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City of Campbell, California Fiscal Year 2010 – 2011 Operating / Capital Budget & 2011 – 2015 Five Year Capital Improvement Plan Prepared by the Finance Department Jesse Takahashi, Finance Director Under the Direction of Daniel Rich, City Manager Cover Photo – City of Campbell Events ---PAGE BREAK--- TABLE OF CONTENTS Budget Message Budget Message from the City Manager i Budget Summary ii Operating Budget iii Capital Budget iv Revenues iv General Fund iv Sales Tax v Property Tax vi Transient Occupancy Tax vii Charges for Services viii Investment Income ix License & ix Lease Rental Income ix Franchise Tax ix Other General Fund Revenues x Revenue - Other Funds x Special Revenue Funds x Debt Service Funds x Internal Service Funds x Expenditures xi Employee Services xi Salaries and Benefits xi Multi-Year Comparative Analysis xii General Fund – Revenues and Expenditures xii Redevelopment Agency (RDA) Funds xiii Internal Service Funds xiii Special Revenue Funds xiii Gas Tax Fund xiii Lighting and Landscape District Fund xiv Environmental Services Fund xiv Economic and Fiscal Issues Facing the City xiv Fiscal 11 Major Work Plan Items xvii FY 10 Significant Accomplishments xvii ---PAGE BREAK--- TABLE OF CONTENTS Budget Message – Continued Strategic Plan and Performance Reporting xvii Financial Policies xvii Basis of xvii Level of Budgetary Control xviii Budget Development xviii Budget and Financial xviii Conclusion and xix Exhibit 1, FY 10 Significant Accomplishments xx Exhibit 2, Financial xxiv Exhibit 3, Budget Correction xxvix City & Community Information General 1 City Officials 2 City Administrative 2 Community Vision 3 Community 3 Mission 3 Campbell Statement of 4 Campbell Strategic Plan Elements & Objectives 6 Council Committee 8 Commissions, Committees and Advisory Boards 9 Permanent Authorized Budgeted Personnel Positions 10 Frozen/Unfunded 13 Campbell's Heritage From 1846 to 14 Campbell Community Profile - Demographic Statistics (General) 16 Campbell Community Profile - Demographic Statistics (Infrastructure) 17 Campbell Community Profile - Demographic Statistics (Housing) 18 Campbell Community Profile - Demographic Statistics (Employment & Education) 19 Major Employers (Listed 20 Principal Property Taxpayers (Listed 20 Top 40 Sales Tax Producers (Listed Alphabetically) 21 ---PAGE BREAK--- TABLE OF CONTENTS Financial Summaries Total City & RDA Revenue Summary 23 Total City & RDA Revenue by Fund (Includes Capital Project Revenue & Transfers-In) 24 Total City & RDA Expenditure Summary 25 Total City & RDA Expenditures by Fund (Includes Capital Project Expenditures & 26 Total City & RDA Expenditures by Type 27 General Fund Revenue Summary and 28 General Fund Expenditure Summary and 29 General Fund Expenditures by Type 30 Schedule of Interfund Transfers (Operating & Capital) Fiscal Year 31 Major General Fund Reserves/Designations Comparative Statistics & Chart 32 City of Campbell Operating/Capital Budget – Fiscal Year 2010-2011 All Funds Estimated Revenues 34 City of Campbell Operating/Capital Budget – Fiscal Year 2010-2011 Summary of Expenditures by Government Function and Fund 40 Debt 44 Debt Service 44 General Obligation Debt 44 Certificates of 44 Certificates of Participation FY 11 to Maturity 44 Tax Allocation 45 Redevelopment Agency Tax Allocation Bonds - FY 11 to Maturity 45 Annual Debt Service Payments to Maturity 45 Special Assessment Debt - FY 11 to Maturity 46 Gann Appropriations 47 Sales Tax Comparison with Other 48 Property Tax Revenue Comparison with Other 49 Transient Occupancy Tax Comparison with Other 50 Franchise Fee Revenue Comparison with Other Jurisdictions 51 Building Permit Revenue Comparison with Other 52 ---PAGE BREAK--- TABLE OF CONTENTS Fund Balances Fund Balance Analysis - Fiscal Year 2010-2011 53 Fund Balance Analysis - Fiscal Year 2009-2010 54 General Fund (101) Revenues - Expenditures - Fund Balances 55 Gas Tax Fund (202, 203, 204) Revenues - Expenditures - Fund Balances 57 Lighting District Fund (207) Revenues - Expenditures - Fund Balances 58 Housing & Community Development Act Fund (208) Revenues - Expenditures - Fund 59 Environmental Services Fund (209) Revenues - Expenditures - Fund Balances 60 Redevelopment Agency Fund (223) Revenues - Expenditures - Fund Balances.......... 61 1915 Act Bond Fund (360 & 367) Revenues - Expenditures - Fund 62 Redevelopment Agency Fund (364) Revenues - Expenditures - Fund Balances.......... 63 C.O.P. Debt Service Fund (366) Revenues - Expenditures - Fund 64 1997 C.O.P. Debt Service Fund (368) Revenues - Expenditures - Fund Balances....... 65 Capital Projects - RDA Fund (434) Revenues - Expenditures - Fund Balances............ 66 Capital Projects Fund (435) Revenues - Expenditures - Fund 67 Motor Vehicle Pool Fund (641) Revenues - Expenditures - Retained Earnings 68 Information Technologies Fund (647) Revenues - Expenditures - Retained Earnings.. 69 Workers’ Compensation Fund (690) Revenues - Expenditures - Retained Earnings.... 70 City Council City 71 Campbell City Council Organization Chart 72 Summary 73 City Council Program (501) 74 City Administration City 81 City Manager’s Office Organization Chart 82 City Manager Department Summary 83 Administration Program 85 City Clerk Program 92 Human Resources Program 99 Workers’ Compensation Self-Insurance Program 107 ---PAGE BREAK--- TABLE OF CONTENTS Recreation & Community Services Recreation & Community Services 113 Recreation & Community Services Organization 114 Recreation & Community Services Department 115 Administrative Services Program (524) 119 Senior Nutrition Program 125 Adult Services Program 131 Campbell Community Center Program (527) 137 Museum Services Program 143 Heritage Theatre Program 151 Sports, Aquatics & Fitness Program (531) 159 Trips / Tours & Classes Program (532) 165 Finance & Non-Departmental Finance 171 Finance Department Organization 172 Finance Department 173 Accounting Services Program 174 Non-Departmental Program (540) 181 City Treasurer Program 189 Information Technology Program 195 Transfers Out - General Fund (101.980) 205 Transfers Out - Miscellaneous Funds (Misc. 207 Community Development Community 209 Community Development Organization Chart 210 Community Development Department Summary 211 Administration Program 212 Current Planning Program 218 Policy Development Program 224 Housing Program (553) 230 Building Codes Regulation Program (554) 236 CDBG Program (555) 243 ---PAGE BREAK--- TABLE OF CONTENTS Legal Services Legal 249 Legal Services Organization 250 Legal Services Program 251 Legal Services Program 252 Public Safety Public Safety 259 Police Department Organization 260 Public Safety Program 261 Administration Program 262 Communications Program 268 Records Program (603) 274 Special Enforcement Program (604) 280 Field Services Program 287 Fire Protection Services Program (610) 295 Public Works Public Works 299 Public Works Department Organization 300 Public Works Department 301 Department Administration Program 303 Environmental Services Program 309 Transportation Engineering Program (720) 312 Engineering Program (730) 319 Land Development / Environmental Program (740) 