TO:
Honorable Mayor and Members of the City Council
THROUGH:
Bruce Moe, City Manager
FROM:
Steve S. Charelian, Interim Finance Director
Henry Mitzner, Controller
Libby Bretthauer, Financial Analyst
SUBJECT:Title
Conduct Public Hearing and Adoption/Approval of the Fiscal Year 2019 and 2020 Operating Budgets and Gann Appropriation Limit for Fiscal Year 2019 (Interim Finance Director Charelian).
a) CONDUCT PUBLIC HEARING
b) ADOPT RESOLUTION NOS. 18-0084 AND 18-0085
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Recommended Action
RECOMMENDATION:
Staff recommends that the City Council: a) conduct a Public Hearing; b) adopt Resolution No. 18-0084 adopting the FY 2018-2019 Operating Budget, approving the FY 2019-2020 Operating Budget subject to modification prior to the commencement of that fiscal year, and authorizing the City Manager to take certain personnel-related actions; and c) adopt Resolution No. 18-0085 establishing the Appropriation Limit for FY 2018-2019.
Resolution No. 18-0084 includes authorization for the City Manager to make salary grade changes to the positions of Police Records Manager and Senior Deputy City Clerk. Additionally, the City Council is authorizing the City Manager to approve specifications and salaries for the following new classifications that are included within the Fiscal Year (FY) 2018-2019 Operating Budget:
• Deputy City Clerk
• Engineering Technician I/II/III
• Information Technology Analyst
• Lead Records Technician/Matron
• Senior Financial Analyst
• Senior Recreation Manager
Body
FISCAL IMPLICATIONS:
This budget is a biennial spending plan covering fiscal years 2018-2019 (“FY 2019”) and 2019-2020 (“FY 2020”). With the passage of resolution 18-0084, the City Council will be adopting the FY 2019 Budget (for the fiscal year beginning July 1, 2018 through June 30, 2019) and approving the FY 2020 Budget. The FY 2020 Budget will be adopted, as modified, one year from now before the fiscal year commences on July 1, 2019.
The FY 2019 Budget, including all funds, estimates total revenues of $125,285,419 and total expenditures of $151,986,658. Staff recommended adjustments to the Proposed Budget are noted in Exhibit “A” of Resolution No. 18-0084. Prior to the adjustments, the General Fund was structurally balanced with an anticipated surplus of $773,246. After the adjustments, General Fund expenditures ($75,689,871) exceed revenues ($75,505,117) by $184,754 due to the carry forward re-appropriation of funds for safety and security measures at Manhattan Beach Unified School District (MBUSD) facilities. Without this $1 million re-appropriation, General Fund revenues would exceed expenditures by $815,246.
The fiscal year 2020 budget includes revenues of $125,031,863 and expenditures totaling $125,808,281 across all funds. The General Fund is balanced with revenues of $75,199,750 and expenditures of $74,625,671 resulting in a projected surplus of $574,079. Year-end surpluses add to unreserved fund balance unless allocated by the City Council for expenditure.
The total FY 2017-18 year-end General Fund balance is estimated to be $23.2 million, of which $5,101,580 is unreserved. This year-end estimate has been adjusted to reflect the re-appropriation of $1,000,000 for MBUSD facilities and the correction to the CIP Fund transfer for Fire Station #2 Design ($20,000). The FY 2019 budget projects a General Fund balance on June 30, 2019 (after adjustments and net transfers out) of $20.8 million. Within the total fund balance, $18.9 million has been designated to policy and economic uncertainty reserves. The balance of $1,847,384 is unreserved.
Please note that all annual surpluses and estimated fund balances listed in the budget and five year forecast include up-to-date pension rate projections.
BACKGROUND:
The Proposed Two-Year Operating Budget for FY 2019 and FY 2020 was presented at the City Council Meeting on May 1, 2018. The overview presentation outlined budgeted revenues, expenditures and changes in the fund balance due to transfer activity. For highlights, a reading of the City Manager’s Budget Message within the Budget document is recommended.
Subsequent budget discussions occurred during Budget Study Sessions held on May 8th and 22nd and during the June 5th City Council meeting. To date, no changes from the Proposed Budget (as presented on May 1, 2018) have been directed by the City Council.
DISCUSSION:
The Proposed Two-Year Operating Budget is attached to this report and available on the City’s website at www.citymb.info/Budget <http://www.citymb.info/Budget>.
