Consider and adopt the proposed LAFCo Budget for fiscal year (FY) 2025/26 and set May 22, 2025, as the public hearing date to approve the final budget

1. Receive staff presentation and open a public hearing to accept public comments on the Draft LAFCo Budget for FY 2025/26;
2. Close the public hearing, provide staff direction as desired, and set May 22, 2025, as the public hearing to consider approval of the Final Budget.

The attached Draft LAFCo budget (Attachment A) proposes a 2% overall budget increase from roughly $675,000 to $691,000, in order to address succession planning and increase LAFCo staff/benefits to 2.3 FTE (full-time/FT equivalent). However, due to higher-than-expected proposal application revenue and fund balance carryover, city and County costs funding LAFCo are down -4% from last year. 

In accordance with the Cortese-Knox-Hertzberg Act, a proposed budget must be adopted by May 1 and final budget by June 15 of each year. Following approval of the final budget and no later than July 1, the County Auditor requests payment from each agency. In order to meet these timelines, the final budget is scheduled to be adopted at the May 22, 2025, LAFCo Commission meeting.

The cities and County split the cost of LAFCo funding 50/50. A formula for the apportionment of the cities’ share is outlined in Government Code Section 56381(b)(1), in proportion to a city’s overall revenue, or an alternative method approved by a majority of the cities. Beginning in FY 2007/08, the cities agreed to an alternative formula to apportion their half of LAFCo funding by averaging a city’s general tax revenue and population. LAFCo sources city tax revenue from the State Controller's Office database and population data from the State Department of Finance. Please note that staff is unable to use the most current 2023 tax revenue information because the City of Woodland data is not available, and therefore, 2022 data has been used. 

The draft budget shows an overall appropriation increase of 2% compared to last year, with a total appropriation amount of $691,291 (including $25,000 of appropriated contingency). Agency costs will go down -4% on average overall (city costs vary slightly).

Salaries and Benefits Expenditures
Salaries and Benefits costs are proposed to go down by -4% overall. The budget includes 2.3 FTE total, comprised of a 0.7 FTE Executive Officer, 1.0 FTE Deputy Executive Officer, and a 0.6 FTE Administrative Specialist I. The Executive Officer has plans to assume 70% part-time status, which frees up funding to hire a part-time administrative assistant. If the Commission is concerned about a fixed 70% time for the Executive Officer with the ebb and flow of work demands, another option would be using the County's extra time off (XTO) system for flexibility, which is effectively unpaid time off. However, under XTO staff would continue to accrue CALPERS years of service, vacation, benefits, etc. at a full-time rate rather than being prorated, which may not be appropriate. For this reason, staff developed the draft budget with salary and benefits prorated at 70% rather than using the XTO model, but the Commission can provide alternative direction if desired. In addition to the staffing adjustments described above, the salary (Account 500100) conservatively assumes a 3% cost of living increase per County direction even though its labor negotiations have not been completed yet.

Another issue to highlight is the benefits package (Account 500400) for part-time employees. LAFCo employees are unrepresented and part-time employee healthcare benefit packages would be prorated (i.e. the two proposed part-time employees would, respectively, receive 60% and 70% of the $26,723 healthcare full benefit amount). As an independent agency, LAFCo can opt to fund a full benefit package, and staff recommends it be provided for the Administrative Specialist I currently being recruited because the hourly pay rate is relatively low at $26.65 - $32.39. The net cost to complete the healthcare package for the 60% part-time Administrative Specialist I is $10,689. This cost has been included in the draft budget, but not $8,017 for the Executive Officer position because of its higher salary level and the 70% part-time reduction is voluntary. The Commission can provide different direction if desired.

Services and Supplies Expenditures
Services and Supplies costs are up 41% mostly due to two line items: new County A-87 charges for overhead and indirect costs of $24,046 and increasing the professional services budget to $30,000 to pay for a community services district consolidation study, which is optional and discussed in detail in LAFCo's Strategic Plan. A-87 charges are indirect costs charged for the County space and services used by LAFCo. Staff agrees the charge is appropriate, but it creates a bump in services and supplies costs. 

Funding Agency Costs
Due to a higher-than-expected carryover fund balance at the end of this FY and keeping our contingency at 15% of the operating budget (while the policy goal is to strive for 20%), LAFCo is able to use $157,855 of carryover fund balance to offset agency contributions for 2025/26. The funding agencies’ contributions would decrease overall by -4%. The following itemizes the proposed draft budget cost for each agency (and net decrease as compared to the previous fiscal year):
 

Agency	FY 24/25	FY 25/26	Net Change	Apportionment
Yolo County	$276,117	$265,218	($10,899)	50.00%
West Sacramento	$96,415	$92,283	($4,132)	17.40%
Woodland	$85,695	$82,440	($3,255)	15.54%
Winters	$8,987	$8,615	($372)	1.62%
Davis	$85,021	$81,880	($3,141)	15.44%

Budget Next Steps
Following Commission direction on the draft budget, staff will make any changes as directed by the Commission and send the proposed budget to the city/county managers for review and comment. Staff will report on all feedback received and any changes during the final budget hearing on May 22, 2025.