325 Maintenance Administration Program (745) 332 Vehicle & Equipment Maintenance Program 338 Street Maintenance Program (760) 346 Signals & Lighting Maintenance Program (770) 353 Parks Maintenance Program 360 Building Maintenance Program (530) 368 Redevelopment Agency Redevelopment 377 ---PAGE BREAK--- TABLE OF CONTENTS Redevelopment Agency Department Summary 378 Redevelopment Agency (Continued) Administration Program 379 Debt Service Program 386 20% Housing Program (817) 392 Debt Service Debt Service Programs (541 – 399 L.I.D. Debt Service 400 C.O.P. Debt Service 403 1997 C.O.P. Debt Service 405 Capital Improvement Plan Capital Improvement Plan 407 Background 407 Summary 408 Project Funding Sources 408 Environmental 409 Assumptions 409 Project Selection Criteria 409 Capital Improvement Plan Summaries - Exhibit 411 By Responsible 411 By 412 By Funding 413 Capital Improvement Plan Five Year Cash Flow Analysis - Exhibit 415 FY 10-11 Through FY 14-15 - General Fund (101) 415 FY 10-11 Through FY 14-15 - Funds 209, 212, 216, 218 416 FY 10-11 Through FY 14-15 - Funds 202, 295 417 FY 10-11 Through FY 14-15 - Funds 434, 435, 437 418 Capital Improvement Plan Flow Chart 419 Capital Projects - Exhibit 420 Capital Improvement Plan - By Project - Category & Funding 446 Capital Projects Program 447 ---PAGE BREAK--- TABLE OF CONTENTS Transfers-Out - Capital Projects Program (Misc. 451 Budget Reference Materials Resolution Adopting the City’s Operating & Capital Budget for FY 2010-11 453 Resolution Adopting the Redevelopment Agency Operating & Capital Budget for FY 454 Resolution Adopting the Capital Improvement Plan FY 455 Budget 456 FY 2010-2011 Budget Calendar 457 Summary of Budget Process 458 Budget 458 Budget Exhibits 459 Budget Exhibits Flow 460 Program / Department / Fund 461 List of 462 List of 463 Fund Descriptions 465 Revenue 468 Chart of Accounts – Revenues 470 Chart of Accounts – 477 Glossary of 485 Glossary of Budget Terms 491 Index 497 ---PAGE BREAK--- - i - Honorable Mayor and Members of the City Council: I am pleased to present the fiscal year 2010-11 (FY 11) operating and capital budget. The budget is intended to serve as a policy document, a financial plan, a communications device, and an operations guide. The budget reflects the policies, goals, programs and service priorities that the Council and staff are committed to providing to the Campbell community. The City has managed through difficult economic times for the past 8 years with the most recent year presenting the greatest challenge to-date. Described by many economists and experts as the Great Recession, and likely the worst economic period since the Great Depression, the past couple of years have been very damaging to the fiscal health of many municipalities. From the collapse of the housing and credit markets to a significant rise in unemployment to the troubles in the corporate financial world, the recession has been unprecedented in scope and magnitude, affecting markets and economies around the world. In the latter half of FY 10, however, it appears the bad economic news has subsided with stabilization in the housing and credit markets while unemployment has also appeared to level out. While the economy has ceased from deteriorating further, it has not yet showed significant progress of recovery. In fact, because unemployment is still in double digits, it is widely believed a sustained recovery will take many years to occur. After experiencing additional shortfalls in revenues this past year, the City, once again, was forced to undertake significant cost cutting steps on top of the $4 million cuts it had already made over the preceding 5-6 years. This led to the development of another set of budget correction strategies consisting of more than 130 separate items and totaling close to $3.2 million (Exhibit 3 of this letter contains the details of the budget correction strategy). Among other things, it involved freezing additional positions, voluntary and involuntary work hour reductions, and offering early retirement incentives. As a result, the budget was balanced without the need to draw from the City’s Reserve for Economic Fluctuations. This reserve is specifically established to buffer the City from significant downturns in the economy lasting more than a single year. The City’s reserve policies require that whenever this reserve falls below $4 million or the City’s five-year financial projections indicate the reserve will fall below this minimum, a plan be submitted to the Council by the following year’s budget adoption to get back to the target within five years. The budgeted level of proposed expenditures are considered necessary and proper, taking into consideration the City’s Strategic Plan objectives of providing quality services to our residents. Reserve requirements have been maintained consistent with established and updated financial policies. The result is an overall budget that continues most of the program and service levels from the prior year, which the residents of Campbell have indicated are important to them. However, there are a number of service level reductions incorporated in this year’s budget as a result of the budget correction strategies. ---PAGE BREAK--- - ii - BUDGET SUMMARY The combined FY 11 operating and capital budget totals $60.1 million, comprised of $49.8 million for the City and $10.3 million for the Redevelopment Agency (RDA). Related revenue sources total $60.6 million comprised of $50.2 million for the City and $10.4 million for the RDA, indicating a balanced budget in which total revenues, including the use of reserves, meet or exceed total expenditures. Excluding capital transfers, the City’s budget would be $46.2 million and the RDA’s budget would be $10.3 million. The excess of total combined revenue over expenditures is attributable to building a small surplus into the General Fund budget to replenish the Economic Fluctuation Reserve over the next 5 years. The following table depicts the total operating and capital budget for the City and the RDA at their respective legal levels of appropriation compared to the prior fiscal year: Total Total $ Change Operating Capital Adopted Operating Capital Adopted Operating % Budget Budget Budget Budget Budget Budget Budget Change City 42,610,006 $ 3,580,000 $ 46,190,006 $ 45,250,915 $ 2,458,250 $ 47,709,165 $ (2,640,909) $ -5.8% Capital Transfers - 3,580,000 3,580,000 - 2,364,500 2,364,500 - n/a Total City 42,610,006 7,160,000 49,770,006 45,250,915 4,822,750 50,073,665 (2,640,909) -5.8% RDA 10,331,628 - 10,331,628 8,070,709 - 8,070,709 2,260,919 28.0% Capital Transfers - - - - 93,750 93,750 - n/a Total RDA 10,331,628 - 10,331,628 8,070,709 93,750 8,164,459 2,260,919 28.0% Total City & RDA 52,941,634 $ 7,160,000 $ 60,101,634 $ 53,321,624 $ 4,916,500 $ 58,238,124 $ (379,990) $ -0.7% FY 2010 - 11 FY 2009 - 10 Overall, the total operating budget is 0.7% lower than the previous year. The City’s operating budget, by itself, is lower by $2.6 million The RDA expenditures increase is attributable to a higher tax sharing obligation to the County and other taxing jurisdictions in addition to an expected $0.5 million State