TO: Mayor
and City Council
FROM: City Staff
SUBJECT: Review Mid- Fiscal Year 2004/05 Budget Status; Approve Associated Budget Changes; Adopt Resolution Establishing Various Classification and Salary Rates; Consider Status of Community Priorities and Results of Resident Survey and Provide Preliminary Direction on Preparation of Budgets for the Next Two Fiscal Years
INTRODUCTION
In
preparation for development of the Fiscal Year (FY) 2005/06 budget and
financial plan for FY2006/07, this report provides the mid-year status of the
current budget, recommends associated changes including classification and
compensation changes, provides an update on work efforts related to the key
Community Priorities for the current year and reports the results of a survey
of residents. The report proposes
refinement of the budget preparation and adoption schedule and requests
preliminary direction from Council to inform the development of the budget and
work plan, including community priorities.
MID-TERM BUDGET REVIEW
For the past several years, City Council has adopted General Fund operating and capital budgets that sought to bring projected expenditure and revenue growth in line with each other. Difficult choices and constrained project and program aspirations characterized the period. An annual emphasis on achieving expenditure savings and operating efficiencies and stronger than anticipated economic recovery this past year contributed to completing each year with positive General Fund positions.
Staff recommends that Council adopt mid-year expenditure changes. These include loan interest for the purchase of 1601 14th Street ($160,000), hazard mitigation costs associated with capital construction ($1,393,869), Anticipated construction close out costs and other expenses, such as signage and furniture, for Virginia Avenue Park ($392,300), construction of streetscape and safety improvements for 20th and Cloverfield Boulevard in the Pico Neighborhood ($540,000), payroll software improvements and fax/copier replacement ($200,000) and matching funds for a grant for a new Fire radio system ($224,100). Appropriations, totaling $299,066, of prior year unspent funds, funds that have been set-aside for implementation fo the Matrix study recommendation, and other adjustments bring the total General Fund appropriation to $3,209,335 million.
A summary of changes to the FY2004/05 Adopted Budget are detailed in the chart below (page 3). Descriptions of the proposed changes to revenues, expenditures and balance sheet transactions are shown on Exhibit A2. Exhibit A3 identifies budget changes requiring Council actions that transfer monies between departments but have no net impact on the adopted budget.
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FY2004-05 |
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Adopted
Budget |
Year-To- Date Changes |
Total |
Proposed |
Revised
Budget |
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Beginning Fund Balance |
32.5
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1 |
0.0 |
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32.5
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0.0
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32.5
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Revenues |
192.4
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0.0 |
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192.4
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2.0
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194.4 |
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Other Financing |
0.0 |
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27.1 |
2 |
27.1 |
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(0.0) |
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27.1 |
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Expenditures |
(186.1) |
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(46.3) |
3 |
(232.4) |
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(3.2) |
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(235.6) |
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Balance Sheet Transfers |
(7.7)
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8.8
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4 |
1.1
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5.1
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6.2 |
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Ending Fund Balance |
31.1
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(10.4)
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20.7 |
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3.9 |
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24.6 |
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1 Adjusts beginning
balance for audited FY2003/04 balance. |
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2 Civic Center Parking Structure
Lease/Rental Bonds. |
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3 Appropriates funds for
Civic Center Parking Structure ($27.1M), 1601 14th Street
Acquisition ($17.1M: $18.5
cost less appropriation from Public Safety Facility used for purchase -$1.4),
General Plan update ($1.6M)
and Convention & Visitors Bureau Tourism Promotion (0.5M). |
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4 Includes transfers for
use of funds
set-aside on the Balance Sheet for General Plan update ($1.6M) and Tourism
Promotion ($0.5M)
less set-aside for one time employee benefit increases ($3.3M). |
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During
the economic downturn, rates for service charged by Enterprise funds including
Water, Wastewater, Stormwater and Solid Waste
increased annually by the CPI. Like the
General Fund,
Solid Waste: FY2005/06
Water: FY2006/07
Wastewater: FY2007/08
Stormwater:
FY2009/10
During
budget preparation staff will review with Council the fund assumptions and
proposed actions to bring the funds into healthier condition.
