposes to the City Manager or designee for the purpose of reporting these amounts in the annual financial statements. Examples of assigned fund balance include:
Financial Policies - Fund Balance
• Encumbered Fund balance levels must be sufficient to meet funding requirements for materials or services ordered, but not received, before the end of the fiscal year.
• Continuing Appropriations Fund balance levels must be sufficient to meet funding requirements for projects approved in prior years and which must be carried forward into the new fiscal year.
• Other Designations Assigned fund balance can also include amounts designated for certain programs, additional reduction of debt, special events, or other non-recurring expenditure needs of the City.
Unassigned Fund Balance
Unassigned fund balance is the residual positive net resources in excess of what can properly be classified in one of the other four categories. The Consolidated General Fund is the only fund that may report a positive (surplus) unassigned balance. Conversely, any governmental fund in a negative (deficit) position could report a negative amount of unassigned fund balance.
Fund Balance Classification
The accounting policies of the City consider restricted fund balance to have been spent first when the expenditure is incurred for purposes for which both restricted and unrestricted fund balance is available. Similarly, when the expenditure is incurred for purposes for which amounts in any of the unrestricted classifications of fund balance could be used, the City considers committed amounts to be reduced first, followed by assigned amounts and the unassigned amounts.
Surplus
Since a surplus of unassigned fund balance does not represent a recurring source of revenue, it shall not be used to fund a recurring expense; however, the surplus may be appropriated for use to fund a onetime expenditure or use not already funded through an appropriation. If it is determined there is an operating surplus, the City Council may appropriate funds for the following nonrecurring purposes, listed in order of priority:
• Surplus funds may be used to meet the minimum Operating Reserve requirement;
• Any surplus may be transferred to reduce the unfunded pension liability and/or any other unfunded postemployment benefit liabilities;
• If there is short-term debt within the General Fund, the surplus may be applied to reduce, or eliminate, the debt if determined to be advantageous for the City. If a borrowing is scheduled, the surplus may be used to reduce the principal amount the City needs to obtain if determined to be advantageous for the City; and
• Surplus funds may be used for capital improvements and equipment purchases that are not financed with borrowings or other contributions.
Financial Policies - Fund Balance
Replenishment of Reserves
If the Operating Reserve balance established in this policy falls below the minimum required level, the City shall strive to restore it to the minimum required balance by any feasible means, including, but not limited to, adopting a budgetary surplus; applying any cost savings, over-realized revenues, and/or surpluses realized within the applicable fund.
If the Information Technology Reserve, Fleet Replacement Reserve, or Facility Repairs Reserve fall below the 1.0% of annual Consolidated General Fund operating expenditures. The levels will be replenished when surplus funds become available.
These guidelines may be suspended, in whole or part, if financial or economic circumstances prevent meeting any or all of the timelines. These policy guidelines may also be amended by action of the City Council from time to time.
This policy is instituted to provide a measure of protection for the City against unforeseen circumstances and to comply with GASB Statement No. 54. No other policy or procedure supersedes the authority and provisions of this policy.
Enterprise Fund Reserves
Reserves for Enterprise Funds – Water and Wastewater (Sewer): Revenues contained in these funds are restricted and may only be used for their described purposes below. In no event will these funds be used to fund general fund services.
• Operating Reserve – The purpose of the Enterprise Fund Operating Reserve is to provide working capital to meet cash flow needs during normal operations and support the operation, maintenance and administration of the utility. This reserve ensures that operations can continue should there be significant events that impact cash flows. The target balance to be maintained is 90 days (25 percent) of the current annual operating expense budget.
• Capital Reserve – The purpose of the Enterprise Fund Capital Reserve is to fund future replacement of assets and CIP projects. The Capital reserves are used to fund the construction of the projects as the projects progress and the funds are expended. The reserve target has been established at $500,000 each for the water and wastewater systems through prior cost of service studies.
Lopez Fund Reserve – The Enterprise Fund Lopez Fund accounts for the revenue and expenditures of the surface water purchases from the County. Revenues are collected through the water rates in sufficient amounts to provide for a transfer of revenue to meet the expenses in the Lopez Fund. A reserve is maintained in the fund at least equal to annual Lopez debt service
Financial Policies – Debt Management
INTRODUCTION
This Debt Management Policy (the “Debt Policy”) was adopted by the City Council on March 13, 2018 with Resolution 4836. This Debt Policy will apply to any debt issued by any public agency for which the City Council acts as its legislative body.
The Debt Policy has been developed to provide guidance in the issuance and management of debt by the City or its related entities and is intended to comply with section 8855(i) of the California Government Code effective on January 1, 2017. The main objectives are to establish conditions for the use of debt; to ensure that debt capacity and affordability are adequately considered; to minimize the City’s interest and issuance costs; to maintain the highest possible credit rating; to provide complete financial disclosure and reporting; and to maintain financial flexibility for the City.
Debt, properly issued and managed, is a critical element in any financial management program. It assists in the City’s effort to allocate limited resources to provide the highest quality of service to the public. The City understands that poor debt management can have ripple effects that hurt other areas of the City. On the other hand, a properly managed debt program promotes economic growth and enhances the vitality of the City for its residents and businesses.
POLICY
1. Findings
This Debt Policy shall govern all debt undertaken by the City. The City hereby recognizes that a fiscally prudent debt policy is required in order to:
• Maintain the City’s sound financial position.
• Ensure the City has the flexibility to respond to changes in future service priorities, revenue levels, and operating expenses.
• Protect the City’s credit-worthiness.
• Ensure that all debt is structured in order in a manner that protects both current and future taxpayers, ratepayers and constituents of the City.
• Ensure that the City’s debt is consistent with the City’s planning goals and objectives and capital improvement program or budget, as applicable.
• Encourage those that benefit from a facility/improvement to pay the cost of that facility/improvement without the need for the expenditure of limited general fund resources.
2. Policies
A. Purposes For Which Debt May Be Issued
The City will consider the use of debt financing primarily for capital improvement projects (CIP) when the project’s useful life will equal or exceed the term of the financing and when resources are identified sufficient to fund the debt service requirements. An exception to this CIP driven focus is the issuance of short-term instruments such as tax and revenue anticipation notes, which are to be used for prudent cash management purposes and conduit financing, as described below. Bonded debt should not be issued for projects with minimal public benefit or support, or to finance normal operating expenses.
Financial Policies – Debt Management
If a department has any project which is expected to use debt financing, the department director is responsible for expeditiously providing the City Manager and the Administrative Services Director with reasonable cost estimates, including specific revenue accounts that will provide payment for the debt service. This will allow an analysis of the project’s potential impact on the City’s debt capacity and limitations. The department director shall also provide an estimate of any incremental operating and/or additional maintenance costs associated with the project and identify sources of revenue, if any, to pay for such incremental costs.
(i) Long-Term Debt. Long-term debt may be issued to finance or refinance the construction, acquisition, and rehabilitation of capital improvements and facilities, equipment and land to be owned and/or operated by the City.
(a) Long-term debt financings are appropriate when the following conditions exist:
• When the project to be financed is necessary to provide basic services.
• When the project to be financed will provide benefit to constituents over multiple years.
• When total debt does not constitute an unreasonable burden to the City and its taxpayers and ratepayers.
• When the debt is used to refinance outstanding debt in order to produce debt service savings or to realize the benefits of a debt restructuring.
(b) Long-term debt financings will not generally be considered appropriate for current operating expenses and routine maintenance expenses.
(c) The City may use long-term debt financings subject to the following conditions:
• The project to be financed has been or will be approved by the City Council.
• The weighted average maturity of the debt (or the portion of the debt allocated to the project) will not exceed the average useful life of the project to be financed by more than 20%, unless specific conditions exist that would mitigate the extension of time to repay the debt and it would not cause the City to violate any covenants to maintain the taxexempt status of such debt, if applicable.
• The City estimates that sufficient income or revenues will be available to service the debt through its maturity.
• The City determines that the issuance of the debt will comply with the applicable requirements of state and federal law.
• The City considers the improvement/facility to be of vital, time-sensitive need of the community and there are no plausible alternative financing sources
(d) Periodic reviews of outstanding long-term debt will be undertaken to identify refunding opportunities. Refunding will be considered (within federal tax law constraints, if applicable) if and when there is a net economic benefit of the refunding. Refundings which are non-economic may be undertaken to achieve City objectives relating to changes in covenants, call provisions, operational flexibility, tax status of the issuer, or the debt service profile.
In general, refundings which produce a net present value savings of at least three (3) percent of the refunded debt will be considered economically viable. Refundings which produce a net
Financial Policies – Debt Management
present value savings of less than three (3) percent or negative savings will be considered on a case-by-case basis, and are subject to Council approval.
(ii) Short-term debt. Short-term borrowing may be issued to generate funding for cash flow needs in the form of Tax and Revenue Anticipation Notes (TRAN).
Short-term borrowing, such as commercial paper, and lines of credit, will be considered as an interim source of funding in anticipation of long-term borrowing. Short-term debt may be issued for any purpose for which long-term debt may be issued, including capitalized interest and other financingrelated costs. Prior to issuance of the short-term debt, a reliable revenue source shall be identified to secure repayment of the debt. The final maturity of the debt issued to finance the project shall be consistent with the economic or useful life of the project and, unless the Council determines that extraordinary circumstances exist, must not exceed seven (7) years.
Short-term debt may also be used to finance short-lived capital projects; for example, the City may undertake lease-purchase financing for equipment, and such equipment leases may be longer than seven (7) years.
(iii) Financings on Behalf of Other Entities. The City may also find it beneficial to issue debt on behalf of other governmental agencies or private third parties in order to further the public purposes of City. In such cases, the City shall take reasonable steps to confirm the financial feasibility of the project to be financed and the financial solvency of any borrower and that the issuance of such debt is consistent with the policies set forth herein. In no event will the City incur any liability or assume responsibility for payment of debt service on such debt.
B. Types of Debt
In order to maximize the financial options available to benefit the public, it is the policy of the City of Arroyo Grande to allow for the consideration of issuing all generally accepted types of debt, including, but not exclusive to the following:
• General Obligation (GO) Bonds: General Obligation Bonds are suitable for use in the construction or acquisition of improvements to real property that benefit the public at large. Examples of projects include libraries, parks, and public safety facilities. All GO bonds shall be authorized by the requisite number of voters in order to pass.
• Revenue Bonds: Revenue Bonds are limited-liability obligations tied to a specific enterprise or special fund revenue stream where the projects financed clearly benefit or relate to the enterprise or are otherwise permissible uses of the special revenue. An example of projects that would be financed by a Revenue Bond would be improvements to a water system, which would be paid back with money raised from the rates and charges to water users. Generally, no voter approval is required to issue this type of obligation but in some cases, the City must comply with proposition 218 regarding rate adjustments.
• Lease-Backed Debt/Certificates of Participation (COP/Lease Revenue Bonds): Issuance of Lease-backed debt is a commonly used form of debt that allows a City to finance projects where the debt service is secured via a lease agreement and where the payments are budgeted in the annual budget appropriation by the City from the general fund. Lease-
Financial Policies – Debt Management
Backed debt does not constitute indebtedness under the state or the City’s constitutional debt limit and does not require voter approval.
• Special Assessment/Special District Debt: The City will consider requests from developers for the use of debt financing secured by property based assessments or special taxes in order to provide for necessary infrastructure for new development only under strict guidelines adopted by the Council, which may include minimum value-to-lien ratios and maximum tax burdens. Examples of this type of debt are Assessment Districts (AD) and Community Facilities Districts (CFD) or more commonly known as Mello-Roos Districts. In order to protect bondholders as well as the City’s credit rating, the City will also comply with all State guidelines regarding the issuance of special district or special assessment debt, as well as any policy required to be adopted under Government Code Section 53312.7.
The City may from time to time find that other forms of debt would be beneficial to further its public purposes and may approve such debt without an amendment of this Debt Policy.
To maintain a predictable debt service burden, the City will give preference to debt that carries a fixed interest rate. An alternative to the use of fixed rate debt is variable rate debt. The City may choose to issue securities that pay a rate of interest that varies according to a pre-determined formula or results from a periodic remarketing of securities. When making the determination to issue bonds in a variable rate mode, consideration will be given in regards to the useful life of the project or facility being financed or the term of the project requiring the funding, market conditions, credit risk and third party risk analysis, and the overall debt portfolio structure when issuing variable rate debt for any purpose. The maximum amount of variable-rate debt should be limited to no more than 20 percent of the total debt portfolio.
The City will not employ derivatives, such as interest rate swaps, in its debt program. A derivative product is a financial instrument which derives its own value from the value of another instrument, usually an underlying asset such as a stock, bond, or an underlying reference such as an interest rate. Derivatives are commonly used as hedging devices in managing interest rate risk and thereby reducing borrowing costs. However, these products bear certain risks not associated with standard debt instruments.
C. Relationship of Debt to Capital Improvement Program and Budget
The City intends to issue debt for the purposes stated in this Debt Policy and to implement policy decisions incorporated in the City’s capital budget and the capital improvement plan.
The City shall strive to fund the upkeep and maintenance of its infrastructure and facilities due to normal wear and tear through the expenditure of available operating revenues. The City shall seek to avoid the use of debt to fund infrastructure and facilities improvements that are the result of normal wear and tear, unless a specific revenue source has been identified for this purpose, such as Gas Tax funds.
The City shall integrate its debt issuances with the goals of its capital improvement program by timing the issuance of debt to ensure that projects are available when needed in furtherance of the City’s public purposes.
The City shall seek to issue debt in a timely manner to avoid having to make unplanned expenditures for
Financial Policies – Debt Management
capital improvements or equipment from its general fund.
D. Policy Goals Related to Planning Goals and Objectives
The City is committed to financial planning, maintaining appropriate reserves levels and employing prudent practices in governance, management and budget administration. The City intends to issue debt for the purposes stated in this Debt Policy and to implement policy decisions incorporated in the City’s annual operating budget.
It is a policy goal of the City to protect taxpayers, ratepayers and constituents by utilizing conservative financing methods and techniques so as to obtain the highest practical credit ratings (if applicable) and the lowest practical borrowing costs.
The City will comply with applicable state and federal law as it pertains to the maximum term of debt and the procedures for levying and imposing any related taxes, assessments, rates and charges.
Except as described in Section 2.A., when refinancing debt, it shall be the policy goal of the City to realize, whenever possible, and subject to any overriding non-financial policy considerations minimum net present value debt service savings equal to or greater than 3% of the refunded principal amount.
E. Internal Control Procedures
When issuing debt, in addition to complying with the terms of this Debt Policy, the City shall comply with any other applicable policies regarding initial bond disclosure, continuing disclosure, post-issuance compliance, and investment of bond proceeds.
The City will periodically review the requirements of and will remain in compliance with the following:
• any continuing disclosure undertakings under SEC Rule 15c2-12,
• any federal tax compliance requirements, including without limitation arbitrage and rebate compliance, related to any prior bond issues, and
• the City’s investment policies as they relate to the investment of bond proceeds.
Whenever reasonably possible, proceeds of debt will be held by a third-party trustee and the City will submit written requisitions for such proceeds. The City will submit a requisition only after obtaining the signature of the City Manager or the Finance Director.
F. Method of Sale
For the sale of any City-issued debt, the City Manager or the Finance Director or designee shall recommend the method of sale with the potential to achieve the lowest financing cost and/or to generate other benefits to the City. Potential methods of sale include:
• A competitive bidding process through which the award is based on, among other factors, the lowest offered true interest cost
• Negotiated sale, subject to approval by the City to ensure that interest costs are in accordance with comparable market interest rates
• Private placement sale, when the financing can or must be structured for a single or limited number of purchasers or where the terms of the private placement are more beneficial to the City than either a negotiated or competitive sale
Financial Policies – Debt Management
G. Waivers of Debt Policy
There may be circumstances from time to time when strict adherence to a provision of this Debt Policy is not possible or in the best interests of the City and the failure of a debt financing to comply with one or more provisions of this Debt Policy shall in no way affect the validity of any debt issued by the City in accordance with applicable laws.