takeaway. Operating Budget: The total operating portion of the budget is $52.9 million, comprised of $42.6 million for the City and $10.3 million for the RDA. Related revenue sources total $53.4 million comprised of $43.0 million for the City and $10.4 million for the RDA. The budget reflects expenditures that are expected to recur on an annual basis as well as those that may be non- recurring or one-time in nature. The recurring expenditures are generally funded with on-going operating revenues that are expected to be received annually. Total City & RDA Operating Revenues - $53.4 Million Sales Tax 17% Property Tax 32% Operating Transfers 8% Rents & Leases 3% Special Assessments 2% Licenses & Permits 2% Investments 3% Charges for Services 9% Inter-Govt'l. 3% Other Taxes 8% Other Revenue 7% Reserves 6% ---PAGE BREAK--- - iii - Non-recurring or one-time expenditures are typically funded with a combination of one-time revenues, specific reserves and/or unreserved fund balances, all of which are considered to be revenue sources for purposes of presentation within this document. The FY 11 operating budget relies on a total of $3.1 million in non- recurring revenues, reserves and fund balances, to fund operating expenditures. The largest component is $2.2 million from RDA tax increment reserves needed to fund tax sharing obligations and the State takeaway. An additional $0.5 million in General Fund reserves will be used to fund specific expenditures. No funding from the Economic Fluctuations Reserve is contemplated this year. General Fund operating revenues and expenditures are budgeted at $33.9 million and $33.5 million, respectively, representing a $2.0 million reduction in expenditures from the FY 10 adopted budget. The $0.4 million difference represents budgeted surplus intended to replenish the Reserve for Economic Fluctuations back to its target of $6 million over the next five years. Capital Budget: The City’s Capital Improvement Plan (CIP) is used both as a short and medium-range plan for the acquisition, improvement and/or renovation of City assets, infrastructure in particular. The CIP is reviewed and updated annually by a committee of senior management staff. It includes projects and equipment items valued in excess of $25,000. Also included are studies or evaluations that will potentially lead to a capital project. Capital items with a value of less than $25,000 are included in the operating budget in the appropriate capital outlay line item or as a building maintenance special project if related to facility improvements. The CIP is presented on a five-year horizon in which project scheduling is dependent upon various factors including the urgency of need, availability of funding and staff workload to name a few. The first year of the CIP is incorporated within the operating / capital budget document, and formally appropriated by the City Council. The remaining years function as a project planning and budgeting tool. Any expected operating budget impacts resulting from the CIP are General Fund Operating Revenue - $33.9 Million Investment Income 2% Licenses & Permits 3% Property Taxes 27% Franchise Fees 8% Reserves 2% Rents & Leases 4% Charges for Services 13% Hotel Tax 4% Operating Transfers 4% Other Revenue 6% Sales Taxes 28% Total City & RDA Operating Expenditures - $52.9 Million Fire Services 12% Public Works 18% City Council/City Manager 5% Recreation & Community Services 9% Finance & Non- Dept'l. 5% Operating Transfers 4% Community Development 3% Debt Service 3% Police Dept 22% Redevelopment Agency 19% ---PAGE BREAK--- - iv - incorporated into the operating budget. The City has historically funded various capital projects with General Fund surpluses. Current projections, however, indicate the City anticipates only modest surpluses that are designated for replenishing the Economic Fluctuations Reserve for the next several years. Therefore, the number and scope of proposed capital projects compared to previous years will be reduced. There are 8 capital projects proposed for funding in FY 11. Project expenditures of $3.58 million plus related inter-fund transfers of an additional $3.58 million total $7.16 million in capital appropriations for the City and RDA combined. The largest component of the projects is $1.5 million for the rehabilitation of Hacienda Avenue with an additional $1.1 million for improvements to Winchester Blvd. The full CIP, along with details of specific projects, can be found in the Capital Improvement Plan tab of this document. REVENUES Estimating revenues for the coming year was an extremely difficult task in light of the poorly performing economy. Program managers evaluated comparative historical data in conjunction with necessary inflationary adjustments, changes in volume or activity, and any fee increases. Then, current and forecasted activity changes, based on the latest available information, were taken into consideration to adjust estimates up or down as needed. Total budgeted revenue for FY 11 is $60.6 million, including capital funding sources of $7.2 million. This reflects an increase of $1.8 million from the previous year. In looking at only the operating budget component, total revenue is $53.4 million, down $0.3 million from the previous year. It is important to note that the capital project budget can fluctuate dramatically from year to year depending upon the number and size of projects that are approved. Capital projects are generally one-time and long-term in nature, and they are funded with non-operating revenue so there is no impact on the operating budget funding sources. The operating and capital budgets contain transfers-in totaling $4.1 million and $3.6 million, respectively. Although this has a tendency to make the budget appear higher in total than it actually is, the transfers-in on the revenue side are offset by transfers-out on the expenditure side. Including transfers in the City’s adopted budget is done to readily demonstrate that budgets are balanced and match the internal budgeting system. General Fund: Contained within the budget are a variety of funds, each with its own source(s) of revenue. The budget document is organized by operating department, then by program within the department. The General Fund is the City’s largest single fund where the majority of services are budgeted. It funds general services such as police, fire, parks, streets and administration. Therefore, the focus of this section of the budget message is on the General Fund. General Fund operating revenue, excluding capital funding sources and use of operating reserves/beginning fund balances, is estimated to be $32.5 million, a decrease of $1.9 million from the previous year’s adopted budget. Almost all of this decrease is due to reduced sales tax revenue estimates. Sales Tax: Sales tax, the single largest revenue source for the General Fund, comprises approximately 28% of its net operating revenue base. Net revenues exclude reserves, which are not considered to be an on-going revenue source. The sales tax base is comprised of over 1,300 diverse businesses throughout the City. While most of the City’s largest sales tax producers can be