TO:
Honorable Mayor and Members of the City Council
THROUGH:
David N. Carmany, City Manager
FROM:
Bruce Moe, Finance Director
SUBJECT:Title
Introduction of Fiscal Year 2013-2014 Proposed Operating Budget
RECEIVE AND FILE
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Recommended Action
RECOMMENDATION:
Staff recommends that the City Council accept a presentation of the Fiscal Year 2013-2014 Proposed Operating Budget.
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FISCAL IMPLICATIONS:
The City's fiscal year 2013-2014 budget (expenditures) totals $127.2 million across all funds. The General Fund budget totals $58.6 million, and reflects a use of unreserved fund balance of $1,065,307. While the operating portion of the General Fund is balanced with a surplus of $344,053, one-time capital projects and equipment totaling $1,409,360 result in the use of fund balance of $721,254.
The fiscal year 2012-2013 General Fund budget is expected to realize a surplus (revenues in excess of expenditures) of $2 million, which will result in an estimated beginning fund balance on July 1, 2013 of $18.1 million The FY 2013-2014 budget projects a General Fund balance on June 30, 2014 (after net transfers out) of $15.7 million. That amount has been designated to policy and economic uncertainty reserves. The ending fund balance includes a transfer of $1.1 million from the General Fund to the Capital Improvements Fund as part of the FY 2013-2014 budget.
It is important to note that the FY 2013-2014 budget fully allocates General Fund balances to reserves and CIP projects. As a result, any mid-year appropriations may require transfers in from CIP fund balance or the temporary use of policy reserves, depending upon the amount and timing of the need.
DISCUSSION:
Staff is pleased to present the proposed operating budget for Fiscal Year 2013-2014. The budget is the culmination of several months of work on the part of all departments as well as Finance staff.
Budget Highlights
While the City Manager's Budget Message serves as an executive summary of the spending plan for fiscal year 2013-2014, the following are a few highlights of the proposed budget:
- Ten full time positions have been funded, most of which are currently filled at a part time level. These additions and upgrades are the result of increased service level demands and reinstatement of positions reduced in prior years. Historically, this organization has operated on minimal staffing levels. As service demands have continued to rise, we have found ways to make it work through existing staff, or by adding part time labor. But this approach ultimately has consequences: existing resources are strained beyond acceptable levels; and part time labor is utilized where permanent full time staffing is more appropriate.
Many of the aforementioned positions are the result of consolidating part time hours. The City has extensively used part time labor to provide important services such as managing Parks & Recreation programs, issuing building permits, generating utility bills and staffing the City's Information Technology function. However, earlier this year the City Council expressed concern that reliance on part time labor has its own issues including assignment of mission-critical responsibilities to employees who may leave if presented with full time opportunities elsewhere, taking with them, valuable and costly training and skills we have provided. Additionally, the provisions of the new Affordable Care Act (e.g. Obamacare) will institute additional regulations on part time labor in certain situations, reducing the cost benefit of part time employees.
While the addition of the positions adds to the city's labor costs, the need reflects the reality of the demands for service that have challenged our abilities to serve the community. The key is finding the right balance. Employing civil servants on a full-time career basis allows the city to attract and retain individuals who are highly skilled and committed. But the benefits of a large, full-time staff to cover every possible contingency must be balanced against the need to use personnel efficiently and economically. With financial resources available, these full time positions help meet service commitments.
- Technology projects identified in the Information Systems Master Plan have been funded across several funds, and total $1.575 million.
- Debt service in the General Fund has increased by $875,668 (48%) to reflect the new Certificates of Participation (COPs) issued to refinance the Metlox and Water-Wastewater COPs which are now a General Fund liability (the refunding saved the City $2.8 million)
- General Fund revenues are expected to increase by 8.3% from fiscal year 2012-2013 levels. The City's largest source, Property Tax, is estimated to increase by 4.3% over fiscal year 2012-2013 levels. Sales Tax revenues are projected to increase by 2% over the current year.
- Measure R continues to support the City's Dial-A-Ride (Proposition A) activities due to insufficient revenues in Proposition A to meet current service level demands. The subsidy totals $103,967 for fiscal year 2013-2014
- The Street Lighting and Landscape Fund will receive a General Fund subsidy of $267,665 in FY 2013-2014. This has been the case for the past several years and will continue until new assessments are approved by property owners.
- Storm Water assessments are insufficient to adequately fund mandates and requirements of the National Pollution Discharge Elimination System (NPDES). While the General Fund is not directly funding a subsidy in FY 2013-2014, fixed assessments and rising costs will cause an imbalance in 2014-2015 and beyond, requiring a General Fund transfer of over $400,000 which grows to nearly $800,000 in five years. This issue is on the City Council Strategic Plan for review and action.