The Proposed Budget includes several service delivery investments to address priorities of the City Council and community. Unless noted otherwise, the following investments are included in the FY 2019 Budget:
• Public Safety enhancements
o Public School Safety Measures ($1,000,000) at MBUSD facilities
o Radio Interoperability Equipment ($1,273,895) for Police, Fire and Public Works Departments
• Community Development Policy Research and Studies
o Environmental Sustainability - $150,000 is budgeted to initiate the climate action plan and climate resiliency program
o Engineering and Traffic Survey - $50,000 is budgeted to update the survey as required by the State in order for the City to legally enforce posted speed limits and conduct speed enforcement
o Local Traffic Impact Guidelines - $80,000 is budgeted in FY 2020 to address impacts of new developments
o Short-Term Rental Policy Compliance Services - $80,000 is budgeted in FY 2020 should the City decide to revisit its short-term rental policy
• Technology Investments to replace existing end-of-life resources:
o Enterprise Resource Planning (ERP) Software - $718,892
o Permitting/Land Management Solution - $380,240
o Enterprise backup solution and Storage Area Network (SAN) - $409,000
The Proposed Biennial Budget also included several staffing adjustments to meet workload demands and enhance efficiencies. These changes will result in the net addition of four full-time employees when considering the elimination of two high-level management positions and the addition of six rank-and-file positions. The position changes, and their associated budgetary impacts in FY 2019, include:
Management Services
• Eliminate Assistant City Manager (Savings of $319,962)
• Eliminate Economic Vitality Manager (Savings of $163,385)
• Upgrade Management Analyst to Senior Management Analyst ($5,000)
City Clerk
• Reclassify Administrative Clerk II to Deputy City Clerk ($10,000)
• Change salary grade of Senior Deputy City Clerk classification from MC1 to MC2 ($10,000)
Finance
• Upgrade Financial Analyst to Senior Financial Analyst ($5,400)
• Add Management Analyst ($52,007 after part-time offset)
Parks and Recreation Re-organization (Overall net savings of $83,500)
• Eliminate one Recreation Manager
• Upgrade one Recreation Manager to Senior Recreation Manager
• Upgrade two Recreation Supervisors to higher-level Recreation Program Supervisors
• Add one Recreation Coordinator
Police Department
• Add Administrative Clerk I/II ($37,928 after part-time/overtime offset)
• Upgrade of two Records Technician/Matrons to supervisory “Lead” positions ($8,256)
• Change salary grade of Police Records Manager classification from MC2 to MC4 ($2,003)
Fire Department
• Increase hours for part-time Emergency Services Coordinator ($24,460)
Community Development Department
• Add Administrative Clerk I/II ($6,964 after part-time offset)
• Add Engineering Technician I/II/III ($87,609)
Public Works
• Reinstate second Electrician (Savings of $17,153)
• Reinstate second Public Works Inspector ($82,261)
• Upgrade Engineering Technician series from I/II to I/II/III ($9,294)
• Downgrade one Maintenance Supervisor position to the level of Maintenance Worker III (Savings of $29,985)
• Add part-time Management Analyst in Water Division ($34,464)
Information Technology Department
• Change one IT Specialist Position to Senior Management Analyst (No change to budget)
• Change one vacant Network Administrator position to Information Technology Analyst (No change to budget).
New job classifications are required for the positions of Deputy City Clerk, Engineering Technician I/II/III, Information Technology Analyst, Lead Records Technician/Matron, Senior Financial Analyst, and Senior Recreation Manager. Additionally, salary grade changes for the positions of Police Records Manager and Senior Deputy City Clerk are recommended to appropriately reflect each position’s current job scope and duties.
Staff recommends the City Council authorize the City Manager to approve the job specifications and salary ranges of these new and revised classifications once finalized by the Human Resources Department.
As typical during the budget development and review process, a few minor adjustments are needed. The changes recommended by staff are included in Exhibit A of Attachment #1 (Resolution 18-0084). FY 2019 changes include:
• Streets and Highways Fund Revenues: The Proposed Budget included preliminary Gas Tax revenue estimates based on the State’s initial funding projections released in January. Revised estimates were announced in May after the Board of Equalization failed to enact the $0.04 per gallon increase anticipated in the January estimates. The revenue impact resulting from this decision is a reduction of $122,196 in FY 2019. However, FY 2020 is not impacted at this time due to language within SB1 (enacted in 2017) that ended the variable rate adjustments after FY 2019. Staff will return with updated funding estimates next year prior to the adoption of the FY 2020 budget.
• MBUSD Safety and Security: The City appropriated $1,000,000 in FY 2018 for safety and security measures at MBUSD facilities. Although appropriated, these funds have remained unspent while MBUSD and City staff finalize their safety enhancement plans. This re-appropriation will allow for the expenditure to occur in FY 2019.