considered stable businesses, they are still subject to fluctuations from ---PAGE BREAK--- - v - regional and national economic conditions which can have a direct impact on the sales tax revenue base. The loss of any one of these top revenue generators would have a significant financial impact to the City. Growth in the sales tax base is limited because the City is largely “built out” with little room for new retail development and growing reliance on “in-fill” projects of smaller scale and redevelopment of existing parcels. In addition, increased regional competition and the impact of electronic commerce continue to erode the revenues of some of the City’s larger existing sales tax producers. By comparison, other Silicon Valley cities and the State overall have seen higher levels of sales tax growth, on average, due to their capacity to accommodate new retail business when the economy expands. Campbell has also not seen significant growth in its business-to-business segment compared to neighboring cities, making the City’s largest revenue source one of the most challenging to deal with in future years. Consequently, the FY 11 budget of $9.3 million is a net $2 million (17.3%) lower than the adopted FY 10 budget and lower than FY 10 estimated actual. Because the economy is expected to remain weak for the next couple of years, future revenue increases are expected to be modest at best. In fact, revenue growth from existing retail businesses is projected to be 0% for FY 12 based on the latest data available from the City’s sales tax consultant and recent trends. Only because of a couple of new retail developments anticipated to be completed in FY 12 does the projected revenue increase. Beyond next year, the growth assumption is a paltry 1% based on a slight improvement in the economy. Sales Tax Trends – General Fund $8.0 $8.5 $9.0 $9.5 $10.0 $10.5 $11.0 $11.5 $12.0 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 Millions Actual Projected The graph above reflects actual sales tax performance for the past seven fiscal years and projected revenue through FY 15. Property Tax: Property tax revenue is the second largest source of revenue to the General Fund, estimated at $9 million or 27% of net operating revenue for FY 11. This is an increase of $0.2 million from the previous fiscal year’s adopted budget but essentially flat growth) from estimated FY 10 revenues. This is due to the unprecedented decline in assessed values in parts of Silicon Valley that began a couple of years ago and has yet to fully recover. The County Assessor indicated negative County-wide growth has only occurred four times in the past 75 ---PAGE BREAK--- - vi - years, primarily during the years immediately following the Great Depression of 1929. Clearly, this is an anomaly to the usual positive growth which typically results from the general desirability of the region and the limited housing supply compared to overall demand. Despite the ongoing difficulties in the housing market, it is expected that housing in the Silicon Valley will eventually recover, but this could take several more years. In recent months, real estate sales and housing prices in many parts of Silicon Valley have been up indicating a rebound has already begun. Beginning in fiscal year 1993, and continuing for the past 16 years, the City has cumulatively lost in excess of $16 million in property tax revenue due to State legislated takeaways. Under the enabling “Education Revenue Augmentation Fund” (ERAF) legislation, the State, as a means to fix a significant budgetary deficit, began diverting local government property tax revenues to the ERAF to help fund its fiscal obligation to schools. The ongoing impact to the City is approximately $1.5 million in annual lost revenue for which there is no end in sight. Primary factors in the projection are historical growth in assessed valuation and new construction. The following graph depicts the historical and projected trend for property tax revenues in the General Fund. The significant jump from FY 04 to FY 05 is attributable to legislative action taken by the State that reduced the City’s vehicle license fee and replaced it with additional property tax revenue taken from the State’s ERAF fund. As discussed, although projected to have no growth next year, future projections anticipate a return of modest growth over the next several years. Property Tax Trend – General Fund 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 $2 $4 $6 $8 $10 $12 $14 Millions Actual Projected Transient Occupancy Tax: This tax, more commonly referred to as hotel/motel tax, or simply TOT, is derived from a 10% tax that is applied to the room rates of the City’s hotels/motels. TOT revenue for FY 11 is budgeted at $1.5 million, reflecting a $0.2 million increase from the revised FY 10 projections. The expected increase is due, in part, to a new 162 room hotel that finished construction and opened mid-way through FY 10. The City’s existing hotel/motel revenue is anticipated to also increase based on seeing evidence that this sector has already hit bottom and should be able to at least meet revenue levels from the previous year based on recent data. A ballot measure, contemplated for the November, 2010 election, would increase ---PAGE BREAK--- - vii - the tax rate from 10% to 12%, effective January 1, 2011. This increase has not been included in the long-term projections of revenue. Key factors in developing the revenue projections are such things as historical trends, the number of available rooms, the occupancy rate, exemptions, new rooms coming on-line, and the weighted average room rate. Historically, Campbell hotels/motels have averaged occupancy rates of 85%. In recent years, occupancy rates have been in the range of 50-75%, however, the most recent two quarters show occupancy to be increasing as average room rates have dropped considerably. The following chart depicts historical activity and projections for current and future years. The projections also include the anticipated revenues from the new hotel. Transient Occupancy Tax (TOT) Trend – General Fund 500 750 1,000 1,250 1,500 1,750 2,000 2,250 2,500 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 Thousands Actual Projected Charges for Services: Charges for services include revenues derived from a variety of sources, the largest being Recreation program fees that consist of classes/lessons, trips/tours, preschool and theater revenues. Other fees are charged for Police and Fire services; engineering services; zoning review and business license processing. The City maintains a cost allocation plan and user fee model, which serves as the basis for the Schedule of Fees and Charges. A Council-established User Fee Policy framework for establishing appropriate percentages of recovery is the guideline from which fee modifications are proposed and approved annually in conjunction with the budget process. During FY 10, a comprehensive user fee study was performed and most of the recommendations were approved by Council and incorporated into the budget estimates which resulted in increases for many fees in FY 11. In addition to the cost of providing the