- Several enterprise funds are not meeting established financial policy reserves. These include Storm Water, Wastewater, and Refuse. The Wastewater Fund in particular will need to be reviewed for rate structure since it is forecast to run a deficit and will require support by fiscal year 2014-2015.
- A General Fund transfer of $1,138,637 to the CIP Fund is included in support of general capital improvements. Future transfers in support of the CIP Fund will be diminished if not eliminated due to subsidies in other funds (Storm Water, Street Lighting) unless otherwise mitigated.
- The budget does not include funding of a new joint use agreement with the school district, for which the City Council will provide direction during the budget process.
Five Year Forecast
Staff has prepared a five year forecast which is attached to this report, and will discuss the projections during the budget presentation. Key points to note include the aforementioned Storm Water and Street Lighting Fund subsidies from the General Fund, which have a long term impact on the City's ability to fund capital improvement projects. To the extent remedial action is not taken to adjust assessments through a Proposition 218 vote, projected surpluses in the General Fund will be utilized to support Storm Water and Street Lighting services. Issues must also be resolved in the Wastewater, Proposition A, and Capital Improvement funds in order to maintain equity.
As in past years, the budget document presents detailed information about each department's operations, service indicators, goals and accomplishments, staffing levels, funding sources and proposed expenditures. Efforts were made to improve service indicators to illustrate value and/or workload efficiency and effectiveness.
Capital Improvement Project Process
Historically, the City Council has considered and approved the annual Capital Improvement Project (CIP) budget concurrently with the adoption of the Operating budget (July 1). It has been successful because there has been little in the way of funding available for those projects whose source of funds relied on and competed with general funds and the operating budget. In the past few years of constrained funding there were few dollars with which the City had available for capital projects and really little to discuss in the way of the Capital budget.
In the case of enterprise funds, where revenues are generated through user fees, there has been increased funding available for projects in both water and sewer and a corresponding increase in the number of projects undertaken. Typically those projects are well defined to meet maintenance criteria and do not generate much public discussion during the operating budget deliberations.
The combination of few capital projects and well defined enterprise fund projects have allowed the CIP budget to be reviewed and adopted within the operating budget timeline.
In the upcoming CIP budget, there will be a minimum of two million dollars available for CIP Fund projects. In addition, the City will have completed a facility needs assessment of eighteen facilities that will identify building needs and rehabilitation costs to assist the Council in deliberating in what manner they desire to use available funding. Given the wide array of needs to be considered, staff determined that additional and separate time from the general operating budget in which to analyze data and options, combined with a more robust public input process, would be beneficial. Accordingly, a timeline for the consideration of projects, public comment, and regulatory deliberation and adoption of the CIP is proposed as follows:
- City call for projects from all internal City departments - May 1-31
- City receive Building assessment study - July 1
- Preliminary project priority established - July 15
- Public meeting to gather input - July/August
- Preliminary CIP to Council for direction - August 20
- CIP to PPIC (for informational purposes) - September
- CIP to Planning Commission (concurrence with City General Plan) - September
- Presentation to City Council for review - November 5
- Council adoption of CIP - December 2
Since the CIP process will occur in the months following adoption of this budget, staff based CIP funding on the second year of the previously adopted five year plan. As new projects are approved in the CIP plan, the fiscal year 2013-2014 budget, as well as the five year forecast, will be amended to reflect the changes.
Public Engagement
In an effort to further engage the community in the City's budgeting process, staff sent an invitation to households announcing the budget meeting schedule, which is as follows:
May 7 - Budget Introduction - 6:00 PM - City Council Chambers
May 9 - Council Budget Study Session #1 - 6:00 PM Police/Fire Conference Room
Scheduled Departments: Parks & Recreation, Human Resources, Public Works
May 14 - Council Budget Study Session #2 - 6:00 PM Police/Fire Conference Room
Scheduled Departments: Fire, Police
May 16 - Council Budget Study Session #3 - 6:00 PM Police/Fire Conference Room
Scheduled Departments: Community Development, Management Services, Finance
June 4 - Budget Public Hearing & Adoption - 6:00 PM Council Chambers
These dates have also been included on the City's calendar of events for which e-notifications have been sent. An advertisement has been included in The Beach Reporter and a press release with the information was provided to the media.
Finally, funds are budgeted in fiscal year 2013-2014 to further promote public engagement in the budgeting process.
CONCLUSION:
City staff is pleased to present the fiscal year 2013-2014 operating budget. The document is available on-line at the City's website (www.citymb.info) and in hardcopy at City Hall and the County Library.
Attachments:
1. Proposed 2013-2014 Operating Budget
2. Five-Year Forecast
3. Letter Inviting Residents to Budget Meetings
4. Ten-Year General Fund Comparison with FTE