FIVE-YEAR FINANCIAL FORECAST
Five-Year Financial Forecast
INTRODUCTION
The General Fund is the City’s largest fund and is used to account for the revenues and expenditures that support most services commonly associated with local government, including police, fire, public works, community development, parks and recreation, and administration. The preparation of the Fiscal Year (FY) 2025-26 through FY 2029-30 Five-Year Financial Forecast is one of the first steps in the City’s budget process.
The City of Arroyo Grande’s Forecast is a long-range fiscal planning tool that serves as the framework for the development of the FY 2025-26 and FY 2026-27 General Fund Biennial Budget. The Forecast provides City Council, key stakeholders, and the public information about the City’s financial resources to facilitate discussion and decisionmaking regarding the General Fund budget.
The Forecast is a fiscally conservative, yet realistic, point-in-time estimate of the capacity of the General Fund to pay for both ongoing services and capital needs for the next five years. Because the General Fund is the City’s primary fund and is where most discretionary funds reside, this Forecast does not include other City funds such as the water, sewer, transportation, and park development funds. The Forecast takes into account cost inflation over its five-year timeline while also implementing a “Status Quo” approach to staffing and program levels by projecting costs into the future with no material changes.
As depicted in Table 1 below, the following keys items are highlights of this forecast:
• Projected beginning fund balance of $7.7 million for FY 2025-26;
• $1.6 million higher beginning fund balance than the FY 2024-25 mid-cycle budget update, primarily due to:
• FY 2023-24:
o Revenues higher than estimate by $0.6 million;
o Expenditures lower than estimate by $0.5 million;
• FY 2024-25 Revenues expected to be $0.5 million higher;
• General Fund shortfall projected to an average of $1.4 million annually throughout Forecast;
• Fund balance drops below 15% minimum target by FY 2027-28 and to only 2% by FY 2029-30.
Table 1: Status Quo Financial Forecast
Five-Year Financial Forecast
Analysis of Major Revenues and Expenditures in Forecast Revenues
After an expected modest increase of 0.4% projected for FY 2024-25, revenues are projected to increase 3.2% annually thereafter. Chart 1 shows major revenue projections in the Forecast.
Chart 1: Major Key Revenue Projections
Property Tax
• 40% of General Fund revenue.
• Key drivers: annual increase assessed by the County of up to 2%, home sales, and home prices.
• County Auditor-Controller’s office provided property tax estimates for FY 2024-25 and FY 2025-26.
• Forecast includes growth of 4.25% annually.
Five-Year Financial Forecast
Sales Tax
• 24% of General Fund revenue.
• Key drivers: consumer confidence, unemployment, consumer spending, business retention and development.
• City’s sales tax consultant provided estimates of 1.5% in FY 2024-25 and 2.8% in FY 2025-26.
• Sales tax is projected to grow approximately 3% per year for remaining years of the Forecast.
Transient Occupancy Tax (TOT)
• 7% of General Fund revenue.
• Key drivers: lodging capacity, room rates, and occupancy rates.
• TOT is forecasted to grow 3% annually throughout this Five-Year Forecast
• Forecast does not factor in any increase in room capacity.
Chart 2: Property Tax Revenue Projections
Chart 3: Sales Tax Revenue Projections (General Fund only)
Chart 5 shows the major expenditure categories and projected costs throughout the Forecast period.
Chart 5: Major Expenditure Projections
Salary and payroll taxes are forecasted to increase 4.3% in FY 2024-25 and 3.5% in FY 2025-26. The increase in FY 2025-26 would be 1.1% under the scenario that moved the cost of one additional police officer to Measure O Local Sales Tax funding. For the remainder of the Forecast salaries and taxes are projected to increase 3.5% per year.
The City’s unfunded accrued liability (UAL) is expected to increase 9% annually on average according to projections from CalPERS. Employee benefits are projected to increase on average 4.6% over the Forecast period. Health insurance costs alone account for 85% of all employee benefit costs. Workers’ compensation costs are forecasted to increase 8% per year over the Forecast period.
Five-Year Financial Forecast
After an expected 7.2% decrease in contractual and professional service costs in FY 2025-26, due to the completion of the General Plan update, these costs are expected to increase 2% per year for the remainder of the Forecast. During the period of the Forecast, the cost of services provided by Five Cities Fire Authority is projected to average $4.5 million annually.
General Fund, Measure O, and Measure E Consolidated Five-Year Forecast
Sales tax revenue received from Measures O and E are deposited into separate funds in the City’s financial accounting system. This enhances transparency and allows for more efficient reporting on how these voter-approved tax sources are being spent. However, since sales tax funding from these two measures are designed to be used for programs that are also funded by the General Fund (e.g. public safety and street and road improvements), their budgets should be looked at as a whole when allocation decisions are being made. Table 3 below is a consolidation of all three funds (General, Measure O, Measure E) so the budgetary connection between the funds can be seen more clearly.
The numbers in Table 2 for the General Fund are the same as shown earlier in Table 1. The impact of allocating all Measure E funding to pavement improvement can be seen most clearly in the ending fund balance line for that fund, that shows a zero balance for the entire five-year forecast.
Five-Year Financial Forecast
Table 3 – General Fund, Measure O, and Measure E Consolidated Five-Year Forecast
COUNCIL GOALS
Council Goals
On December 9, 2024, an Arroyo Grande Community Priorities Survey was published. This 4-question online survey was posted on the City website and promoted on social media channels. The survey was open for one month and closed on January 15, 2025. The survey allowed community members to provide input regarding their thoughts on what the top priorities should be for the City over the next 2-3 years. The survey included a combination of multiple-choice and short-response questions.
On February 10, 2025, the City Council held a Goal Setting Workshop focused on priorities for the FY 202527 Budget. The Results of this Goal Setting Workshop were provided to the City Council on March 11, 2025.
The City Council established five (5) major City goals for staff to prioritize for the biennial budget cycle. The goals were established considering the results of the community survey and input from the public and staff. This set of priorities has been used by staff to create work plans and the biennial budget. Here are the five major goals.
Council Goals
Council Goal’ s Work Plans
The budget is built from base operations. Once the base budget is established, work plan budget items are considered. These items include program enhancements, staffing modifications, service modifications, etc., that fit within the City’s goals. The ability to add work plan items changes from year to year and is based on the amount of funding available.
FY 2025-27 City Council Goal's Work Plan
Evaluate opportunities related to City TBID and potential TOT Measure
1.3d Hold study session with City Council and visitor serving accomodations to eliminate TBID
1.3e If directed by Council, issue RFP for consultant to develop a survey and outreach strategy to community for TOT
1.3f Award contract for consultant to survey and develop outreach strategy for TOT
1.3g Conduct public education regarding need for TOT
1.3h Bring TOT measure to City Council for consideration of placing on the November 2026 ballot
Council Goal’ s Work Plans
FY 2025-27 City Council Goal's Work Plan Continued
Council Goal’ s Work Plans
BUDGET OVERVIEW
Overview
The City’s Biennial Budget is a two-year, Council-approved spending plan that is the legal authority for departments to commit financial resources to provide services within the City of Arroyo Grande. The Operating Budget for Fiscal Year (FY) 2025-27 is approximately $111.1 million in expenditures, including operating costs such as salaries, benefits, services, supplies, maintenance, debt service, and capital related items, over the next two fiscal years. The FY 2025-26 Budget is approximately $55.7 million in expenditures, including operating costs such as salaries, benefits, services, supplies, maintenance, debt service, and capital-related items as shown in the consolidated fund summary as shown in Table 1.
The FY 2026-27 Budget is approximately $55.4 million in expenditures, including operating costs such as salaries, benefits, services, supplies, maintenance, debt service, and capital-related items as shown in the consolidated fund summary as shown in Table 2.
Table 1: FY 2025-26 Consolidated Fund Summary
Table 2: FY 2026-27 Consolidated Fund Summary
INTERFUND TRANSFERS
Interfund Transfers
Interfund Transfers represent a transfer of resources from one fund to another fund. The transfer appears as a resource in the fund receiving the transfer and as a budget requirement in the fund that is sending the transfer. The nature of interfund transfers causes revenue and expenditures to be double counted in the citywide budget; however, the inclusion of interfund transfers provides transparency to the performance of individual funds and the subsidies from one City fund to another.
The following schedules of Interfund Transfers show the relationship of operating transfers between funds.
Interfund Transfers
Interfund Transfers
Interfund Transfers
Interfund Transfers
Interfund Transfers
Interfund Transfers
Interfund Transfers
Interfund Transfers
FUND SUMMARIES
CONSOLIDATED SUMMARY – ALL FUNDS
2025-26 Budget
2026-27 Budget
GENERAL FUND
GENERAL FUNDS
This is the primary operating fund of the City, which accounts for resources and services traditionally associated with government. The General Fund provides administrative, financial, police protection, community development, public works, and recreation services to the community and other funds. The General Fund accounts for revenues that have unrestricted uses and are not required legally or by contractual agreement to be accounted for in another fund.
2024-25
LOCAL SALES TAX FUNDS
FUND: 120 MEASURE O-06 LOCAL SALES TAX
This fund accounts for the revenues derived from Measure O 2006 Sales Tax, a local 1/2% sales tax approved by the City's voters in November 2006.
2024-25
2025-262026-27
FUND: 140 MEASURE E-24 LOCAL SALES TAX
This fund accounts for the revenues derived from Measure E 2024 Sales Tax,
tax approved by the City's voters in November 2024.
2024-25
CONSOLIDATED GENERAL FUND
The General Fund is the primary operating fund of the City, which accounts for resources and services traditionally associated with government. The General Fund provides administrative, financial, police protection, community development, public works, fire, and recreation services to the community and other funds. The General Fund accounts for revenues that have unrestricted uses and are not required legally or by contractual agreement to be accounted for in another fund. The City has historically reported on the General Fund separately from the Local Sales Tax Fund, although the City’s auditors traditionally combine this information in the Annual Comprehensive Financial Report (ACFR). There are two Local Sales Tax Funds. Measure O-06 accounts for the revenues derived from the local 1/2% sales tax approved by the City's voters in November 2006. Measure E-24 accounts for the revenues derived from the local 1% sales tax approved by the City's voters in November 2024. To ensure accountability, these measures include provisions requiring the City to publish and distribute an annual report to each household on the revenues and expenditures from the sales tax proceeds. To aid in the collection and reporting of this information, the City has accounted for this fund in a separate account.
CONSOLIDATED
GENERAL FUND REVENUES BY SOURCE
CONSOLIDATED GENERAL FUND
REVENUES TRENDS
Property Tax
Property Tax revenues are estimated to increase by 4.25% in FY 2025-26 and increase by 4.25% in FY 2026-27.
Sales and Use Tax
Sales Tax revenues are estimated to increase by 0.9% in FY 2025-26 and increase by 2.6% in FY 2026-27.
Transient Occupancy Tax
Transient Occupancy Tax revenues are estimated to increase by 3% in FY 2025-26 and increase by 3% in FY 202627.
CONSOLIDATED GENERAL FUND
REVENUES DETAIL
CONSOLIDATED GENERAL FUND
EXPENDITURES BY DEPARTMENT
2025-26 Consolidated G eneral Fund E xpenditures by Department
GENERAL FUND EXPENDITURES SUMMARY
BY DEPARTMENT
GENERAL FUND EXPENDITURE BY OBJECT
SERVICES & SUPPLIES (Continued)
ENTERPRISE FUNDS
ENTERPRISE FUNDS
FUND: 612 SEWER
This fund is used to account for maintenance of sewer lines connecting City residents to the South San Luis Obispo County Sanitation District sewer treatment plant. Money is collected from utility bills paid by customers.
2024-25
FUND: 634 SEWER FACILITY
This fund is used to account for the accumulation of sewer facility revenues to be used in capital improvement projects in the City. Money is collected from development to offset the impacts new development has on the sewer collection system.
FUND: 640 WATER
This fund is used to account for the activities associated with the transmission and distribution of potable water by the City to its users. Money is collected from utility bills paid by customers.
2024-25
FUND: 641 LOPEZ
This fund is responsible for the purchase of water from Lopez Dam. The City has a 50.55% share of the water and expense generated by Zone 3 – County of San Luis Obispo’s Flood Control and Water Conservation District.
2024-25
FUND: 642 WATER
FACILITY
This fund is used to account for the accumulation of water facility revenues to be used in capital improvement projects in the City. Money is collected from development to offset the impacts new development has on the water distribution system.
2024-25
SPECIAL REVENUE FUNDS
SPECIAL REVENUE FUNDS
FUND: 210 FIRE PROTECTION IMPACT FEES
This fund accounts for impact fees collected from developers for the expansion of the existing fire station in order to serve future development.
2024-25
2025-262026-27
FUND: 211 PUBLIC ACCESS TELEVISION
This fund accounts for fees collected from Charter Communications that are restricted for support of public, education, and government access programming and equipment.
2024-25
2025-262026-27
FUND: 212 POLICE PROTECTION IMPACT FEES
This fund accounts for impact fees collected from developers for the expansion of the existing police facility in order to serve future development.
2024-25
FUND: 213 PARK FACILITIES
This fund accounts for the receipts of park-in-lieu fees (Quimby) and grant revenues that are used for construction, park acquisition, and development of park facilities.
2024-25
FUND: 214 PARK IMPROVEMENT
Impact fees collected from developers for park improvements are to be used to maintain the adopted level of service for neighborhood and community parks of 4.0 acres per thousand population. This fund accounts for the receipt and use of these monies.
2024-25
2025-262026-27
FUND: 215 RECREATION COMMUNITY CENTER
This fund accounts for impact fees collected from developers and used for recreation facilities in order to maintain the adopted level of service of recreation/community center facilities of 542 square feet per thousand population.
2024-25
FUND: 216 GRACE LANE ASSESSMENT DISTRICT
This fund accounts for the landscape maintenance within the Grace Lane housing tract. A special benefit assessment is levied on property owners to pay for landscape maintenance expenditures.
2024-25
2025-262026-27
FUND: 217 LANDSCAPE MAINTENANCE DISTRICTS
This fund accounts for the landscape maintenance of parkways within two housing tracts. A special benefit assessment is levied on property owners to pay for landscape maintenance expenditures.
2024-25
FUND: 219 PARKSIDE ASSESSMENT DISTRICT
This fund accounts for revenue derived from annual assessments, which are used to pay the cost incurred by the City for landscape maintenance.
2024-25
FUND: 220 STREETS (GAS TAX)
This fund accounts for receipts and expenditures of money apportioned by the State under Streets and Highway Code. The use of gas tax revenues can only be used to construct and maintain streets, roads and highways. 2024-25
2025-262026-27
FUND: 222 TRAFFIC SIGNALIZATION
FUND: 223 TRAFFIC CIRCULATION
This fund accounts for developer traffic mitigation measure fees charged as a result of an environmental review.
This fund accounts for traffic signalization assessment levied against developments for the future cost of traffic signals. 2025-262026-27
2024-25
FUND: 224 TRANSPORTATION FACILITY IMPACT
This fund accounts for developer impact fees (AB1600 fees) paid to protect the public health, safety, and welfare by maintaining the existing level of public services for existing and future residents within the City of Arroyo Grande. 2024-25
FUND: 225 TRANSPORTATION
This revenue source is provided by the San Luis Obispo County of Government’s (SLOCOG) Local Transportation Fund (LTF). The annual appropriation is restricted to transportation systems, including transit, pedestrian, street and road maintenance.
2024-25
FUND: 226 WATER NEUTRALIZATION IMPACT
The City requires development projects that increase total water consumption in the City to “neutralize” that demand by reducing water consumption in existing development by an equivalent amount or by paying a fee in-lieu of performing water consumption reductions. This fund accounts for the amount collected from de velopers and is used towards the City’s water conservation efforts.