service, other factors such as the allowable percentage of recovery, number of participants or attendees, inflationary factor, comparison to other agencies, and the historical trends are analyzed for nearly all fees and charges. The combined revenue for all user fees and charges is anticipated to generate $4.3 million for the General Fund during FY 11, an increase of 10.5% from the previous fiscal year. The following chart depicts historical activity and projections for current and future years: ---PAGE BREAK--- - viii - Charges for Services Trend – General Fund $2 $3 $4 $5 $6 Millions 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 Actual Projected Investment Income: Investment income comprises approximately 2.1% of General Fund net operating revenue and is estimated to be $0.7 million for FY 11, about the same as estimated FY 10 revenue but a decrease of $0.2 million or 19% from the previous year’s adopted budget. Investment earnings are expected to decrease due to the Federal Reserve Bank keeping short- term interest rates low to try and stimulate increased economic output. Average interest rate yields are expected to be lower in FY 11 than they were in FY 10. For example, in May 2010, the yield from the City’s Local Agency Investment Fund was 0.6% compared to 1.5% in May 2009. The following chart depicts historical activity and projections for current and future years: Investment Income Trend – General Fund $250 $500 $750 $1,000 $1,250 $1,500 $1,750 $2,000 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 Actual Projected T h o u s a n d s ---PAGE BREAK--- - ix - Licenses & Permits: Revenues in this category are comprised primarily of construction permits and advanced plan check fees. Also included are fire permits and other Building Division fee revenues. Total revenues from this category can fluctuate significantly with the level of development activity from year to year and serve as one measure of how the economy is faring. Budgeted FY 11 revenues are $1.2 million compared with $0.8 million budgeted in FY 10, an increase of 39%. This is due to a significant development project that is anticipated to occur during the year while the overall expectation for development and construction activity continues to be soft. Revenues from this source have declined in recent years, due to the poor economy, and future projections indicate construction activity will continue to lag for sometime to come. Licenses & Permits – General Fund $500 $1,000 $1,500 $2,000 $2,500 $3,000 Thousands 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 Actual Projected Lease Rental Income: The City collects rental income by leasing out space to tenants at its Community Center facility. Lease rental income in FY 11 is projected to be approximately the same as in FY 10 at $1.4 million, representing approximately 4.2% of net General Fund operating revenues. Rental income from this source is reasonably consistent from year to year attributable to having a number of long-term leases. Occupancy has been at or near capacity for the past several years. However, it is expected that due to the severity of the economy, occupancy levels may see a modest decline. The revenue projection is based on actual lease contracts and estimated market rates for available space. Franchise Tax: Franchise tax revenue is generated from fees charged to various utilities for doing business within the City. The fee is usually computed as a percentage of the gross income of the utility. This revenue source is projected to generate General Fund revenue of approximately $2.6 million for FY 11. This is an increase of $0.2 million from the previous year. The projection is developed from a combination of increased services/customers plus an inflationary factor averaging 3% on the historical amounts generated by utilities operating within the City limits, e.g. cable, water, garbage, gas and electric. Others are set contractually. In developing the electric and gas franchise fees, consideration was given to the changes in market conditions in the State of California, which have tended to generate higher energy costs and produce variations in consumption. However, Campbell has not experienced a significant variance in this revenue source as a result of the current economic state. ---PAGE BREAK--- - x - Other General Fund Revenues: The remaining significant General Fund revenue sources consist of other miscellaneous income of $0.8 million, operating transfers-in of $1.4 million, representing reimbursements from other funds for services provided by the General Fund, and reserves of $0.5 million that are used to fund operating expenditures. Where appropriate, other revenue sources are projected to reflect modest inflationary increases and/or changes in activity levels. Revenue - Other Funds A variety of other funds are contained within the budget and explained in greater detail further in the budget message. In summary, each fund’s operating revenue meets or exceeds operating expenditures consistent with established financial policies. Exhibit A within each program budget provides a summary of that program’s funding sources and all revenues monitored by that program. Narrative descriptions and account number references pertaining to the particular revenue sources can be found in the budget reference materials section of this document. Charts and graphs for General Fund revenue as well as total City revenue, other than what is presented in this budget message, can be found in the financial summaries section of the budget document. Because this budget is organized by program, funds other than the General Fund are included in the respective operating department’s section of the budget along with the General Fund programs. Each program is identified with the fund number at the beginning of each section. Special Revenue Funds consist of Gas Tax; Lighting and Landscape District; Housing and Community Development; Environmental Services; Parkland Dedication; Asset Forfeiture; Supplemental Law Enforcement; Other Grants; Other Special Revenues; and, RDA Housing. Gas Tax revenue is considered a State-shared revenue. Projections for this revenue source come directly from the State on an annual basis. Revenue in funds such as the Lighting and Landscape District and Environmental Services are based on rates that are assessed to individual properties depending upon type of service being provided or type of property. Total operating revenues for Special Revenue funds for FY 11 are $5.2 million, down $0.2 million from the previous year due to decreased operating transfers-in from other funds. Debt Service Funds are incorporated within the budget due to various bond covenant requirements. Local Improvement District (LID) revenue comes from the County of Santa Clara via property tax levies assessed against the properties that received the specific improvements. Certificates of Participation (COP) debt service are funded by the General Fund with an offset from the RDA. RDA debt service funds are funded with tax increment from properties located within the redevelopment project area in Campbell. Such properties start out in a blighted condition