• Elimination of Electrical Contract: With approval of the reinstated Electrician position, a reduction in Electrical contract services is necessary. Contract savings across the funds identified in Exhibit A total $159,625; net savings after reinstating the position is $17,153. Since FY 2019 includes one-time equipment costs necessary for the position, this savings will increase in FY 2020.
• Fleet Fund Accounting Adjustments: The Proposed Budget included vehicle purchases for the Public Works Inspector and Electrician positions, which were budgeted in the respective General Fund programs of each reinstated position. Likewise, the purchase of a small utility vehicle to house Closed Caption Television (CCTV) equipment is budgeted in the Sewer Fund. For accounting purposes, these net new vehicles will be purchased from the Fleet Fund with monies transferred in from the respective originating funds.
• Changes to Capital improvement projects and purchases:
o Streets & Highways Fund: Added Strand Resurfacing Project ($200,000) using Gas Tax Funds; Added Marine Resurfacing Project from Sepulveda to Aviation ($598,259) using SB1 Road Maintenance and Rehabilitation Funds; Moved Liberty Village Street Resurfacing (-$275,000) to Measure M Fund; Reduced Annual Residential Street Resurfacing Program
(-$125,000) in line with aforementioned Gas Tax revenue reduction.
o Measure M Fund: Added Liberty Village Street Resurfacing Project ($275,000).
o Water Fund: Added monies to purchase the equipment Well 11A Variable Frequency Drive (VFD) equipment ($125,000) and Well 15 Variable Frequency Drive (VFD) Installation ($300,000).
o Refuse Fund: Moved Hydrodynamic Trash Capture Device Installation ($800,000) from FY 2020 to FY 2019.
FY 2020 adjustments include the elimination of the Electrical Services contract and deletion of the Hydrodynamic Trash Capture device in the Refuse Fund.
Staff recommends that these changes are incorporated into the final budget and adopted with Resolution No. 18-0084 (Attachment #1), which adopts the first year of the biennial budget (FY 2019) and approves the second year (FY 2020). Additionally, the resolution contains approval to adjust the Police Records Manager and Senior Deputy City Clerk positions in the salary schedule. The revised FY 2019 and FY 2020 Operating Budgets, as first presented in the Proposed Budget (Attachment #3) and modified per Exhibit A of Resolution No. 18-0084, are incorporated into the revised Five Year Forecast (Attachment #5) to provide an updated assessment of fund balances and reserves.
GANN APPROPRIATIONS LIMIT
In 1980, California voters adopted Article XIIIB of the California State Constitution, commonly referred to as the Gann Initiative or Gann Appropriations Limit, placing limits on the amount of tax proceeds that State and local agencies can appropriate each year. The City’s limit is adjusted each year for inflation, population and other factors.
On June 5, 1990, Proposition 111 was voted into California law. Among other provisions, Proposition 111 provided for changes in the calculation of the Gann Appropriation Limit. The annual adjustments to the spending limit were liberalized by Proposition 111 to be more closely linked to the rate of economic growth in personal income or the percent increase in the local tax roll due to nonresidential property construction. Additionally, cities can choose to use the rate of change in population either within the City or County, whichever is higher. The City utilized elements of these adjustment factors in calculating this year’s Gann Appropriation Limit. The Gann calculation is reviewed annually by the City’s external audit firm as part of the annual audit process.
Staff has calculated the FY 2018-2019 Gann limit to be $79,412,267. The City’s tax proceeds subject to the FY 2018-2019 Gann Limit equal $51,452,791. Therefore, the City is under the Gann limitation by $27,959,476 and in compliance with state law. This Gann limit calculation is attached (Attachment #4).
PUBLIC OUTREACH/INTEREST:
Ads were published in The Beach Reporter on April 19, 2018 and May 3, 2018 inviting the community to attend Budget Study Sessions held in May. Public Hearing notices were published on May 31st and June 7th for the adoption of the Budget and Capital Improvement Plan. Additional outreach was conducted using social media and eNews notifications.
ENVIRONMENTAL REVIEW
The City has reviewed the proposed activity for compliance with the California Environmental Quality Act (CEQA) and has determined that there is no possibility that the activity may have a significant effect on the environment; therefore, pursuant to Section 15061(b)(3) of the State CEQA Guidelines the activity is not subject to CEQA. Thus, no environmental review is necessary.
LEGAL REVIEW
The City Attorney has reviewed this report and determined that no additional legal analysis is necessary.
Attachments:
1. Resolution No. 18-0084 (Budget Adoption)
2. Resolution No. 18-0085 (Gann Appropriations Limit)
3. Proposed Biennial Budget for Fiscal Years 2019 and 2020
4. 2018-2019 Gann Appropriation Limit Calculation
5. Updated Five Year Forecast