2024-25
FUND: 231 DRAINAGE FACILITY
This fund accounts for impact fees paid by development and are restricted to improving drainage within the City.
2024-25
2025-262026-27
FUND: 232 IN-LIEU AFFORDABLE HOUSING
This fund accounts for monies paid by developers in meeting the City's mandatory affordable housing requirements.
2024-25
FUND: 233 IN-LIEU UNDERGROUND UTILITY
This fund accounts for monies paid by developers in meeting the City's underground utility requirements.
2024-25
2025-262026-27
FUND: 240 TOURISM BUSINESS IMPROVEMENT DISTRICT
The purpose of the Tourism Business Improvement District (TBID) is to provide projects, programs and activities that benefit lodging businesses located and operating within the City of Arroyo Grande. A two percent (2%) assessment is l evied on all lodging businesses of the rent charged by the operator per occupied room per night for all transient occupancies. Revenue collected is used to promote the lodging industry within the City.
2024-25
FUND: 241 WATER AVAILABILITY FUND
Pursuant to the provisions of Section 38743 of the Government Code, water availability charges is a “special charge” which is levied to each parcel of property not served with city water. These charges are restricted for the sole purpose of expanding water supply such as desalination plant, recycled water, scalping plant, etc.
2024-25
FUND: 250 CDBG GRANT FUND
This fund accounts for revenues and expenditures related to Community Development Block Grant (CDBG) Funds. The program is a flexible program that provides the City with resources to address a wide range of unique community development needs.
2024-25
FUND: 271 STATE COPS BLOCK GRANT
This fund accounts for the receipt and use of monies from the State of California restricted to the purchase of police equipment and technology for crime prevention.
2024-25
2025-262026-27
Expenditures:
AGENCY FUNDS
AGENCY FUNDS
FUND: 286 SUCCESSOR AGENCY TO THE FORMER REDEVELOPMENT AGENCY
This private-purpose trust fund was created to hold the assets of the former redevelopment agency of the City of Arroyo Grande until they are distributed to other units of state and local government after the payment of enforceable obligations have been made.
2024-25
FUND: 287 SUCCESSOR AGENCY TO THE FORMER REDEVELOPMENT AGENCY - HOUSING FUNCTION
This private-purpose trust fund was created to hold the housing assets of the former redevelopment agency of the City of Arroyo Grande until they are distributed to other units of state and local government after the payment of enforceable obligations have been made.
2025-262026-27
FUND: 751 DOWNTOWN PARKING
This agency fund collects assessments from Arroyo Grande Village merchants for the maintenance of the Village parking lots for the Downtown Village Merchants Association.
2024-25
CITY STAFFING AND PERSONNEL COSTS
City Staffing
Number of City FTE Positions: Staffing resources are an integral part of the City’s two-year budget. The current number of budgeted permanent full time equivalent (FTE) positions in FY 2025-26 and FY 202627 is 88.3. The FY 2025-26 and FY 2026-27 budgeted FTEs are the same as the FY 2024-25 budget.
PERSONNEL CHANGES
Staffing levels for FY 2025-26 and FY 2026-27 reflect no change compared to FY 2024-25 in total FTEs. However, there were three position reclassifications. One reclassification of the Records Clerk/Property & Evidence Clerk to a Supervisor within the Police Department. This reclassification will provide an additional level of supervision for the non-sworn police personnel. The Supervisor will oversee the Police Cadet, Police Service Technician (PST), and Records Clerk.
Two reclassifications are within the Engineering division. The first is a reclassification of the Engineering Inspector to Assistant Engineer. There is no budget impact associated with this shift, as the positions are within the same salary range. The Engineering Inspector can provide Inspections and other tasks, but not all of the Assistant Engineer's duties. However, the Assistant Engineer position can complete Engineering Inspections. The second reclassification is to reclassify the unfilled Assistant Project Manager to an Engineering Technician position. This would streamline the Engineering Division’s succession planning, add engineering capacity, and help deliver the large-scale Capital Improvement Projects that were adopted in the 10-Year CIP Budget.
A summary of FTEs by Department is provided in the following chart and tables.
Personnel Summary
Comparative Budgeted Staffing Levels FY 2022-23 through FY 2026-27
Personnel Summary
Personnel Summary
Soto Sports Complex
Personnel Costs
PERSONNEL COSTS
Personnel costs: Salary and benefit summaries are provided in the following tables and can also be found in the Departments section of this document.
Employee Compensation and Benefits: There are two union-represented groups in the City: the Police Officers Association (POA) for sworn and non-sworn "Safety Police" employees; and Service Employees International Union (SEIU), Local 620, for "Miscellaneous" (all other represented) employees. The remaining, non-represented employees include City Manager, management employees, midmanagement/professional employees, and supervisory/technical employees. Employees receive a wide range of benefits, including (California Public Employees’ Retirement System) (CalPERS) retirement; medical, dental, vision, and life insurance; vacation, holiday, sick, and administrative leave; deferred compensation, employee assistance program, flexible benefits, and tuition reimbursement. Each Memorandum of Understanding with the bargaining units defines the benefit details for each job classification and can be found on the City’s website.
Personnel Costs
DEPARTMENT BUDGET DETAIL
Department Budget Detail
OVERVIEW
Department budget details include the following information for each applicable City department:
• Department Introduction: Outlines a brief overview of a department’s purpose, responsibilities, and core functions.
• Department Purpose and Services and Structure:
o Department Purpose provides a concise summary of why the department exists and the role it plays within the organization.
o Services and Structure section describes the key functions, programs, and organizational makeup of the department.
• Significant Accomplishments: The significant accomplishments section of a budget book highlights a department’s notable achievements from the prior fiscal year. It showcases how resources were used effectively and communicates the impact of the department’s work.
• Performance Measures: Metrics used to evaluate how effectively a department is achieving its goals and delivering service.
• Department Work Plans: Outlines the specific goals, initiatives, and major projects a department intends to carry out during the fiscal year. It links the department’s day-to-day operations to the city’s strategic priorities.
• Division/Program Budgets and Personnel Complement:
o Division/Program Budgets provides schedules of the budget included expenditures by Program, Expenditures by Category and Funding Source.
o Personnel Complement outlines the authorized staffing levels for a department or division.
CITY ADMINISTRATION
City Administration
INTRODUCTION
Cities are a deliberate democratic choice to provide enhanced local public services above and beyond what the State can supply through the legislature and the County Board of Supervisors. In order to effectively operate business functions, the City of Arroyo Grande’s administrative functions are organized into three departments (City Administration, Legislative and Information Services, and Administrative Services) that are the core of an effective government structure.
The City Council
Your City government is entrusted to five elected officials that serve as the City Council – A Mayor, elected every two years, and four City Council Members elected to represent one of four electoral districts every four years on staggered election schedules. These five elected officials make all policy decisions for the City. The Mayor is the ceremonial head of the City and is equal to the other City Council Members when it comes to power to make policy. In addition to interacting with the community and preparing for and attending City Council meetings, all City Council Members also serve on other government bodies such as the South San Luis Obispo County Sanitation District, Five Cities Fire Authority, the Air Pollution Control District, and the Integrated Waste Management Authority. City Council Members receive a small stipend to cover minor expenses of office, offered health insurance, and are enrolled in a non-CalPERS retirement plan.
City Manager
The City Manager is responsible for providing information and recommendations to the City Council, implementing Council policies and programs as well as managing the day-to-day operations of the City. It is the lead department charged with overseeing the implementation of the Major Council Goals.
City Attorney
The City Attorney is a professional specializing in the area of Municipal Law. The City Council appoints a City Attorney to whom it turns for legal advice. The City Attorney attends Council meetings to advise on points of law and to ensure that all proper procedures are maintained. The City Attorney also provides legal advice and represents the City Council, City Manager, City Departments, and other City Boards and Commissions on legal matters. The City Attorney is responsible for drafting ordinances, reviewing contracts, and prosecuting municipal code violations.
Retiree Health
This program accounts for the City’s obligations to retirees for post-employment benefits other than pensions. The City provides health contributions for retirees who have met specific criteria related to years of service.
City Manager
PURPOSE
Support the City Council in carrying out the community’s vision by identifying policy issues, analyzing and recommending solutions to those issues, implementing the Council’s direction, and managing the operation of the organization.
SERVICES AND STRUCTURE
The City Manager’s Office consists of the following programs:
City Management
Provide citywide leadership and coordination to the City organization; provide policy development support for the City Council; implement economic development initiatives; and represent the City's interests in local and regional issues.
Human Resources
Develop, implement, and support programs and processes that add value to the City and its employees; ensure organizational compliance with employment laws and regulations; coordinate employee training and development; and develop policies and procedures to ensure a safe and welcoming workplace.
FY 2024-25 SIGNIFICANT ACCOMPLISHMENTS
• Completion of a contract with the County of San Luis Obispo to provide fire services to Oceano through the Five Cities Fire Authority
• Facilitated Council goal-setting process, as well as updates on current Fiscal Year (FY) goals
• Development of coordinated work plan process to implement Council goals for FY 2023-25
• Completed a comprehensive Risk Management Evaluation to identify priority areas to minimize liability exposure
• Implemented a new Human Resources Management system in Tyler Munis, including Payroll, Time & Attendance, Position Control, and Employee Self-Service
• Conducted an Organizational Assessment to assess current staffing structure, service delivery, and recommended process improvements
• Offered a Supervisory Training Program to equip supervisors with foundational leadership and communication skills to effectively motivate their teams
• The City Council supported the County of San Luis Obispo rejoining the Integrated Waste Management Authority through the approval of the Second Amended and Restated Joint Powers Agreement.
• The City Council authorized additional use of the Affordable Housing Trust Fund in support of 63 affordable housing units at 700 Oak Park Boulevard.
• Obtained a $10,000 grant from the Integrated Waste Management Authority to install water filling stations at three City locations.
• Appropriated $300,000 in American Rescue Plan Act (ARPA) Funds for Homeless Support Services
• Received confirmation from the Council to proceed with a Buy Local Program administered by the South County Chamber of Commerce to mitigate impacts from the Traffic Way Bridge Reconstruction project
City Manager
PERFORMANCE MEASURES
1 Average Time to Fill Vacant Positions
2
3
4 Number of surveys administered through FlashVote to engage the community and gather feedback.
FY 2025-27 DEPARTMENT WORK PLAN
Strategic Goal Task/Action City Manager's Office
° Participate in FCFA Management Committee
° Implement recommendations of Raftelis Organizational Assessment
° Continue coordination with 5Cities Homeless Coalition regarding community needs
1.3c Evaluate opportunities related to City TBID and potential TOT Measure Standard Operations
° Secure funding for lobbying services and begin State advocacy; work with lobbyist on policies and bills that impact City operations
° Work with the South County Chamber of Commerce on a "Buy Local Program" during the Traffic Way Bridge Replacement Project
° Continue the review and update of old administrative policies
° Develop City’s first legislative platform to inform lobbying services
1.1a 400 W. Branch Disposition and Development Agreement
1.1c Develop an Economic Development Program
1.2a Evaluate cannabis operations that bring in revenue
1.2b Conduct study session with the City Council regarding potential cannabis ordinance development agreement
1.2d Prepare and adopt cannabis ordinance, if directed by the City Council
1.2e Evaluate feasibility of a Cannabis Tax, if directed
1.3a Work on changes to TBID ordinance for expanded use of TOT funds
1.3b Bring changes to TBID assessment and ordinance to Council for approval
City Manager
Strategic Goal Task/Action
City Manager's Office
Human Resources
1.3d Hold study session with City Council and visitor serving accomodations to eliminate TBID
1.3e If directed by Council, issue RFP for consultant to develop a survey and outreach strategy to community for TOT
1.3f Award contract for consultant to survey and develop outreach strategy for TOT
1.3g Conduct public education regarding need for TOT
1.3h Bring TOT measure to City Council for consideration of placing on the November 2026 ballot
2.1a Meet with Department of Public Works at the County of San Luis Obispo to begin discussion surrounding purchasing some allocated State Water
2.1b If directed by Council, Issue an RFP for a Consultant to evaluate feasibility of State Water Ballot Measure
2.1c Award bid to consultant and begin public outreach and community messaging regarding a potential State Water Ballot Measure
2.1d Seek Council approval on placing a November Ballot Measure
2.2a Identify opportunities and constraints associated with new Water Sources
2.2b Support ongoing development and financing of regional water solution
2.3a Preserve Lopez water supply by working with the County on Lopez litigation
° Complete HRM Implementation
° Update Job Descriptions in preparation for Classification and Compensation Study
° Conduct RFP and launch Classification & Compensation Study
° Conduct Open Enrollment through Munis
° Negotiate Successor MOU with SEIU
° Negotiate Successor MOU with POA
° Revamp Performance Management System
° Recruit and onboard the City’s next Chief of Police
° Track and report vacancies in compliance with AB 2561
° Ressurect Safety Committee and address items found in site assessments during the Workplace Violence Prevention plan inspections
City Manager
City Manager
CITY MANAGER OFFICE ORGANIZATIONAL CHART
Legislative & Information Services
PURPOSE
At the heart of our mission is a deep commitment to serve the public, City Manager, City staff, and City Council. We strive to protect the democratic process by building a foundation of trust and confidence through transparency, openness, and community involvement. We are dedicated to ensuring the careful preservation and easy accessibility of official documents and legislative history. Our goal is to deliver services that are not only efficient and professional, but also marked by genuine courtesy and respect.
SERVICES AND STRUCTURE
The Legislative & Information Services Department consists of the following programs:
City Clerk
The City Clerk is the local official who administers democratic processes, such as elections, access to City records, and all legislative actions, ensuring transparency to the public. The City Clerk also attests, seals, and/or certifies official documents; receives and files petitions, subpoenas, and summons. The City Clerk serves the City Council, City Manager, City staff, and the public.
Public Information
The Director of Legislative & Information Services/City Clerk also serves as the City's Public Information Officer (PIO). The department is responsible for providing public information through various media such as online, print, social media, and a Mobile app. The department is the webmaster for the City website and Mobile app, "My AG." Staff are also responsible for the City's social media accounts and the City newsletter, Arroyo Grande Gazette.