and, as they are redeveloped and improved, the RDA receives the incremental growth in property tax over the established base. For presentation purposes, the RDA debt service fund is grouped along with other RDA funds under the Redevelopment Agency tab in the budget document. Total funding sources for Debt Service funds, excluding the RDA fund, for FY 11 are $1.7 million. The RDA Debt Service funding sources for FY 11 are $8.3 million. Three Internal Service Funds (Motor Vehicle, Information Technology and Workers’ Compensation) are presented within the City’s budget. Revenues in these funds are generated primarily through charge-backs to user departments depending upon the volume of assets and type of service provided by the specific fund. Costs that get recovered include staff time, repair, ---PAGE BREAK--- - xi - maintenance, claims payout and replacement of assets managed by the particular fund. Total revenues for Internal Service funds for FY 11 are $2.2 million, down $0.6 million from the previous year. This is due to reduced charges for all funds resulting from reduced appropriations. EXPENDITURES As previously noted, the FY 11 budget is comprised of operating and capital expenditures for both the City and the Redevelopment Agency totaling $60.1 million. City operating expenditures total $42.6 million, and RDA operating expenditures total $10.3 million for a combined total of $52.9 million. The General Fund comprises approximately 63% of total City and Redevelopment Agency operating expenditures. Other City funds comprise 17%, and RDA makes up the balance at 20% of the total. Operating expenditures in the General Fund are budgeted at $33.5 million, which is 5.6% less than the FY 10 adopted budget. This is net of a $0.5 million increase in the City’s fire contract. Employee Services: Staffing resources are an integral part of the City’s annual budget. Page 13 of this budget (“City and Community Information” tab) captures the currently frozen/unfunded positions for the City which total more than 15% of the workforce. The current number of budgeted permanent positions proposed in FY 11 is 155, down seven positions from FY 10. Salaries and Benefits: Salary and benefit summaries including charts can be found within the financial summaries section of this document, and can also be seen in the departmental budget summaries section, or on Exhibit B-1 of each program budget. These summaries reflect FTE’s and budgeted expenditures for both permanent full-time, permanent part-time, and temporary staffing. Exhibit B in each program budget summarizes the various salary and benefit line-items contained within that program’s budget. The salaries and benefits category represents all personnel-related costs and makes up the largest component of the General Fund expenditures. In fact, personnel costs are approximately 43% of the total budget and 57% of the General Fund. This number is relatively low compared to many other cities because fire personnel are provided by contract with the County, so do not show up as City personnel costs. For FY 11, salaries and benefits in the operating budget total $22.7 million for all City funds, which is a $1.6 million decrease from the previous fiscal year. The largest contributing factor to the overall decrease was the Budget Correction Strategy that reduced wage expense through voluntary separation incentives, freezing additional positions, shortening work weeks for some, reorganizing departments, and implementing employee furloughs. General Fund Operating Expenditures by Function - $33.5 Million Police Services 36% Recreation & Community Services 14% Fire Services 19% Community Development 4% Finance & Non- Departmental 6% Public Works 10% Operating Transfers 5% City Administration 7% ---PAGE BREAK--- - xii - In addition, the City Council, the City Manager, the City Attorney, Department Heads and all but two labor groups, who received previously negotiated increases, did not receive any salary increase in the FY 11 budget. MULTI-YEAR COMPARATIVE ANALYSIS General Fund - Revenues and Expenditures: The comparative analysis that follows reflects the historical trend between General Fund revenues and expenditures covering the past six years as well as projections through FY 15. City revenues declined sharply following a peak in FY 01 after the “dot-com” era. Subsequently, increased costs combined with the lower revenues to create several years of budget deficits. Two years of significant expenditure cutbacks coupled with a slight growth in revenues brought back the budget into a surplus in FY 07 & FY 08. However, this did not last long as the economy entered into the Great Recession and faltered once again, this time even more severely, while at the same time the City’s fire services contract saw a 35% increase over 3 years creating several years of new deficits. The City developed its Budget Correction Strategy that, once again, aligned expenditures with the lowered revenue levels. The following chart depicts actual and projected General Fund operating revenues and expenditures: Comparative Analysis: General Fund – Revenues to Expenditures $26 $28 $30 $32 $34 $36 $38 $40 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 Millions Revenues Expenditures Projected Actual Redevelopment Agency (RDA) Funds: Redevelopment is a primary means to eliminate economic and physical blight from a designated area and to achieve desired development and private investment to revitalize the area. The designated area is commonly referred to as a redevelopment project area. Funding for redevelopment activities comes from incremental growth in property tax revenue within the project area as a result of redevelopment efforts. Such revenue can only be used to fund capital improvements and/or debt service after 20% of the revenue is set aside for affordable housing. The redevelopment operating budget is comprised of three funds: the 20% Housing Fund; the RDA Administration Fund; and the RDA Debt Service Fund. Operating revenue for FY 11 totals $10.4 million, which is a $2.1 million (25%) increase from the previous fiscal year’s adopted budget. Operating expenditures are $10.3 million, a $2.2 million ---PAGE BREAK--- - xiii - (27%) increase from the previous fiscal year’s adopted budget. The majority of the increase is for higher expected tax-sharing obligations to various recipients of property tax pass-through payments. Additionally, the State has legislated another “take-away” of $0.5 million during FY 11. This is on top of the $2.1 million take-away in FY 10. For future years, revenue projections utilize an average inflation factor of which takes into consideration the maximum annual increase in assessed value plus a percent for new construction or changes of ownership resulting in reappraisals. Expenditures are projected utilizing a modest inflationary factor. Internal Service Funds: The City utilizes three internal service funds (more commonly referred to as “pool funds”) to finance and account for goods and services provided by one City department to other City departments on a cost reimbursement basis. These funds are: Motor Vehicle; Information Technology (IT); and, Workers’ Compensation. The primary funding source for these funds is user charges. City and RDA program budgets contain line items for charges from the various pool funds. Included in these charges to other City departments or programs are the pro-rata share of the cost of operations of the particular fund in addition to a replacement cost factor whenever physical assets such as vehicles and computers belong to the fund. As operating or replacement costs change or as asset inventories grow, the corresponding changes are reflected in the charges to the user departments. For FY 11, revenues and expenditures in these funds total $2.2 million. Expenditures are $0.5 million (15%) lower than the previous year’s adopted budget due to reduced replacement of various pool fund assets compared to the previous year. Annually, any assets scheduled for replacement are funded from reserves within the respective fund. This can and does result in large variances when making year-to-year budgetary comparisons. The various methodologies utilized to determine reserve levels and replacement charges are periodically evaluated and modified. Projections in future years have been estimated using a modest inflationary factor. Special Revenue Funds Funds in this category are used to account for the proceeds of specific revenue sources that are legally restricted for specified purposes. These are generally created when legally mandated in accordance with State and/or Federal statutes or is otherwise restricted by the funding source. Consistent with the City’s financial and administrative policies, revenues in the special revenue funds must meet or exceed expenditures, and one-time monies are not utilized to fund on-going expenditures. To the extent revenue shortfalls exist in a given year, expenditures would either be amended and/or the fund may receive subsidization from the General Fund. In any case, the goal is a balanced budget in all special revenue funds. Listed below are the major funds in this category: Gas Tax Fund: Gas Tax revenue is derived from State imposed taxes on the purchase of gasoline which, in turn, gets appropriated to cities based on population and other factors. Revenues are restricted for the construction, improvement and maintenance of public streets and roads. Revenue projections are provided annually by the State Controller’s office and future years include an inflationary factor on the current year’s projection and adjusted for any known variances. Expenditures in this fund are used for on-going maintenance of the City’s street infrastructure. Gas Tax funds, however, are insufficient to fully maintain the City’s roads. Revenue and expenditure totals for FY 11 are projected to be $1.3 million, a decrease of 7% over the previous year’s adopted budget. Projections for future years utilize a modest inflationary factor approximating 2.5% for revenues and 1.5% for expenditures. ---PAGE BREAK--- - xiv - Lighting and Landscape District Fund: The City provides a range of services, which are eligible for funding through the City-wide annual Lighting and Landscape District (LLD) as allowed under the Lighting and Landscaping Act of 1972. Annual levies are established and assessments are collected via property tax bills. The County of Santa Clara bills, collects, and remits LLD revenue to the City of Campbell Lighting and Landscape District fund. Services that are provided include the installation, operation, and maintenance of public lighting, including traffic signals, landscaping, parks and recreational improvements, including play equipment and public restrooms, and other equipment for maintenance of the above, including curb, gutters, sidewalks, irrigation, and drainage improvements. In FY 11, the operating revenues and expenditures total $2.6 million. This includes operating transfers-in of $0.7 million and transfers-out of $0.1 million. The General Fund accounts for most of the total transfers-in as a subsidy to this fund. In other words, revenues from the assessment are not sufficient to cover the cost of services funded by the LLD. Details related to transfers-out may be found in Exhibit E of Program 775 in the Lighting and Landscape District Fund budget worksheets. Projections for future years are based on inflationary increases approximating 1.5%. Environmental Services Fund: This fund budgets and accounts for revenues and costs associated with administration and management of the City’s solid waste collection and disposal, storm water management, and other environmental programs as needed or required. The City participates in a Solid Waste Joint Powers Authority (JPA) and utilizes a franchised solid waste and recycling provider who bills, collects, and remits revenues to the City related to services provided to Campbell residents and businesses. Fees remitted to the City include storm water, storm drain, solid waste, hazardous waste, and recycling fees. Operating revenues and expenditures for FY 11 are $0.9 million, the same as the previous fiscal year’s adopted budget. Future years’ costs are based on inflationary increases approximating 1.5%. ECONOMIC AND FISCAL ISSUES FACING THE CITY The nation was in one of the longest and deepest recessions experienced since the Great Depression during the second half of FY 08 and through most of FY 09. Due to the nature of municipal government, it generally takes between 1 to 1 ½ years for the City to feel the economic impact of these events. Thus, in FY 09 and FY 10, the City felt the brunt of the damage. This environment has resulted in a major source of revenue instability caused by: 1) the prolonged economic weakness which has eroded consumers’ ability to make retail purchases, 2) the ongoing hit to key City revenues such as development revenue, sales tax and investment income, and 3) State of California-imposed ERAF (Educational Revenue Augmentation Fund) take-aways of the City’s property tax revenues. At the same time, contractual obligations such as fire services and retirement costs, have continued to exert upward pressure on operating expenditures. As a result, the City has been constantly challenged to close a structural budget deficit in which on-going revenues are insufficient to fully fund on-going expenditures. In response to the latest crisis, the City developed a Budget Correction Strategy comprised of 130 separate items, totaling $3.2 million, which made significant reductions in expenditures by paring back employee costs while enhancing revenues, primarily through fee increases. The strategy also built in a modest surplus over the next five years to gradually replenish the City’s Economic Fluctuations Reserve back to its targeted level of $6 million. ---PAGE BREAK--- - xv - The California and San Francisco Bay Area economies experienced positive growth in FY 10 due to improvement in the troubled housing market from the previous year. Silicon Valley has seen its residential market values improve as well. The average home price in Santa Clara County, for example, increased 29% from $611,014 in January, 2009 to $790,611 in January, 2010. Campbell has experienced similar increases during this time