Included at Exhibit B1 is a resolution establishing new position classifications and adopting salary rates for various classifications. The salary changes result from analysis of similar positions in comparable cities and internal equity factors and implement the study required by the 2001-2004 collective bargaining agreement with MEA. The resolution establishes the minimum salary for as-needed classifications at $11.50 in response to Council direction regarding establishment of a living wage for City employees.
At
Exhibit B2 is a listing of changes to budgeted positions and classifications
that have been reviewed and approved by the Director of Human Resources and the
City Manager and require approval by Council in order to be incorporated into
the FY2004/05 budget. No appropriation
is required at this time to implement the changes.
At Exhibit C is a status report on work
efforts associated with the Community Priorities adopted by Council with the
2004/05 budget. Each is a multi-year
objective requiring staff and financial resources as well as cooperative
efforts by multiple departments to accomplish.
Staff recommends that, with Council concurrence, these objectives remain
a principal focus for staff and financial resources in 2005/06 and into
2006/07. A two year work plan will be
proposed in conjunction with the budget.
It is estimated that 1000 or more homeless
individuals are in
Council may wish to consider the addition of a
community priority to address the impacts of homelessness in the
community. A potential work plan could
include steps such as the following, that would be refined in the proposed
budget should Council add this priority.
PREPARATION OF 2005/06 AND 2006/07 BUDGETS
In addition to public input provided in person, by fax or letter and/or over the internet throughout the year, the results of a random telephone survey of residents have been useful in shaping responsive budgets and work plans. For 2005 the survey of 400+ randomly selected households was conducted commencing January 17. A report of key findings will be presented to Council at the January 25, 2005 Council meeting and results will be posted on the City website.
By Charter provision, the Council adopts a budget annually. During the recent economic downturn, staff prepared for Council’s consideration both the one-year budget for adoption and, in addition, a tentative financial and work plan for a second year. The practice has been helpful to staff, Council and the community in anticipating multi-year work plans and the associated financial consequences.
With greater economic stability projected over the next several years, a logical refinement of this practice would be to move to biennial budget preparation and consideration. As captured in Exhibit D, the significant work effort associated with budget development would occur every two years. Council would continue to adopt the budget one year at a time as required by Charter, informed by annual public input. In adopting the budget for FY2005/06, for example, the Council would also signal satisfaction with the financial and work plan for FY2006/07. Following a mid-term status report at the end of the first year, the FY2006/07 budget would be presented for adoption, incorporating any changes required to ensure that it remains responsive to community priorities.
The
principal advantage of this refinement would be to concentrate the “heavy
lifting” of budget development in a single year and dedicate the time saved by
preparing a second year update to conducting other studies and analyses that
benefit services and operations. The
Charter requirements for annual adoption of a budget by vote of four or more
Council members would be observed.
Public input and Council direction would occur annually as they do
now. The longer range financial focus
afforded recently by the two-year budget time horizon would be maintained by
enhanced availability of the five year forecast, now primarily used as a staff
planning tool.
Preliminary
direction from Council is requested for development of the FY 2005/06 and 2006/07
budget and work plan, including community priorities.
The impact of adoption of the mid-year changes detailed in Exhibits A2, A3, B1 and B2 are incorporated in the chart on page 3 of this report.
RECOMMENDATION
Staff recommends that:
1) City Council approve the budget changes detailed in Exhibits A2 and A3 and position and classification changes detailed in Exhibit B2;
2) City
Council adopt a Resolution establishing various classifications and salary
rates for various positions in Exhibit B1;
3) Council
provide direction to staff for development of the FY 2005/06 and 2006/07
budgets and work plans, including community priorities.
EXHIBITS
A1: Summary of FY2004-05 Revenue and Expenditure Budget Changes
A2: Proposed FY2004-05 Mid-Term Revenue, Expenditure and Balance Sheet Changes
A3: Proposed FY2004-05 Mid-Term Budget Changes with No Net Budget Impact
B1: Resolution Establishing New Classifications and Adopting Salary Rates for Certain Positions
B2: Position and Classification Changes
C: Community Priorities Update
D: Rolling Biennial Budget Process
Prepared by:
Kathy
Chang, Principal Budget Analyst
Annette
Morales, Senior Budget Analyst
Prema
Krishnan, Senior Budget Analyst
Terese
Toomey, Senior Budget Analyst
Karen
Bancroft, Director of Human Resources
Julie Rusk
– Human Services Manager