FY 2024-25 SIGNIFICANT ACCOMPLISHMENTS
• Administered the November 5, 2024, Municipal Election
• Coordinated education efforts for Transaction & Use Tax Measure, Measure E-24
• Assisted with the Council Chamber AV Upgrade Project, transitioned to automated public meetings, and developed best practices for all City legislative bodies
• Conducted extensive public outreach for the Traffic Way Bridge Replacement Project
• Implemented an ADA web accessibility tool on the City’s website
• Issued 4 more issues of the City newsletter – the Arroyo Grande Gazette
• Developed a City Seal, City Logo, and Police Badge Policy
• Implemented modern, paperless processes, including paperless Municipal Code Supplements and legislative action recordkeeping for greater internal efficiencies and cost savings
• Completed a comprehensive update of the City’s Records Retention Schedule
Legislative & Information Services
PERFORMANCE MEASURES
1 Percentage of Legal Notices published within established timelines
2 Percentage of Public Records Act Requests Processed within required timeframes
5
*This number of spotlights is higher due to extensive communication efforts for the Traffic Way Bridge Replacement Project
FY 2025-27 DEPARTMENT WORK PLAN
Strategic Goal Task/Action
Legislative and Information Services
State Mandate Standard Operations
Pursue New Revenue Sources
° In-house Ethics Training for Officials and Staff
° 2026 General Municipal Election
° City Website Refresh
° City Website ADA Updates
° Traffic Way Bridge Project Communications
° Implement Freedom of Information Act (FOIA) System
° Develop Brand Guidelines
° Implement LaserFische Records Management Module
° Complete Permanent Records Scanning Project
° Replace City Hall Bulletin Board
1.2b Conduct study session with the City Council regarding potential cannabis ordinance
1.2c Conduct study session with the City Council regarding potential cannabis development agreement
1.3a Work on changes to TBID ordinance for expanded use of TOT funds
1.3b Bring changes to TBID assessment and ordinance to Council for approval
1.3c Evaluate opportunities related to City TBID and potential TOT Measure
1.3d Hold study session with City Council and visitor serving accomodations to eliminate TBID
Legislative & Information Services
Strategic Goal
Pursue New Revenue Sources
Task/Action
1.3e If directed by Council, issue RFP for consultant to develop a survey and outreach strategy to community for TOT
1.3f Award contract for consultant to survey and develop outreach strategy for TOT
1.3g Conduct public education regarding need for TOT
1.3h Bring TOT measure to City Council for consideration of placing on the November 2026 ballot
2.1b If directed by Council, Issue an RFP for a Consultant to evaluate feasibility of State Water Ballot Measure
Achieve Water Resilience
East Grand Avenue Corridor Redevelopment (Halcyon Road to Elm Street)
2.1c Award bid to consultant and begin public outreach and community messaging regarding a potential State Water Ballot Measure
2.1d Seek Council approval on placing a November Ballot Measure
5.2b Public Outreach
LEGISLATIVE AND INFORMATION SERVICES ORGANIZATIONAL CHART
Legislative & Information Services
Personnel Complement
Administrative Services
PURPOSE
Provide accurate and timely financial and accounting information through the maintenance of appropriate financial systems and effective internal controls to promote the City’s fiscal accountability. To engage in a partnership with the departments to provide technical guidance in an effective, strategic, and fiscally responsible manner for all technology initiatives.
SERVICES AND STRUCTURE
The Administrative Services Department consists of the following programs:
Financial Services
The Financial Services Division manages the City's financial systems by providing accurate and timely actions and information to City Council, operating departments, and the public. Policies, record keeping, and reporting are carried out in compliance with generally accepted accounting principles and all applicable laws and regulations. Areas of responsibility include utility billing, cash receipting, accounts payable, payroll, budgeting, business licensing, and non-departmental charges that are not directly related to a specific department.
Information Technology
The Information Technology (IT) Division handles all centralized and many decentralized City technology services, facilitating the City's ability to deliver effective and efficient service to the public. IT staff perform maintenance and upgrades of the City's IT network system, ensures network security, supports multiple software applications, manages the Citywide IT replacement program purchases, provides technical support to City staff members, and completes research and planning for new technology solution.
FY 2024-25 SIGNIFICANT ACCOMPLISHMENTS
• Completion of the Phase I - Financial implementation of Enterprise ERP Financials (Munis) 07/01/2025
• California Society of Municipal Finance Officers (CSMFO) award for Operating Budget for the City’s FY 2023-25 Biennial Budget
• GFOA Distinguished Budget Presentation Award for the City’s FY 2023-25 Biennial Budget
• Updated Solid Waste Rates
• Completed RFP and selected Auditing Firm
• Updated the Measure O-06 Local Sales Tax Measure Annual report
• Collaborated with City Departments to ensure effective allocation, timely utilization, and accurate accounting of the American Rescue Plan Act (ARPA) funding.
• Successfully implemented GASB 96, establishing new accounting and reporting standards for subscription-based information technology arrangements.
• Completed the Public Safety Camera System Project
• Completed the Chamber AV System Upgrade Project
• Completed the Phone System Upgrade Project
• Completed EOC Upgrade at PD
• Completed PD CAD Update
• Assisted PD with MDC Deployment in new Police Fleet
Administrative Services
1 Complete ACFR 180 days after close of fiscal year
3
4
Administrative Services
Strategic Goal Task/Action
° Complete Payroll Impementation of Munis conversion
Standard Operations
° Utility Billing Munis conversion
° Finalize 2025 ACFR by 12/31/25
° Mid-Cycle FY 2026-27 Budget Update
° Finalize 2026 ACFR by 12/31/26
° Provide 5-Year Review of Measure O-06 Local Sales Tax
° FY 2027-29 Budget Preparation
Pursue New Revenue Sources1.2e Evaluate feasibility of a Cannabis Tax, if directed
Prioritize Key Infrastructure Projects3.2a Pursue Grant applications and administration for infrastructure projects
Achieve Water Resilience
2.2c Conduct a water and wastewater rate study to adjust rates based on changes to water supply and changing or new regional partnerships
Administrative Services
2024-25
PUBLIC WORKS
Public Works
PURPOSE
The City of Arroyo Grande Public Works Department provides high-quality, cost-effective services that ensure that the design, construction, maintenance, and operation of public infrastructure, facilities, and services are responsive to the needs of residents, visitors, businesses, and other City departments.
SERVICES AND STRUCTURE
The Public Works Department consists of the following programs:
Emergency and Day-to-Day Demands
Staff respond to emergency events such as storms and resulting flooding, etc. After traffic accidents, staff facilitate street closures and debris cleanup. In addition, the Department repairs and fills potholes, installs red curbs and street signs, and maintains all street and traffic lighting. The Department responds to fallen trees or branches within the City limits and also facilitates homeless encampment posting and cleanup. Staff respond to facility maintenance requests, such as electrical, plumbing, pest control, or other safety issues and collect and dispose of trash within the City limits.
Facilities Maintenance
Staff conduct all maintenance activities at City Facilities, such as AC/heating maintenance, office painting, moving and assembly of office furniture, trash and sanitization of offices and restrooms, and landscape maintenance. The Department also maintains all Public Use facilities such as the Woman’s Club, Recreation building, park facilities, including gazebos, BBQs, and picnic tables, and public restrooms, including plumbing repairs, graffiti removal, vandalism repair, maintenance, stocking, and sanitization
Annual Pavement Management Plan/Street Repairs Program
Each year, the Department identifies street segments that require certain maintenance treatments. The intention of this is to perform slurry seal, overlays, and digout repairs to slow the deterioration and avoid near-term reconstruction. In addition to the treatments mentioned above, the Program proposes to include refreshing existing traffic striping and pavement markings on certain arterial streets.
Annual Concrete Repairs Program
Each year, staff identify damaged sidewalks requiring repair to mitigate the potential for trip and fall hazards located in the public right-of-way, with a priority focus on commercial areas, high pedestrian traffic areas, and safe routes to schools. Sidewalk gaps are also evaluated for cost and connectivity, and curb ramp improvements are included to the extent possible.
Annual Storm Drain Maintenance Program
The City’s storm drain maintenance program includes debris removal in the City’s 517 storm drain inlets and outfalls. All maintenance is in preparation for storm events, compliance with MS4 permits, and allowing drainage to function as designed. This also includes maintenance of all 8 City -owned drainage and retention basins and other drainage facilities.
Annual Soto Sports Complex Annual Field Maintenance Program
Annually, the Department conducts hydro seeding and turf maintenance as well as infield and outfield dirt improvements. Staff manage all irrigation maintenance, fence repairs, and field lighting maintenance.
Public Works
Annual Vegetation Maintenance Program
Staff conduct annual street, parks, and open space tree and shrub trimming, removal, and planting, hazardous fuels vegetation management at development and interfaces (i.e. Ocean Oaks Condos), as well as turf management at parks. The City has received USA accreditation as a Tree City.
Sewer Lift Station Maintenance
All five (5) sewer lift stations are cleaned along with 10 check valves. This maintenance program helps ensure trouble free operation of these stations.
Water Conservation Programs
Cash for Grass projects, Washing Machine Rebates, and Home Water Audits are provided as part of the City’s Water Conservation Program. Home water audits help our customers make changes in their current water use to help them continue to conserve water
Annual Water System Air/Vacuum Valve Program
All of the City’s 130 Air/Vac valves are cleaned and tested for proper operation. Air and vacuums formed in the pipeline can have serious effects on the operation of the pipeline like pipe failure, pressure build and vibration. Air/Vacuum valves allow large volumes of air to be exhausted from or admitted into a pipeline as it is being filled or drained.
Annual Water Audit Program
The Audit is a requirement from the Department of Water Resources. This detailed audit must be validated by a third party certified by the American Water Works Association.
Fleet, Equipment, and Fuel Management and Coordination
The Department maintains the Citywide fleet, which includes tire and oil changes, brake pads and rotors maintenance, and more complex repairs on equipment. Staff manage the replacement program and surplus vehicles and equipment program (not including Five Cities Fire Authority), including the procurement and bids for new vehicles and equipment. The Department manages fuel purchasing, pump system and fuel dispenser system maintenance, and annually reviews the San Luis Obispo County Air Pollution Control District Permit.
Engineering
The Engineering Division is responsible for the City’s long-term infrastructure, including projects for repair or improvement of existing infrastructure, as well as ensuring that new infrastructure, including infrastructure built by new development, meets the City’s standards.
FY 2024-25 SIGNIFICANT ACCOMPLISHMENTS
• Oak Park Boulevard and El Camino Real drainage repair
• Implementation of water conservation programs and preparation of a Resolution rescinding the declaration of Stage 1 Water Shortage Emergency and related restrictions and penalties
• Approval of both the Pavement Management Plan and Concrete Repairs Programs
• Safe, responsive, and coordinated response to the winter 2024 storm emergencies
• Storm-related debris removal projects in AG Creek
• Pavement Maintenance on 17.7 miles of road
• Finished rehabilitation of Swinging Bridge
Public Works
• Completed design and right-of-way acquisition for Traffic Way Bridge Replacement Project
• Completed frontage improvements at 191 Tally Ho
• Replaced water main on Fair Oaks Avenue and Cornwall Street
• Completed trenchless repair of sewer lines across Highway 101 and through Arroyo Grande Cemetery
• Began design of Halcyon Complete Streets
• Replaced 3,500 feet of 8” diameter 1929 cast iron water main along with 56 water services
• Replaced 305 water meters
• Completed the required Lead Service Line Inventory and submitted to the State Water Resources Control Board
• Replaced 50 galvanized pipe water services
• Completed Annual flushing program
• Cleaned 32 miles of sewer main
• Lined 450 feet of 8” cast iron sewer main under HWY 101
• Lined 600 feet of sewer main located in AG Cemetery
PERFORMANCE MEASURES
1 Pavement
2 Pothole
4 Storm Drain Inlet inspection and maintenance 517 inlets
FY 2025-27 DEPARTMENT WORK PLAN
inlets
inlets
inlets
Strategic Goal Task/Action
Public Works
Standard Operations
° Develop and implement a sidewalk repair program
° Begin implementing the 13-year pavement improvement program
° Negotiate Golden State Interconnect
° Establish an on-call trades list
° Update City Engineering Standards
° Update City construction agreement
° Radar Speed survey 5-year extension
° Develop Asset Management progam
° Sidewalk repairs
° Pothole and roadway repairs
° Storm drain maintenance
° Road signage and striping repairs
° Landscape projects including the Oak Park Traffic Median
PUBLIC WORKS DEPARTMENT ORGANIZATIONAL CHART
Public Works
Public Works
Personnel Complement Continued
2024-25
COMMUNITY DEVELOPMENT
Community Development
PURPOSE
The Community Development Department is dedicated to promoting a diverse and equitable city while maintaining the City's unique environment and character, and balancing economic opportunities through effective land use planning and development review processes.
SERVICES AND STRUCTURE
The Community Development Department works toward its mission through three divisions staffed by highly specialized professionals:
Planning Division
Professional planners develop new long-range plans and programs for the development or redevelopment of the City based upon the ever-changing needs and wants of the community to enhance the quality of life for everyone who lives, works, and plays in Arroyo Grande. This includes: land use, circulation, housing, economic development, agriculture, and open space stewardship.
Professional planners review proposed development projects to ensure they are designed and will function according to the adopted plans of the community. By doing so, new developments must meet high standards.
Building and Life Safety Division
The State of California mandates that virtually all buildings and structures be constructed to very detailed building codes to reduce death, injuries, and damage from improperly designed and constructed buildings, and fires, earthquakes, and other natural disasters. The California Building Codes also incorporate many regulations to achieve State public policy goals such as disabled access and energy conservation. The Division also reviews project plans, issues permits and provides inspection services for compliance with City ordinances, fire and life safety codes, International Property Maintenance Code and works closely with the Community Services Specialist for code compliance.
Community Services Division
The Community Services Specialist (CSS) conducts code enforcement for the City. The CSS performs a wide variety of tasks such as providing information, educating the public, and conducting appropriate investigations. The CSS investigates alleged violations generated by observation or public complaints to ensure compliance with regulations in the Arroyo Grande Municipal Code.
The code enforcement aspect also includes the enforcement of regulations related to temporary signs and banners; abandoned, junk, or inoperable vehicles; unauthorized living in recreational vehicles; grossly unreasonable accumulations of garbage, trash, or any other material that creates an unsafe or unhealthy condition for the neighborhood or the public in general.
FY 2024-25 SIGNIFICANT ACCOMPLISHMENTS
• Adoption of Irrigated Turf Ordinance
• Adoption of Emergency Shelter Ordinance
• Adoption of Halcyon Complete Streets Plan
• Corbett Canyon Stream Restoration CUP
• Arroyo Grande Stream Gauge CUP
• New Building Services Consultant Agreement
• Adoption of Formula Business Ordinance
Community Development
• Completion of the Active Transportation Plan
• Adoption of Revised Public Art Guidelines
• Adoption of Housing Element Programs Ordinance
• Adoption of Telecommunications Ordinance
• Continued Comprehensive General Plan Update
o Completion of Existing Conditions and Trends Workbook
o Completion of Vision Statement and Guiding Principles
o Completion of Land Use Scenarios
PERFORMANCE MEASURES
Measure
1 Building Permits Reviewed within 15 days
2 Percent of potential code enforcement cases with investigation initiated within 7 business days
3 Percent of discretionary permits with initial completeness review within 30 days
FY 2025-27 DEPARTMENT WORK PLAN
Strategic Goal
Task/Action
° Community Services Grants
° Climate Action Plan Update
° Development Code Update
° Ordinance Clean-up
° 2025 Building Code Update
° Arroyo Grande Hospital CUP and EIR
° Meadowbrook Apartments CUP
° CDBG program
° SB 1383 Enforcement
Community Development
Strategic Goal Task/Action
1.1a 400 W. Branch Disposition and Development Agreement
1.2a Evaluate cannabis operations that bring in revenue
Pursue New Revenue Sources
Implement Road and Sidewalk Improvements
Complete General Plan Update
1.2b Conduct study session with the City Council regarding potential cannabis ordinance
1.2c Conduct study session with the City Council regarding potential cannabis development agreement
1.2d Prepare and adopt cannabis ordinance, if directed by the City Council
1.2e Evaluate feasibility of a Cannabis Tax, if directed
3.2a Pursue Grant applications and administration for infrastructure projects
4.1a Retail Market Analysis
4.1b Market Demand Studies
4.2a Land and Safety Analysis
4.2b Administrative Draft
4.3a Complete draft EIR
4.3b Complete final EIR
4.4a Kick off code update
4.4b Bring code changes to Planning Commission for approval
4.4c Bring draft Ordinance of code revision update to Council
4.5a Kick off CAP and research
4.5b Admin Draft
4.5c Final CAP
Land Use Designation Map
Workshops: Small Business/Economic Development; Environmental Justice; Draft General Plan Elements
5.1a Define scope, research other communities
5.2a Kick Off
East Grand Avenue Corridor Redevelopment (Halcyon Road to Elm Street)
5.2b Public Outreach
5.3a Environmental Review
5.4a Administrative Draft Plan
5.5a Final Draft
5.5b Planning Commission Hearings
5.5c City Council Hearings
Community Development
COMMUNITY DEVELOPMENT DEPARTMENT ORGANIZATIONAL CHART
Community Development
2024-25
PUBLIC SAFETY
Police Department
INTRODUCTION
Keeping people safe is a core element of City services. In addition to the City’s efforts to avoid unsafe conditions, the City also provides services that quickly respond when needed.
POLICE DEPARTMENT
PURPOSE
The purpose of the Arroyo Grande Police Department is to maintain public peace, safeguard lives and property, and provide for a quality of life whereby those persons within the City of Arroyo Grande have a sense of security and freedom in their daily activities. To achieve these ends, the Arroyo Grande Police Department will maintain the capability to provide a superior level of law enforcement and related services that are appropriate and timely. Specifically, the Arroyo Grande Police Department will maintain a viable proactive organization that recognizes and effectively responds to current and future community needs and maximizes the available resources, personnel, and technology.
SERVICES AND STRUCTURE
The Police department is responsible for maintaining public order and safety, enforcing the law, and preventing, detecting, and investigating criminal activities.
The Police Department is led by a Chief of Police and is supported by two Commanders who oversee two divisions: Support Services and Patrol Services. Support Services consist of investigations, Police Service Technician, records, property, traffic bureau, and evidence, youth cadet program and School Resource Officer. Patrol Services consists of patrol operations, regional SWAT, field training program, communication and dispatch MOU.
The Police Department operates the following programs:
Support Services Program
Support Services facilitates Crime prevention education, homeless outreach, neighborhood watch programs, tobacco compliance, and planning for special events.
Patrol Services Program
Patrol Services facilitates directed traffic enforcement, DUI grants, Sex Offender registration, probation and warrant sweeps, high-risk operations, emergency services, and military surplus acquisition.
FY 2024-25 SIGNIFICANT ACCOMPLISHMENTS
• Introduced a full-time Police Services Technician dedicated to assisting with non-emergent calls for service, such as crime reports, parking issues, ordinance enforcement, property and evidence, crime scene processing, and traffic collision investigation.
• Successful completion of a Property and Evidence Audit
• Introduced License Plate Reader technology
• Introduced a Public Safety Video camera program
• Updated Emergency Operation Center infrastructure and technology
• Developed standard operating procedures for a shared radio communication structure with the Grover Beach Police Department, enabling faster mutual aid response and support to each agency.
Police Department
PERFORMANCE MEASURES
Measure
1 Total Calls for Service
2 Reduce Crime (# of total Group A Crime by year)**
3 Driving under the influence/ Arrests
4 Total Arrests
*Note numbers are reported by calendar year ** Group A Crimes include: homicide, larceny, rape, assault, arson, robbery, burglary, and vehicle theft.
FY 2025-27 DEPARTMENT WORK PLAN
Police
Strategic Goal Task/Action
State Mandate
Standard Operations
° Continued Mandated Training for Staff
° Complete after action report for wellness grant
° Replace Expired Protective Equipment
° RIPA (Racial and Identity Profiling Advisory) Board Reporting
° Partner with the City of Grover Beach and Pismo Beach to establish a hybrid 5 Cities co-response model with SLO County behavioral health to assist with mental health calls and subjects in crisis.
° Create standard operating procedures for shared radio communication with the Grover Beach Police Department Fill vacant leadership positions due to retirement and vacancies
° Successfully recruit and train two (2) entry-level police officers to fill current vacant positions
Police Department
POLICE DEPARTMENT ORGANIZATIONAL CHART
Police Department
Fire Department – Five Cities Fire Authority
In 2004, the cities of Arroyo Grande and Grover Beach collaboratively entered into an agreement to share one fire chief and training officer. This agreement was expanded over the next several years to include equipment sharing, a consolidation of the reserve firefighter program, and the introduction of "boundary drops," meaning that the closest fire resource would be dispatched to a 9-1-1 call without consideration of community boundary. In 2009, the Oceano Community Services District joined the other communities and on July 9, 2010, a complete fire department consolidation took place, resulting in the creation of the Five Cities Fire Authority (FCFA). As was anticipated in 2010, the communities have increased their demand for service, commercial and residential development projects have continued with multiple projects being three stories in height. As calls for services have increased, so has the cost of providing the service. After two failed revenue measure attempts, the Oceano Community Services District (OCSD) filed an application with the Local Agency Formation Commission (LAFCO) for the Divestiture of Fire Protection Services, with a departure date from the FCFA of June 30, 2023. Accordingly, the cities of Arroyo Grande and Grover Beach executed a new Joint Power Association to continue operating the FCFA. Acknowledging that the divestiture process would likely extend beyond June 30, 2023, the FCFA provided a short-term contract for services with the OCSD that concluded on December 31, 2024. LAFCO approved a Contract for services between the FCFA and the County of San Luis Obispo to serve Oceano, effective December 31, 2024. This contract has a three-year term with two one-year extension options. FCFA responded to 2457 incidents in the City of Arroyo Grande in 2024. This was a 25% increase from the previous year.
FY 2024-25 SIGNIFICANT ACCOMPLISHMENTS
• Initiated the Community Risk Assessment/Standards of Cover/Strategic Plan
• Recruited 5 new Firefighters – First female Firefighter and First Spanish Speaking Firefighter
• Promoted 3 new Fire Engineers
• Promoted 2 new Fire Captains
• Instructor Services Agreement with Allan Hancock College
• Hosted National Fire Academy Leadership and Supervision Course
• Installation of pre-emptive traffic control devices (Spring of 2025)
• Completed the Station Alerting System Upgrades
• Hosted Fire Prevention Week Open House
• Initiated a Cadet program in partnership with the Arroyo Grande Police Department
• Implemented an MOU with Arroyo Grande Police to maintain Fire Investigator firearms certification
• Implemented PS Trax reporting software
• Purchased a new ventilation training prop with Joint Apprentice Committee (JAC) Funds and a Friends of FCFA donation
• Converted Mobile Data Computers to iPads
• Transitioned FCFA to a 2-year budget cycle to align with member agencies
Fire Department – Five Cities Fire Authority
PERFORMANCE MEASURES
1
3
FCFA ORGANIZATIONAL CHART
Fire Department – Five Cities Fire Authority
RECREATION SERVICES
Recreation Services
PURPOSE
To create healthy, sustainable spaces and meaningful experiences that invite people of all ages to play, learn, and connect enhancing well-being, personal growth, and the cultural and economic vibrancy of Arroyo Grande.
SERVICES AND STRUCTURE
The Recreation Services Department consists of the following programs:
Recreation Administration
Implement Council goals and direction; provide leadership of and for the Recreation Services Department; coordinate with other City departments to accomplish goals and objectives; provide high-level customer service to the community (internal and external); and represent the City in non-profit and business partnerships. In FY 2023-24, Recreation Administration assumed responsibility for administering the Tourism Business Improvement District (TBID).
Facilities
Provide and facilitate access to public facilities, including two community centers, public parks, Soto Sports Complex, community gardens, and tennis and pickleball courts; coordinate public requests and develop relationships with external users; organize maintenance and City schedules; administer and collect fees; oversee facility supervision and operations.
Special Events
Plan, develop, and provide opportunities for community engagement, fun, and celebration. Work with local agencies, non-profits, and businesses to enrich the community through historical, cultural, and relevant events.
Volunteer Program
Recruit, train, and oversee volunteers to assist with events, special projects, and City operations. Develop relationships with the community and neighboring agencies to provide continuity and support.
Adult Sports
Coordinate adult basketball and softball sports leagues for the community. Provide relevant active sports opportunities for adults.
Youth Sports
Coordinate the Youth Wrestling program. Provide relevant active sports opportunities for youth.
Special Interest Classes
Contract with instructors to teach exercise, art, and a variety of enrichment classes. Contract with instructors/agencies to provide holiday and summer camps for youth and programs to support health and wellness for the community.
FY 2024-25 SIGNIFICANT ACCOMPLISHMENTS
• Assumed the administration of the Arroyo Grande Tourism Business Improvement District (AGTBID).
• Onboarded new marketing firm and Board members for AGTBID.
• Sponsored and supported regional events contributing to increased hotel occupancy and local revenue.
• Attained the highest level of revenue in special interest classes at over $345,000.
Recreation Services
• Successfully planned and executed over 30 community events annually, including the Summer Concert Series, Holiday Parade, and 4th of July in the Village.
• Reintroduced specialty classes post-COVID, including Zumba (indoors), Senior Fitness, and balance classes.
• Grew the volunteer program to over 680 volunteers, including youth volunteer groups from Cal Poly and Arroyo Grande High School.
• Partnered with two Cal Poly landscape architectural design classes to propose options for Soto Sports Complex and Short Street.
• Recruited and onboarded new staff, including a Recreation Specialist, to support growing program needs and improve service delivery.
• Maintained affordable pricing structures and expanded scholarship offerings in partnership with the South County Youth Coalition to ensure equitable access to programs and services for all Arroyo Grande residents.
• Expanded the Halloween Carnival & Maze to a multi-day event.
• Expanded the Summer Concert Series from July 4th through the weekend before Harvest Festival.
PERFORMANCE MEASURES
Participation (registration in classes, leagues, sports, programs)
Recreation Services
FY 2025-27 DEPARTMENT WORK PLAN
Recreation Services
Strategic Goal
Standard Operations
Task/Action
° Identify a new location for a community center in alignment with the approved Soto Sports Complex Master Plan and in response to the closure of the Mark M. Millis Community Center.
° Implement the Special Events Policy to guide the planning and permitting of community and special events.
Formalize partnerships with 3 additional services organizations or businesses to co-host events or provide in-kind services
° Establish a "Recreation Ambassador" volunteer program to support events and build community pride
° Collaborate in the completion of the City’s General Plan, with a focus on advancing the Parks and Recreation Element to guide long-term planning and investment.
° Implement and utilize tracking mechanism to evaluate economic impact of recreation-led events
° Incorporate water conservation messaging into community events, programs and facility use signage
° Pursue at least two grant applications or partnerships to support recreation infrastructure and park improvements
° Develop and host a shoulder-season signature event in collaboration with AGTBID to drive overnight visitation and increase destination awareness
° Refine the AGTBID sponsorship program to ensure strategic investment in events that yield measurable visitation, align with destination branding, and support TOT growth
° Pursue strategic partnerships to develop a concept and preliminary design for a new community center that meets current and future community needs.
1.1b Develop a Special Event that drives visitation during shoulder and winter months and build destination awareness
1.3a Work on changes to TBID ordinance for expanded use of TOT funds
Pursue New Revenue Sources
1.3b Bring changes to TBID assessment and ordinance to Council for approval
1.3c Evaluate opportunities related to City TBID and potential TOT Measure
1.3d Hold study session with City Council and visitor serving accomodations to eliminate TBID
1.3h Bring TOT measure to City Council for consideration of placing on the November 2026 ballot
Recreation Services
Recreation Services
DEBT MANAGEMENT
The City of Arroyo Grande’s budgeted debt obligations for FY 2025-26 include scheduled principal and interest payments for outstanding long-term debt incurred for capital improvement projects and major infrastructure investments. As of FY 2025-26, the City’s total outstanding long-term debt is approximately $1,151,956, with scheduled debt service payments totaling $78,238 in the current fiscal year. These obligations are funded primarily through the General Fund, Water and Sewer Enterprise Funds, and other designated funding sources.
The City’s outstanding debt includes:
• California Energy Resources Conservation and Development Commission Loan Payable: On July 7, 2010, the City entered into a loan agreement with the California Energy Resources Conservation and Development Commission (CA Energy). The purpose of the loan was to partially fund the city-wide energy savings project. The project consisted of heating, ventilation, and air conditioning retrofits including equipment, building controls, lighting equipment and lighting controls, installation of vending machine misers, installation of LCD computer monitors, installation of computer controls, and installation of LED streetlights. Installation occurred at all City-owned buildings including city council chamber, city hall, fire department, community center, corporate yard, Soto Field complex, and recreation services building. In the event of default, all remaining payments are due in full.
The outstanding loan payable debt of the City at June 30, 2024 is shown below:
The future minimum payment obligation for the loan payable is as follows:
• United States Department of Agriculture Loan Payable: On September 1, 2010, the City entered into a leasepurchase agreement with the United States Department of Agriculture (USDA). The purpose of this loan was to acquire the property and office building for the relocation of the City Hall offices. In the event of default, all remaining payments are due in full. The outstanding loan payable debt of the City at June 30, 2024 is shown below: State Revolving Fund (SRF) Loan used for water system improvements.
The future minimum payment obligation for the USDA loan payable is as follows:
Recreation Services
Total debt service payments budgeted for FY 2025-26 are $78,238, consisting of $47,011 in principal and $31,227 in interest. These payments are in accordance with the City’s adopted debt service schedules and comply with all bond covenants and legal requirements. The City does not anticipate issuing new debt in FY 2025 but will continue to evaluate financing options for future capital needs as part of its long-range financial planning.
The City continues to comply with all bond covenants and maintains a strong credit rating. At this time, the City does not anticipate issuing new debt in FY 2024–25 but will continue to evaluate long-term financing options to support future capital needs identified in the City’s Capital Improvement Program (CIP).
Debt service obligations are reviewed annually to ensure sustainability and alignment with the City's debt management policy and long-range financial goals.
CAPITAL IMPROVEMENT PROGRAM
Capital Improvement Program
OVERVIEW
This Capital Improvement Program (CIP) 10-year plan outlines anticipated City infrastructure improvements for fiscal years (FY) 2025-26 through FY 2034-35 and serves as a public information document, approved by the City Council, to advise residents and property owners on how the City plans to address significant capital needs. It contains information about the scope, location and funding for these projects.
Each year, the overall goal for capital improvements and the means for accomplishing them are assessed. Every project in the plan has been considered for its financial feasibility, public safety, state and federal compliance, environmental impact, conformance to previously adopted plans, priorities established from the City Council, and ability to meet public needs.
The FY 2025-26 through FY 2034-35 CIP totals $138,128,065 It is a flexible plan that can be altered as conditions, funding, priorities and regulations change.
The Capital Improvement Program (CIP) represents a 10-year scheduling plan of public infrastructure improvements and expansion, with many of it largely based on previously adopted master plans such as the Wastewater and Water Master Plans. The CIP is divided into nine category types – Bridges, Drainage, Parks & Play Structures, Public Facilities, Sewer, Sidewalks, Streets and Transportation, Technology, and Water.
The benefits of adopting a Capital Improvements Plan are that it:
• Preserves and improves the infrastructure of Arroyo Grande through capital asset construction, rehabilitation and maintenance,
• Maximizes the useful life of capital investments by scheduling major renovations and modifications at the appropriate time in the life cycle of the facility;
• Improves coordination and scheduling of public improvements that require more than one year to complete,
• Provides an opportunity for long-range financial planning and management, and
• Offers an opportunity for residents and the community to participate in decisions that impact their quality of life.
With growing demands for project expenditures and a limited amount of revenues available, it has become increasingly difficult to predict the availability of future funding for capital projects. As the population in Arroyo Grande continues to grow, so do the demands on City services. It is imperative that the City formulate and organize the use of our limited dollars wisely to complete this plan and ultimately benefit all citizens of Arroyo Grande.
CAPITAL PROJECT DEFINITION
Capital projects are typically projects that lead to the acquisition, construction, improvement or extension of the useful life of capital assets. Capital assets include but are not limited to land, facilities, buildings, parks, playground equipment, streets, sidewalks, bridges, water, wastewater and storm drain infrastructure, technology systems
Capital Improvement Program
and equipment, traffic control devices, and many other items that deliver a public benefit for a prolonged period of time.
Capital expenditures and operating expenditures are primarily differentiated by two characteristics: the dollar amount of the expenditure and the useful life of the asset acquired, constructed, or maintained. Capital expenditures typically enhance, acquire or extend the useful life of assets through a variety of activities. Activities that are associated with capital projects include: land acquisition, feasibility and design studies, planning, design, construction, rehabilitation, enterprise technology acquisition, and project Implementation. In general, capital projects in the CIP:
• Have a total project cost in the range of $25,000 or more,
• Consist of construction, renovation, rehabilitation, conversion or demolition of infrastructure or facilities; and
• Have a minimum useful life of three years, significantly extend the useful life of a capital asset, or significantly alter the nature, character or use of an asset.
PLANNING PROCESS
Public Works serves as the lead Department for developing the Adopted FY 2025-26 and FY 2026-27 CIP Program and Budget. Public Works, in conjunction with other Departments, reviewed the City’s capital needs and prioritized project submittals based on established criteria outlined below. Departments submit projects for funding consideration with a priority ranking, and the Public Works Department, Administrative Services Department, and City Manager review and evaluate submittals. Project submittals are also evaluated within the context of available funding limits to ensure that the limited resources available fund priority projects, while at the same time, maintain the City’s existing infrastructure and minimize future replacement costs. The following criteria are taken into consideration:
• The ability of the project to meet health, safety, and legal concerns and mandates,
• The value of the project to prolong the life of City assets or avoid/minimize future repair costs,
• The benefit the project will provide the community is in support of the goals articulated in the Council Goals,
• The potential for the project to generate savings or increase productivity, and
• The extent to which the project will secure future funds through program planning or grant eligibility.
PROPOSED PLAN
The FY 2025-26 through FY 2034-35 CIP totals $138,128,065. The City completed 12 projects in the previous fiscal year. Completed projects no longer to be shown in the CIP, and New Projects, are listed below:
Completed projects:
• Public Safety Video Cameras (Phase 1)
Capital Improvement Program
• Swinging Bridge Rehabilitation
• Lift Station 3 – upgraded piping protection
• Replacement of Emergency Back-up Generator at Fire Station 1
• Phased Water Main Replacement – Highway 101 Crossing, El Camino Real to West Branch Street
• Trenchless Sewer Rehabilitation -El Camino Real to West Branch St.
• Fire Station 1 Apparatus Bay Doors
• 191 Tally Ho - removal of bump out – Right of Way Acquisition, retaining wall and street repair
• Public Works Office Space Remodel
• Galvanized Service Replacements – upgrade to PVC water service
• 2024 Streets Repairs – 5.2 miles of street repairs and 9 ADA curb ramp upgrades
• Cornwall Waterline Replacement
New Projects in FY 2025-26:
• Traffic Way Bridge replacement habitat mitigation
• Watershed Management Plan and Stormwater Master Plan
• Soto Basin #2 Reservoir Liner Repair
• Replace Beach Volleyball Court at Rancho Grande Park
• Fire Station 1 HVAC Unit Replacement
• Fire Station 1 Front Lobby Security
• City Structures Roof Repairs (City Hall Roof, Balcony & Southern & Western Siding, Old City Hall, Council Chambers, Elm St. Restroom, PD, Women's Club, Fire)
• Old City Hall Building Repairs
• Facilities Safety/ADA Improvements
• Master Plan incl. ADA Access (Community Center, Elm St. Park, Soto Sports Complex, Don Roberts Field, Corp Yard) & Community Survey
• E. Grand (Halcyon to Elm) Economic Development Master Plan
• Replacement of Traffic Guardrails
• Huasna Road, Corbett Canyon and E. Brach Street Intersection Roundabout
• Public Safety Camera System - Phase 2
• Virtual Server Farm at City Hall and PD, and Nimble Network Storage
• Update IT Firewall at City Hall
• Digital Community Bulletin Board Project
• Software for Public Safety Camera System to allow Traffic Count Data
• Reservoir No. 5 Redundancy Water Interconnect (Los Ciervos to Andre Dr.)
• Water Main and Service Replacement related to PMP Projects – underground water utility work that needs to be completed in advance of paving to reduce potential for the need to cut into brand-new pavement.
These capital projects represent the vision for short- and long-range development, maintenance, improvement, and building of new infrastructure and facilities to benefit residents, businesses, property owners, City service
Capital Improvement Program
operations, and visitors. Because the Plan addresses several years of projects, it will serve as a guidance document and must be adjustable to changes and therefore the capital projects included in the Plan are not guaranteed to be delivered. If priorities change, emergent needs arise, or funding sources evolve, capital projects may be added, modified in scope, or eliminated.
Table 1 depicts the proposed annual appropriations for the 10-year period in each of the major project category, which are primarily major maintenance activities on City infrastructure. The largest categories of projects are for the Streets and Transportation, which includes the Pavement Management Program, followed by Water projects, including Water Main and Service Replacement and the Advanced Metering Infrastructure projects. This is followed by $10.7 million for bridge replacement projects, $9.1 million for public facilities, $5.8 million for Sewer projects, $5 million for sidewalks, $4.6 million for parks & play structures, $2.6 million for drainage, and $825,000 for technology projects. It should be noted that the types of projects are based on the best fit and may cover multiple project types.
Table 1 lists the types of projects and their total amounts by fiscal year for FY 2025-26 through FY 2034-35. Table 1 is followed by Chart 1 illustrating the types of projects over the entire 10-year CIP.
Capital Improvement Program
Capital Improvement Program
Chart 1 – FY 2025-26 through FY 2034-35 Capital Improvement Projects by Project Type
Capital projects are scheduled throughout the 10-year plan only those projects with activity scheduled during the first two year’s (FY 2025-26 and FY 2026-27) are adopted as part of the City’s Biennial Budget process. Projects slated for subsequent years may be adjusted to reflect changes in priority or funding. Preparation of the CIP is a result of considerable effort from staff in all departments in the City. Each year staff reassesses overall goals for capital improvements, and the means for accomplishing them.
FUNDING
All funding sources that may be used for various capital improvements are reviewed each year. Much of the work to develop the CIP focuses on the balancing of available resources with the identified capital needs. Consideration must be given to factors such as annual revenue projections from various sources, restrictions on the uses of certain funds, legal limitations on debt capacity, and City policies relative to project funding.
Capital Improvement Program
There are limited sources of funding available for capital improvements, some sources like Development Impact Fees (DIF) have restrictions on their use within broad categories, which are described below. For this reason, outside grants are a significant source of funding for capital projects and are typically needed to advance major capital investments.
Internal Sources
Measure O-2006 Sales Tax Fund (Fund 120): This fund accounts for the revenues derived from Measure O 2006 Sales Tax, a local 1/2% sales tax approved by the City's voters in November 2006.
Measure E-2024 Sales Tax Fund (Fund 140): This fund accounts for the revenues derived from Measure E 2024 Sales Tax, a local 1% sales tax approved by the City's voters in November 2024.
Senate Bill 1 (SB1) Fund (Fund 220): On April 28, 2017, the Governor signed SB1, known as the Road Repair and Accountability Act of 2017. SB1 increases gasoline taxes and vehicle registration fees to address deferred maintenance on the State highway system and the local street and road system. These additional taxes are deposited by the State Controller into the Road Maintenance and Rehabilitation Account (RMRA).
State COPS Block Grant Fund (Fund 271): This fund accounts for the receipt and use of monies from the State of California restricted to the purchase of police equipment and technology for crime prevention.
Sewer Fund (Fund 612): This fund is used to account for maintenance of sewer lines connecting City residents to the South San Luis Obispo County Sanitation District sewer treatment plant. Money is collected from utility bills paid by customers.
Water Fund (Fund 640): This fund is used to account for the activities associated with the transmission and distribution of potable water by the City to its users. Money is collected from utility bills paid by customers.
In-Lieu Parking Fee Fund (Fund 751): This fund accounts for revenue derived from in-lieu fees charged to businesses when using parking spaces within the Village parking lots.
Development Impact Fee (DIF) Sources
Fire Facilities DIF (Fund 210): This fund accounts for impact fees collected from developers for the expansion of the existing fire station in order to serve future development.
Police Facilities DIF (Fund 212): This fund accounts for impact fees collected from developers for the expansion of the existing police facility in order to serve future development
Park Facilities DIF (Fund 213): This fund accounts for the receipts of park-in-lieu fees (Quimby) and grant revenues that are used for construction, park acquisition, and development of park facilities.
Park Improvement DIF (Fund 214): Impact fees collected from developers for park improvements are to be used to maintain the adopted level of service for neighborhood and community parks of 4.0 acres per thousand population. This fund accounts for the receipt and use of these monies.
Capital Improvement Program
Recreation Facilities DIF (Fund 215): This fund accounts for impact fees collected from developers and used for recreation facilities in order to maintain the adopted level of service of recreation/community center facilities of 542 square feet per thousand population.
Traffic Signalization DIF (Fund 222): This fund accounts for traffic signalization assessment levied against developments for the future cost of traffic signals.
Transportation Facilities DIF (Fund 224): This fund accounts for transportation facilities fees paid to protect the public health, safety, and welfare by maintaining the existing level of public services for existing and future residents within the City
Storm Drain Facilities DIF (Fund 231): This fund accounts for impact fees paid by development and are restricted to improving storm drains within the City
Sewer Facility DIF (Fund 634): This fund is used to account for the accumulation of sewer facility revenues to be used in capital improvement projects in the City. Money is collected from development to offset the impacts new development has on the sewer collection system.
Water Facility DIF (Fund 642): This fund is used to account for the accumulation of water facility revenues to be used in capital improvement projects in the City. Money is collected from development to offset the impacts new development has on the water distribution system.
Other CIP Funding Sources
The City continues to aggressively seek grants for a wide variety of needs. While by their nature, these grants are only available for specific projects and purposes, and are often cyclical and competitive, they represent a significant addition to local funds. Grants are the most viable source to fund new improvements and allow internal funds to be kept available for existing assets. Internal funds are also necessary for leverage and matching fund requirements of grants.
Arroyo Grande receives a significant amount of funding from outside sources. These include grants received from the Active Transportation Program (ATP), Community Development Block Grant (CDBG), Highway Bridge Program (HBP), Safe Routes to School (SR2S), and Safe Streets and Roads for All (SS4A). Outside grants fund a wide array of projects, including parks, recreational facilities, bicycle and pedestrian facility improvements, bridge reconstruction and retrofits, and transportation and safety projects. Staff continue to seek grants whenever projects are competitive and meet the City’s need to address unfunded priorities.
The FY 2025-26 through FY 2034-35 Capital Improvement Plan has 23 funding sources. The total estimated cost of all projects included in the ten-year plan, is $138,128,065. A summary of the costs by funding source is summarized below. This table is followed by a pie chart illustrating the percentage of each funding source supporting the entire 10-year CIP plan.
Capital Improvement Program
Capital Improvement Program
Chart 2 – FY 2025-26 through FY 2034-35 Capital Improvement Projects by Funding Source
The following pages provide summary information for each project with proposed funding during the ten year period as well as an overall summary of all projects. The final section breaks down each fiscal years projects.
10-Year Summary by Project Type
10-Year Summary by Project Type
10-Year Summary by Project Type
10-Year Summary by Project Type
Projects Budgeted FY 2025-26
Design and construction to replace the three lane bridge constructed in 1932 over Arroyo Grande Creek. Five year post-construction environmental mitigation and monitoring for the Traffic Way Bridge Rehabilitation project.
SW Master Plan evaluates infrastructure & practices of SW system for current & future needs; Watershed Mgmt. Plan assesses a watershed including water quality, flood risk, protecting water bodies, etc. Documents to be concurrent.
Projects Budgeted FY 2025-26
350-54XX Public
identified as part of the ADA Tranisition Plan, such as signs and accessability adjustments
Improvements identified through the Risk Management Evaluation and the Workplace Violence Prevention Plan site inventories.
City Council Chambers Remodel City Hall update including chairs, caucus room, Council dais, update the front to ramps only, update the c lock on the building front.
Facilities Master Plan incl. ADA Access
(Community Center, Elm St. Park, Soto Sports Complex, Don Roberts Field, Corp Yard) & Community Survey
Master Plan for Elm St., Soto Sports Complex, Don Roberts Field, and the City Corporation Yard to address connectivity, best use, restroom locations, year-round field use, and community survey for community center project.
The City’s Pavement Management Program provides maintenance history and pavement condition index (PCI) for all public streets in Arroyo Grande. The City annually performs pavement maintenance on public streets to the extent that funds are available. Streets are selected based on pavement condition, location, and the type of maintenance application. Maintenance applications are digouts, slurry seals, chip seals, and pavement overlays.
Projects Budgeted FY 2025-26
350-54XX Streets and Transportation E. Grand (Halcyon to Elm) Economic Development Master Plan
The project consists of Complete Streets improvements along 1.7 Miles of Halcyon Road from US 101 to The Pike. The project narrow vehicle driving lanes, add buffered bike lanes with green conflict striping, fill in sidewalk gaps, add two-staged crossings with stop control at key intersections, and install a new signal or roundabout at Fair Oaks Avenue. A safety education program will be part of the project to inform residents of the benefits and proper use of roundabouts.
Develop a comprehensive corridor plan that considers the needs and goals of multimodal users, residents, businesses, and City leaders for East Grand Avenue with a focus on the section from Halcyon Road to Elm Street. Objectives include economic enhancement and vitality, safety, providing distinct nodes/gateways/districts, functionality, and beautification.
& Transportation Replacement of Traffic Guardrails Replacement of damaged guardrails.
350-56XX Streets & Transportation Huasna Road, Corbett Canyon, and E. Branch Street Intersection Roundabout
One of the major circulation improvements identified in the Circulation Element was on East Branch Street at Huasna Road/Corbett Canyon Road adding a new roundabout to help improve the flow of traffic.
Public Safety Camera SystemPhase 2 Replace failed public safety video system with a local vender in order to monitor City buildings and identified intersections.
Digital Community Bulletin Board Project This project is to replace the current outdated and deteriorating physical community bulletin board located outside City Hall with a modern, digital bulletin board that allows for more dynamic, accessible, and user-friendly communication for community members.
Reservoir No. 5 Redundancy Interconnect (Los Ciervos to Andre Dr.)
The water distribution system for Reservoir No. 5 pressure zone has only one watermain that can provide water to the pressure zone. This project will provide a redundant interconnect to assure the zone has water delivery from Reservoir No. 5 with the watermain off. The project will interconnect the watermain from Los Ciervos to Andre Drive.
water utility work that will be completed in advance of paving to reduce the potential need to cut into brand-new pavement.
Projects Budgeted FY 2026-27
350-57XX Bridge
Traffic Way Bridge replacement habitat mitigation
350-5794 Drainage Corrugated Metal Pipe (CMP) Investigation and Repair
Five year post-construction environmental mitigation and monitoring for the Traffic Way Bridge Rehabilitation project.
Annual project to repair deteriorating corrugated metal pipes (CMP) throughout the City.
Compliance as mandated by the MS4 Stormwater Permit required by the State. 350-5798
350-5568 Parks & Play Structures ADA Bathrooms Elm Street Park Restroom facility to replace porta potties in use after demolition of Mark M. Millis Community Center.
350-55XX Parks & Play Structures
Foot Bridge & Kiosk at Entrance of James Way
The entrance to James Way Trail (near windmill) east of Stevenson Dr. becomes unpassable during rain. Users have placed stones and debris to make their own crossing. Proposal to build footbridge over the area which floods and install new kiosk.
350-5430
Develop Short Street into a vibrant pedestrian-friendly plaza including, dining areas, vendor spaces and an amphitheater park area. The development will permanently close Short Street to traffic.
The Advanced Clean Fleets Regulation requires 50% of new City Vehicles purchased after January 1, 2024, to be lowemission, and 100% after January 1, 2027. Before purchasing EVs, a Plan is needed to evaluate the City needs, charging infrastructure, and utility transformer upgrades.
Projects Budgeted FY 2026-27
350-54XX Public Facilities City Facility Access Control Upgrades (PW, Parks, Chambers, Fire, PD) Card readers and authentication program at City facilities to be retrofitted or replaced to install card readers.
350-54XX Public Facilities City Council Chambers Remodel City Hall update including chairs, caucus room, Council dais, update the front to ramps only, update the clock on the building front.
Public Facilities Recreation Services / Community Center Building Conceptual study that presents design alternatives and cost analysis, and then preparation of construction documents for a new Recreation Services/Community Center building. Includes ADA bathroom design and construction.
Cured-in-place pipe rehabilitation along the entire length of the sections mentioned below to reduce infiltration, root intrusion, and maintenance requirements, as well as probability of failure.
Projects Budgeted FY 2026-27
Pavement Management Program
The City’s Pavement Management Program provides maintenance history and pavement condition index (PCI) for all public streets in Arroyo Grande. The City annually performs pavement maintenance on public streets to the extent that funds are available. Streets are selected based on pavement condition, location, and the type of maintenance application. Maintenance applications are digouts, slurry seals, chip seals, and pavement overlays. 350-5638 Streets & Transportation
Le Point Street Parking Lot Expansion
Streets &
Huasna Road, Corbett Canyon, and E. Branch Street Intersection Roundabout
The life of the existing structure as a safe residence is at its end. A historical and archeological analysis will be completed in anticipation of demolition and regrading/repaving of the site to allow for the design and construction of approximately 15 additional parking spaces.
Planning document to evaluate traffic circulation improvement opportunities for Traffic Way and adjacent streets.
One of the major circulation improvements identified in the Circulation Element was on East Branch Street at Huasna Road/Corbett Canyon Road adding a new roundabout to help improve the flow of traffic.
Projects Budgeted FY 2026-27
Virtual Server Farm at City Hall and PD, and Nimble Network
Update the existing Virtual Server's that the City uses for storage at City Hall and the Police Station.
Upgrade the Police Department report writing system to Pro Phoenix to coincide with the San Luis Obispo Sherriff’s Department upgrade.
Phased Main ReplacementHighway 101 Crossing Upgrade, El Camino Real to West Branch Street
Upgrade the existing 8-inch cast iron pipe to an 8-inch high density polyethylene (HDPE) pipe under Highway 101 from El Camino Real to West Branch Street.
Reservoir No. 4 Exterior Coating Sand blast, prime and re-coat Reservoir No. 4 exterior. The tank was built in 1983 and has never been painted since it was originally built.
Projects Budgeted FY 2027-
as mandated by the MS4 Stormwater Permit required by the State.
Conceptual study that presents design alternatives and cost analysis, and then preparation of construction documents for a new Recreation Services/Community Center building. Includes ADA bathroom design and construction.
Cured-in-place pipe rehabilitation along the entire length of the s ections mentioned below to reduce infiltration, root intrusion, and maintenance requirements, as well as probability of
Projects Budgeted FY 2027-28
The City’s Pavement Management Program provides maintenance history and pavement condition index (PCI) for all public streets in Arroyo Grande. The City annually performs pavement maintenance on public streets to the extent that funds are available. Streets are selected based on pavement condition, location, and the type of maintenance application. Maintenance applications are digouts, slurry seals, chip seals, and pavement overlays.
Improvements to Rancho Grande Pump station to increase long term reliability and reduce temporary s torage required to provide water supply with Reservoir 5 offline which will occur for Reservoir 5 Cleaning and Interior Coating.
Projects Budgeted FY 2028-29
Projects Budgeted FY 2028-29
The City’s Pavement Management Program provides maintenance history and pavement condition index (PCI) for all public streets in Arroyo Grande. The City annually performs pavement maintenance on public streets to the extent that funds are available. Streets are selected based on pavement condition, location, and the type of maintenance application. Maintenance applications are digouts, slurry seals, chip seals, and pavement overlays.
Complete upgrade on the Miller Way Booster Station, including a new pump building (or enclosed package pump station), new pumps and motors (2 x 5-HP), and new bladder tanks. The upgraded booster station will have a design capacity of 75-gpm. This will increase the reliability of the water supply to the Miller Way zone and will improve water service pressure. In addition, this is expected to decrease maintenance costs and increase efficiency.
Interior coating is showing signs of failing and must be recoated to preserve the steel tank and protect water quality. The inspection in 2003 indicated it had a useful life of 5 years which has elapsed.
Projects Budgeted FY 2029-30
Cured-in-place pipe rehabilitation along the entire length of the sections mentioned below to reduce infiltration, root intrusion, and maintenance requirements, as well as probability of failure.
The City’s Pavement Management Program provides maintenance history and pavement condition index (PCI) for all public streets in Arroyo Grande. The City annually performs pavement maintenance on public streets to the extent that funds are available. Streets are selected based on pavement condition, location, and the type of maintenance application. Maintenance applications are digouts, slurry seals, chip seals, and pavement overlays.
This is one of the 3 main streets not addressed in the 13-year PMP. The design phase of this project will help find solutions to correct the slope that continues to fall into the nearby creek area. Once the City Council has approved the design of the slope stabilization the construction contractor will be selected and construction can begin.
The 4inch main segment along Bennett Ave and N. Alpine St. lacks sufficient capacity to meet fire flow requirements. This project was identified as a project A-6 to upgrade this main to 6" or greater PVC pipe.
Projects Budgeted FY 2030-31
Emergency backup power to prevent sanitary sewer overflow if the portable generator is not available during an outage. Evaluation and repair of creek bank erosion.
The City’s Pavement Management Program provides maintenance history and pavement condition index (PCI) for all public streets in Arroyo Grande. The City annually performs pavement maintenance on public streets to the extent that funds are available. Streets are selected based on pavement condition, location, and the type of maintenance application. Maintenance applications are digouts, slurry seals, chip seals, and pavement overlays.
This is one of the 3 main streets not addressed in the 13-year PMP. The design phase of this project will help find solutions to correct the slope that continues to fall into the nearby creek area. Once the City Council has approved the design of the slope stabilization the construction contractor will be selected and construction can begin.
Construct improvements on this corridor with better pedestrian and bicycle facilities, traffic calming and improved access and circulation at the intersection of US 101 south bound ramps and Orchard Ave. Work toward applying for Active Transportation Project funding to complete the design and construction.
Streets & Transportation Harden Street Slope Stabilization This is one of the 3 main streets not addressed in the 13-year PMP. The design phase of this project will help find solutions to correct the slope that continues to fall into the nearby creek area. Once the City Council has approved the design of the slope stabilization the construction contractor will be selected and construction can begin.
3,000,000
200,000
Projects Budgeted FY 2031-32
Annual project to repair deteriorating corrugated metal pipes (CMP) throughout the City.
Cured-in-place pipe rehabilitation along the entire length of the sections mentioned below to reduce infiltration, root intrusion, and maintenance requirements, as well as probability of failure.
The City’s Pavement Management Program provides maintenance history and pavement condition index (PCI) for all public streets in Arroyo Grande. The City annually performs pavement maintenance on public streets to the extent that funds are available. Streets are selected based on pavement condition, location, and the type of maintenance application. Maintenance applications are digouts, slurry seals, chip seals, and pavement overlays.
Projects Budgeted FY 2031-32
Improvements, Valley Road to Traffic Way Construct improvements on this corridor with better pedestrian and bicycle facilities, traffic calming and improved access and circulation at the intersection of US 101 south bound ramps and Orchard Ave. Work toward applying for Active Transportation Project funding to complete the design and construction.
Projects Budgeted FY 2032-33
Develop Short Street into a vibrant pedestrian-friendly plaza including, dining areas, vendor spaces and an amphitheater park area. 350-5430 Short Street Plaza Design Parks & Play Structures 350-5638 Streets & Transportation Pavement Management Program The City’s Pavement Management Program provides maintenance history and pavement condition index (PCI) for all public streets in Arroyo Grande. The City annually performs pavement maintenance on public streets to the extent that funds are available. Streets are selected based on pavement condition, location, and the type of maintenance application. Maintenance applications are digouts, slurry seals, chip seals, and pavement overlays.
at
Closed Circuit television inspection to assess the condition of old Clay sewer pipe.
This generator will provide backup power in the event of a power outage to help provide essential support services to the City from City Hall. The current generator only supports the City’s IT Server Room.
the Vulnerability Assessment
Projects Budgeted FY 2033-34
350-56XX Bridge Mason Street Bridge Widening of Mason Street Bridge.
Corrugated Metal Pipe (CMP) Investigation and Repair
Annual project to repair deteriorating corrugated metal pipes (CMP) throughout the City. Drainage
350-55XX Parks & Play Structures
Soto Sports Complex ADA Access Trails, Circulation, Irrigation
Connectivity of Soto Sports Complex, Elm St. Park, and Don Roberts with Trails including ADA Access and updated irrigation.
&
Pavement Management Program The City’s Pavement Management Program provides maintenance history and pavement condition index (PCI) for all public streets in Arroyo Grande. The City annually performs pavement maintenance on public streets to the extent that funds are available. Streets are selected based on pavement condition, location, and the type of maintenance application. Maintenance applications are digouts, slurry seals, chip seals, and pavement overlays.
Existing 4" main is inadequate to provide fire flow and must be upgraded to 6" or greater PVC.
Projects Budgeted FY 2034-35
The City annually performs pavement maintenance on public streets to the extent that funds are available. Streets are selected based on pavement condition, location, and the type of maintenance application. Maintenance applications are digouts, slurry seals, chip seals, and pavement overlays.
APPENDIX
BUDGET RESOLUTION
APPROPRIATION LIMIT
Appropriation Limit
The City’s appropriation limit is based on the Gann Spending Limit Initiative, a State constitutional amendment adopted by the voters on June 6, 1979 and amended in 1990 with Proposition 111 and SB 88, which included new adjustment formulas that allow cities a choice in methodologies for determining both the annual growth and inflation factors. The annual population growth factor can be calculated by using the greater of the City or the County population growth. Agencies have a choice of using the growth in California per capita personal income or the growth in non-residential assessed valuation due to new construction within their city. The City’s calculation uses the changes in California per capita personal income and the County of San Luis Obispo’s population as adjustment factors. It is anchored in the State Constitution under Article XIIIB.
The limit restricts appropriations from tax revenues by State and local governments. Under its provisions, no local agency can appropriate proceeds of taxes in excess of its “appropriation limit”. Excess funds may be carried over into the next year. However, any excess funds remaining after the second year must be returned to taxpayers by reducing tax rates or fees; a majority of the voters may approve an override to increase the limit.
In May 2025, the California Department of Finance released population and per capita personal income information. The population between January 2024 and January 2025 for the City decreased by six-tenths of one percent (-0.6%) and the County population decreased by zero point one percent (-0.1%). For FY 2024-25, the change in per capita personal income from the prior year increased by six and forty-four hundredths percent (6.44%).
In accordance with Proposition 111, the City’s annual spending limit must be approved by the City Council at the beginning of each fiscal year. The limit is calculated using the previous year’s appropriation limit ($28,875,036), multiplied by the per capita personal income percentage increase (6.44%), and multiplied again by the greater available population growth factor, which for FY 2024-25 is the County’s -0.1%.
The City is responsible for separating citywide revenues between tax and non-tax revenue and applying the formula to the cumulative appropriation limit. For FY 2025-26, the appropriation limit has been calculated to be 30,708,601. This calculation means the City cannot appropriate more than $30,708,601 of tax-based revenues in FY 2025-26. The estimated proceeds of taxes subject to the appropriation limit for the proposed FY 2025- 26 budget is estimated to be $27,233,700, which is approximately $3.5 million less than the appropriation limit. Therefore, the City is in compliance with Article XIIIB of the California Constitution. The City Council approved the Gann Limit calculation in Resolution No. 2025-039 on June 24, 2025.
Appropriation Limit
The following summarizes changes in the City’s appropriation limit and appropriations subject to the limit for the past ten years as well as the appropriation limit for 2025-26. A positive variance indicates that the City’s appropriations are lower than the allowable limit.
Appropriation Limit
APPROPRIATION LIMIT RESOLUTION
BUDGET GLOSSARY
Budget Glossary
Account: A subdivision within a fund for the purpose of classifying transactions.
Account Number: A numeric identification of the account. Typically, a unique number or series of numbers. The City of Arroyo Grande’s number structure is comprised of three (3) fields of characters. The first field is three (3) characters wide and identifies the various FUNDS within the account system. The next field contains four (4) characters and identifies the PROGRAMS and/or DIVISIONS within the City. The final field contains four (4) characters and identifies the OBJECT CODE of the account number. The combination of the three fields makes up the account number.
Accrual Basis or Accrual Method: Accounting method whereby income and expense items are recognized as they are earned or incurred, even though they may not have been received or actually paid in cash. The alternative is Cash Basis. The City of Arroyo Grande uses the method of “Modified Accrual” basis of accounting for governmental and agency funds. All proprietary funds are accounted for using the accrual basis of accounting.
ACFR: Annual Comprehensive Financial Report which is an audited and printed copy of the City’s financial statement at the end of a given fiscal year.
Actual: The recorded revenue or expenditure for a specific account number. The actual columns, referenced in this document, report the revenues or expenditures as audited by an independent auditor.
Adopted Budget: A budget which typically has been reviewed by the public and “Adopted” (approved) by the City Council prior to the start of the fiscal year. The adopted budget is the legal authority to expend money for specified purposes in the fiscal year time period.
AGPOA: Arroyo Grande Police Officers Association. This union represents sworn and non-sworn police employees working for the City.
AGTBID: Arroyo Grande Tourism Business Improvement District. Established in May 2013 by Ordinance, the district exists to provide projects, programs and activities that benefit lodging businesses located and operating with the boundaries of the City. Assessments are levied on all lodging businesses and are subject to annual review by the City Council in accordance with the requirements contained in the Parking and Business Improvement Area Law of 1989 (Streets and Highways Code Sections 36500 et seq.).
Appropriate: Set apart for, or assign to, a particular purpose or use.
Appropriated Expenditure: A budget amount set-aside for a specific acquisition or purpose.
Appropriation: An authorization by the City Council to make expenditures and to incur obligation for specific amounts and purposes. For most local governments, the adopted budget document is the source for all or most appropriations.
Budget Glossary
Assessed Valuation: An official value established for real estate or other property as a basis for levying property taxes.
Assessments: Charges made to parties for actual services or benefits received.
Assets: Property owned by the City which has book or appraised monetary value.
Audit: A review of the accounting system and financial records to verify that government funds were spent and received in accordance with Generally Accepted Accounting Principles (GAAP) and in compliance with the legislative body’s appropriations.
Authorized Positions: Employee positions, which are authorized in the adopted budget, to be filled during the year.
Available (Undesignated) Fund Balance: Funds remaining from prior years, which are available for appropriation and expenditure in the current year.
Balance Sheet: A statement presenting the financial position of an entity or fund by disclosing the value of its assets, liabilities, and equities as of a specified date.
Balanced Budget: Budgeted resources, including revenue, transfers from other funds, and unallocated fund balance from previous years meet or exceed the budgeted use of resources, including expenditures and transfers to other funds.
Base Budget: The ongoing expense level necessary to maintain service levels previously authorized by the City Council.
Beginning Balance: Unencumbered resources available in a fund from the prior fiscal year after payment of prior fiscal year expenditures.
Bond: A written promise from a local government to repay a sum of money on a specific date at a specified interest rate. Bonds are most frequently used to finance capital improvement projects such as buildings, streets, and bridges.
Budget: A plan of financial operation, for a set time period, which identifies specific types and levels of services to be provided, proposed appropriations or expenses, and the recommended means of financing them.
Budget Amendments: The City Council has the sole responsibility for adopting the City’s budget, and may amend or supplement the budget at any time after adoption by majority vote. The City Manager and Administrative Services Director have joint authority to approve line-item budgetary transfers between expenditure objects of the budget, as long as transfers do not affect ending fund balances.
Budget Glossary
Budgetary Basis: The basis of accounting used to estimate financing sources and uses in the budget.
Budget Message: The opening section of the budget, which provides the City Council and the public with a general summary of the most important aspects of the budget, changes from previous years, and presents recommendations made by the City Manager.
Budget Year: Is the FISCAL YEAR for which the budget is being considered.
Budgetary Unit: An organizational component budgeted separately, usually a department or a division.
Capital Expenditures: An acquisition or an improvement (as distinguished from a repair) that will have a life of more than one year.
Capital Improvement Budget: A financial plan or authorized expenditures for tangible, long-term construction of, or improvement to, public physical facilities.
Capital Improvement Program (CIP): A long-term plan for multi-year projects such as street or park improvements, building construction, and various kinds of major facility maintenance. The projects set out in the plan usually require funding beyond the one-year period of the annual budget and the plan details funding sources and expenditure amounts.
Capital Outlay: Expenditures that result in the acquisition of or addition to, fixed assets. A capital item is tangible, durable, and non-consumable, and has a useful life of more than one year.
Carryover: Unspent funds, either encumbered, reserved, or unobligated, brought forward from prior fiscal years.
Cash Basis: A basis of accounting in which transactions are recognized only when cash is increased or decreased.
Consumer Price Index (CPI): Measure of change in consumer prices as determined by a monthly survey of the U.S. Bureau of Labor Statistics. Many pension and employment contracts are tied to changes in consumer prices as protection against inflation and reduced purchasing power. Among the CPI components are the costs of housing, transportation, and electricity. Also known as the Cost-of-Living Index.
Contingency: A budgetary reserve set aside for emergencies or unforeseen expenditures not otherwise budgeted.
Contractual Services: Services rendered to a government by private firms, individuals, or other governmental agencies. Examples include maintenance agreements, professional contracts, and tree trimming agreements.
Budget Glossary
Debt Service: The City’s obligation to pay the principal and interest of all bonds and other debt instruments according to a pre-determined payment schedule.
Deficit: The excess of an entity’s liabilities over its assets or the excess of expenditures or expenses over revenues during a single accounting period.
Department: A basic organizational unit of government that is functionally unique in its delivery of services. The components are hierarchically arranged as follows: Department (such as Public Works): and Division (such as Sewer Maintenance).
Depreciation: The loss in value of an asset, due to physical changes, obsolescence, or factors outside of the asset.
Development-related Fees: Fees and charges generated by building, development, and growth in a community. Included in development-related fees are building permits, development review fees, and zoning and subdivision fees.
Disbursement: The expenditure of monies from an account.
Division: An organizational component of a department.
Encumbrance: The commitment of appropriated funds to purchase goods or services. An encumbrance is not an expenditure. An encumbrance reserves funds to be expended on a specific item or service.
Enterprise Fund: A proprietary fund used to account for operations that are financed and operated in a manner similar to private business enterprises. The intent of enterprise funds is to have the costs of providing goods or services to the general public on a continuing basis be financed or recovered primarily through user charges. The rate schedule for these services is established to ensure that revenues are adequate to meet all necessary expenditures.
Expenditure/Expense: The outflow of funds paid or to be paid for an asset obtained or goods and services obtained regardless of when the expenditure is actually paid. The term expenditure applies to Governmental Funds, while the term expense is used for Enterprise and Internal Service Funds.
Expenditure Object Code: Unique identification number and title for a minor expenditure category. Represents the most detailed level of budgeting and recording of expenditures, also referred to as a “line item.”
Fiscal Policy: A government’s policies with respect to revenues, spending, and debt management as these relate to government services, programs and capital investment. Fiscal policy provides an agreedupon set of principles for the planning and programming of government budgets and their funding.
Budget Glossary
Fiscal Year (FY): The 12-month period for recording financial transactions. The City of Arroyo Grande has specified the fiscal year to begin July 1st and end June 30th.
Fixed Assets: Assets of long-term character such as land, buildings, machinery, equipment, and furniture.
Franchise Fee: A franchise fee is charged for the privilege of using public rights-of way and property within the City for public or private purposes. The City currently assesses franchise fees on utilities such as electricity, gas and solid waste collection.
Full-time Equivalent Position (FTE): Positions or fractions thereof based on full-time definition of forty hours of work per week.
Fund: A separate accounting entity with a self-balancing set of accounts to record all financial transactions (revenues and expenditures) for specific activities or government functions. Funds are classified into three categories: governmental, proprietary, and fiduciary. Commonly used funds in governmental accounting are General Fund, Special Revenue Funds, Debt Service Funds, Capital Project Funds, Enterprise Funds, Internal Service Funds, Agency Funds, and Special Assessment Funds.
Fund Accounting: The basis of accounting used particularly by governments. Since there is no profit motive, accountability is measured instead of profitability. The main purpose is stewardship of financial resources received and expended in compliance with legal requirements. Financial reporting is directed at the public rather than investors.
Fund Balance: The excess of assets over liabilities of a fund.
GANN Limit: State of California legislation that limits a City’s total appropriations from tax revenues.
Gas Tax Fund: A fund to account for receipts and expenditures of money apportioned under Street and Highway Code section 2105, 2106, 2107, and 2107.5 of the State of California.
General Fund: The primary operating fund of the City, which accounts for resources and services traditionally associated with government. The General Fund provides administrative, financial, police protection, community development, public works, and recreation services to the community and other funds. The General Fund accounts for revenues that have unrestricted uses and are not required legally or by contractual agreement to be accounted for in another fund.
Generally Accepted Accounting Principles (GAAP): Uniform minimum standards for financial accounting and recording, encompassing the conventions, rules, and procedures that define accepted accounting principles.
Budget Glossary
General Obligation Bond: Bonds that are usually limited by state law as to the amount as well as the length of indebtedness that a government can have. These “Full Faith and Credit” bonds are secured by all of the financial assets of the local government, including property taxes.
Goal: A general statement of broad direction, purpose, or intent that describes the essential reason for existence and which is not limited to a one-year time frame. Generally, a goal does not change from year to year.
Grant: Contributions of gifts or cash or other assets from another governmental entity to be used or expended for a specific purpose, activity, or facility. An example is the Community Development Block Grant awarded by the federal government.
Indirect Cost: Costs that cannot be easily seen in the product or service. Electricity, insurance, and data processing costs are examples of indirect costs.
Infrastructure: The physical assets of the City, i.e. streets, water, sewer, public buildings, and parks, and the support structures within a development.
Interfund Transfers: The movement of monies between funds to assist in financing the services for the recipient fund.
Intergovernmental Revenue: Funds received from federal, state, and other local government sources in the form of grants, shared revenues, and payments in lieu of taxes.
JPA: Joint Powers Agreement. An entity created by two or more public authorities to jointly exercise any power common to all of them. The City of Arroyo Grande joined in a JPA, California Joint Powers Insurance Association, for the purpose of jointly managing liability and workers compensation issues. The City is also a member of the Five Cities Fire Authority, a JPA for fire services with the City of Grover Beach and Oceano Community Services District.
Jurisdiction: Geographic or political entity governed by a particular legal system or body of laws.
Liability: Debt or other legal obligations arising out of transactions in the past which must be liquidated, renewed or refunded at some future date.
Measure O-06 Local Use Tax Fund: Fund to account for the ½% local sales tax increase approved by the voters in November of 2006.
Measure E-24 Local Use Tax Fund: Fund to account for the 1% local sales tax increase approved by the voters in November of 2024.
Long-term Debt: Debt with a maturity of more than one year after the date of issuance.
Budget Glossary
Modified Accrual Basis or Modified Accrual Method: Accounting method whereby income and expense items are recognized, as they are available and measurable.
Objective: Measurable statement of the intended beneficial and tangible effects of a program’s activities. An objective is a specific target toward which a manager can plan, schedule work activities, and make staff assignments. An objective is stated in quantifiable terms such that it is possible to know when it has been achieved. Examples are increase an activity by a specific amount by a certain date; maintain a service level; reduce the incidence of something by a specific amount by a given date, or eliminate a problem by a set date. The emphasis is on performance and its measurability.
Operating Expense: A series of object codes, which include expenditures for items, which primarily benefit the current period and not defined as personnel services, contractual services, or capital outlays.
Operating Revenues: Funds that the government receives as income to pay for ongoing operations. It includes such items as taxes, fees from specific services, interest earnings, and grant revenues. Operating revenues are used to pay for day-to-day services.
Organization Chart: A chart showing the interrelationships of positions within an organization in terms of authority and responsibilities. There are basically three patterns of organization: line organization, functional organization, and line and staff organization.
Performance Measures: Specific quantitative measures of work performed with a program (i.e. miles of streets cleaned). Also, specific quantitative measures of results obtained through a program (i.e. percent reduction in response time compared to previous year).
PERS: Public Employees Retirement System, which is the state retirement system for public employees that provides its members with benefits at retirement or upon disability or death.
Program: A group of related activities performed by one or more organizational units for the purpose of accomplishing a function for which the government is responsible.
Proprietary Funds: These funds account for records of operations similar to those found in a business, such as Enterprise funds and Internal Service funds.
Redevelopment Agency (RDA): A separate legal entity governed by the California Community Redevelopment Law. RDAs were officially dissolved by the California Legislature as of February 1, 2012. To facilitate the dissolution process, Successor Agencies were established to manage redevelopment projects underway, make payments on enforceable obligations, and dispose of redevelopment assets and properties.
Redevelopment Fund: A fund to account for transactions related to proceeds from bonds and other resources and their use to perform redevelopment activities within specific project areas.
Budget Glossary
Resolution: A special or temporary order of a legislative body; an order of a legislative body requiring less legal formality than an ordinance or statute.
Restricted Fund Balance: The portion of a fund’s balance legally restricted for a specific purpose and, therefore, not available for general appropriations.
Revenues: Funds received from various sources and treated as income to the City that are used to finance expenditures. Examples are tax payments, fees for services, receipts from other governments, fines, grants, licenses, permits, shared revenue, and interest income.
SEIU: Service Employees International Union, Local 620. This union represents all full time employees other than police and management employees.
Special Assessment Fund: Contain moneys received from special charges levied on property owners who benefit from a particular capital improvement or service.
Special Revenue Fund: A governmental fund type used to account for specific revenues that are legally restricted to expenditures for particular purposes.
Subvention: That portion of revenues collected by other government agencies on the City’s behalf.
Taxes: Compulsory charges levied by a government for the purpose of financing services performed for the common benefit of the people. This term does not include specific charges made against particular persons or property for current or permanent benefit, such as special assessments.
Transient Occupancy Tax: A tax imposed on travelers who stay in temporary lodging establishments in the City. The tax is collected by the operators of lodging establishments located within the City, on behalf of the City. This tax is then remitted to the City.
User Charges/Fees: The payment of a fee for the direct receipt of a public service by the party benefitting from the service.
GUIDE TO FUNDS BY NUMBER
Guide to Funds by Numbers
100 General Fund – The primary operating fund of the City, which accounts for resources and services traditionally associated with government. The General Fund provides administrative, financial, police and fire protection, community development, parks and recreation, and public works services to the community and other funds. The General Fund accounts for revenues that have unrestricted uses and are not required legally or by contractual agreement to be accounted for in another fund.
120 Measure O-06 Local Use Tax Fund – Fund to account for the ½% local sales tax increase approved by the voters in November of 2006.
140 Measure E-24 Local Use Tax Fund – Fund to account for the 1% local sales tax increase approved by the voters in November of 2024.
210 Fire Protection Impact – This fund accounts for impact fees collected from developers for the expansion of the existing fire station in order to serve future development.
211 Public Access Television – This fund accounts for fees collected from Charter Communications that are restricted for support of public, education and government access programming and equipment.
212 Police Protection Impact – This fund accounts for impact fees collected from developers for the expansion of the existing police facility in order to serve future development.
213 Park Development – This fund accounts for the receipts of park-in-lieu fees (Quimby) and grant revenues that are used for construction, park acquisition, and development of park facilities.
214 Park Improvement – Impact fees that are collected for park improvements will be used to maintain the adopted level of service for neighborhood and community parks of 4.0 acres per thousand population. This fund accounts for the receipt of these monies.
215 Recreation Community Center – This fund accounts for impact fees collected for recreation facilities in order to maintain the adopted level of service of recreation/community center facilities of 542 square feet.
216 Grace Lane Assessment District – Fund to account for revenues derived from annual assessments of properties within the District, which are used to pay the cost incurred by the City for landscape maintenance.
217 Landscape Maintenance District – This fund accounts for the landscape maintenance of parkways within two housing tracts. A special benefit assessment is levied on property owners to pay for landscape maintenance expenditures.
Guide to Funds by Numbers
219 Parkside Assessment District – Fund to account for revenues derived from annual assessments of properties, which are used to pay the cost incurred by the City for landscape maintenance.
220 Street (Gas Tax) Fund – The fund that accounts for receipts and expenditures of money apportioned by the State under Streets and Highway Code sections. Gas tax revenues can only be used to construct and maintain streets and highways.
222 Traffic Signalization – This fund accounts for traffic signalization assessments levied against developments for the future cost of traffic signals.
223 Traffic Circulation – This fund accounts for developer traffic mitigation measure fees charged as a result of an environmental review.
224 Transportation Facility Impact – This fund accounts for developer impact fees (AB1600 fees) paid to protect the public health, safety, and welfare by maintaining the existing level of public services for existing and future residents within the City of Arroyo Grande.
225 Transportation Fund – The fund accounts for revenues from the Local Transportation Fund (LTF), the South County Transit (SCT), and a senior taxi program administered by SCT. Expenditures are restricted to public transportation.
226 Water Neutralization Impact Fund – This fund accounts for mitigation fees collected from developers to neutralize projected water demand, of development projects, above historical usage amounts.
231 Drainage Facility – This fund accounts for development drainage fees restricted to improving drainage within the City.
232 In-lieu Affordable Housing – The fund accounts for monies paid by developers in meeting the City’s mandatory affordable housing requirements.
233 In-lieu Underground Utilities – The fund accounts for monies paid by developers in meeting the City’s underground utility requirements.
240 Arroyo Grande Tourism Marketing Improvement District Fund – The fund that accounts for assessments collected from lodging establishments, which are restricted for programs, projects and activities that benefit lodging businesses in the City.
241 Water Availability Fund – The fund that accounts for impact fees collected to mitigate future water requirements.
Guide to Funds by Numbers
250 CDBG Grant Fund – The fund accounts for revenues and expenditures related to Community Development Block Grant Funds.
271 State COPS Block Grant Fund – The fund that accounts for the receipt of revenues from the State of California restricted to the purchase of police equipment and technology for crime prevention.
286 Successor Agency to the Former Redevelopment Agency Administration – Fund used to account for tax increment revenues to be used for Successor Agency administration and payment of the former Redevelopment Agency enforceable obligations.
287 Successor Agency to the Former Redevelopment Agency Housing Function – The fund accounting for tax increment revenues of the former Redevelopment Agency to be used for low and moderate housing within the City.
350 Capital Improvement Program – Fund established to account for transfers from other City funds and grant revenues to be used for infrastructure improvements within the City. The Program is divided into six project types – Miscellaneous Projects, Park Projects, Street Projects, Drainage Projects, Sewer Projects, and Water Projects.
612 Sewer Fund – Fund used to account for maintenance of sewer lines connecting City residents to the San Luis Obispo County Sanitation District sewer plant. Maintenance costs are funded by user charges.
634 Sewer Facility Fund – This fund accounts for the accumulation of sewer facility revenues to be used in capital improvement projects in the City.
640 Water Fund – Fund used to account for the operation of water utility service to the community. Revenues are received from fees for service.
641 Lopez Fund – The Lopez Fund is responsible for the purchase of water, debt servicing, and the maintenance and operation of Lopez Dam. User Fee charges for water availability and utility billing are the major revenue sources of this fund.
642 Water Facility Fund – Fund used to account for the accumulation of revenues from charges for current services to be used for future water infrastructure improvements.
751 Downtown Parking – Agency Fund collecting assessments from Village merchants for the maintenance of Village parking for the Downtown Village Merchants Association.