period. The unemployment rate is also an important economic statistic as to the state of the economy in general. As of June 2010, the State seasonally adjusted unemployment rate was 12.3% compared to 11.6% the prior year. For Santa Clara County, the unadjusted rate was 11.3%, lower than last year’s June rate of 11.6%. Campbell has historically trended better than both the County and the State in its unemployment rate. In fact, as of June 2010, Campbell’s unemployment rate was 9.7%, unadjusted, down from 10% in the prior year. While unemployment statistics are only a piece of the total economic puzzle, they do provide a comparative indicator of how each area is doing relative to a prior period. Growth and new development within the City pose continuing opportunities and challenges. The City of Campbell is essentially “built out”, meaning there are no significant areas of undeveloped land in the city limits available for improvement. Therefore, the challenge is to focus on “in-fill” projects, consisting of smaller individual parcels of land dispersed throughout the City or redevelopment of existing structures whose current use may be enhanced by new development. Four such projects have been approved but not yet built due to the harsh economy. The City’s goal is to preserve the quality of life for Campbell residents and provide a variety of balanced land uses via established standards for residential, commercial and industrial development. Strategies include developing and retaining a diversified and stable economic base, marketing the community to targeted businesses, and working to retain and grow existing businesses. Related to the issue of growth and new development, an area of particular concern is limited retail growth. The City’s largest source of revenue is sales tax, which is used to fund a variety of City services such as police patrol and emergency response, fire and paramedic services, road improvements and other amenities such as parks and senior services. The existing sales tax base is expected to see 0-1% growth over the next several years and, only better growth thereafter. FY 11 is anticipated to see only slight improvement in the volume of residential and commercial development as construction activity in the region remains sluggish. However, the City has prepared itself to address the overall impacts on the community of future development projects so that they remain manageable and environmentally balanced. The health of the broader economy will also help shape the level of new development activity. In this regard, there has been a significant emphasis placed on environmental sustainability and doing what we can to preserve it, including minimizing the City’s carbon footprint. The City’s practices qualified it as a certified “Green” organization, and it is committed to further exploring a variety of green policies and practices. The City is also committed to providing reasonable health care coverage to its employees. As the general population ages, more reliance is placed upon the health care system to provide comprehensive coverage for employee and their families. Unfortunately, the cost of providing health care and other post-retirement benefits coverage continues to escalate year after year, typically outpacing the City’s revenue growth. Accordingly, the City, like all employers, has ---PAGE BREAK--- - xvi - to consider how to balance the level of on-going benefits it can offer with the cost of providing them. Based on an actuarial valuation, the City is committed to pre-funding its obligation for providing retired employees health benefits and has budgeted $251,000 in FY 11 to partially fund this obligation. Employee retirement costs have also been an ongoing challenge to maintaining a balanced budget. One of the initiatives undertaken during the past year was to try and reduce these costs while still remaining competitive in the marketplace. The City made significant strides in pension reform by negotiating with its labor groups for a lower second tier of retirement benefits for new hires that will help make it financially sustainable for the long-term. While this will not result in a large savings in this budget year or even the next year, as the workforce turns over, increasingly larger savings will accumulate over time. Succession planning is a growing issue as more and more of the “baby-boom” generation is attaining the age of retirement and the number of retirees is anticipated to increase over the next five years. This is the situation in Campbell where a significant number of staff, including senior management, is at or near retirement age. The challenge to the City is in being able to manage the loss of institutional knowledge, ensure sufficient resources are available to replace these positions and enable a smooth transition with minimal disruption in operations. The City has been able to take advantage of such transitions to do organizational restructuring and realize savings where feasible. It is anticipated this will continue for several more years. Another ongoing challenge is the need to maintain the City’s infrastructure, particularly its streets and sidewalks. More than $18 million dollars have been invested in the City’s street infrastructure over the past 12 fiscal years, and work will continue into FY 11 with additional dollars set aside for this purpose. While the overall condition of streets has been good for the past several years, a significant amount of resources are required to maintain a “good” condition rating on an on-going basis. Consistent funding for maintaining this level will continue to be a challenge for the City. The City received Federal Stimulus funds last year that were utilized for street maintenance. However, these were one time funds and much more is needed to adequately maintain the infrastructure at current levels. The City also has a significant amount of other unmet capital needs. The capital improvement plan contains a long list of desired but unfunded projects (see capital improvement plan tab). In addition, there is another approximately $1.7 million of annual lifecycle and maintenance needs that were identified as not being adequately met. Consequently, the City will be unable to initiate or complete these projects until such time as additional funding becomes available. Deployment of technology remains an important ongoing issue for the City. To maintain the City’s current and proposed standards of performance as well as protect systems from outside attacks and viruses, constant attention and resources are required to ensure systems remain stable and reliable for all users. Additionally, the City’s technology infrastructure is aging and many components are reaching end of life. With limited resources available for capital replacements as well as operating budgets, due to the tough economic environment, equipment is being stretched to maximum life-cycle expectancy and bumping up against capacity issues. The City’s Technology Master Plan is being revised in the context of revisiting technology expectations in light of the limited funding resources. ---PAGE BREAK--- - xvii - FISCAL 11 MAJOR WORK PLAN ITEMS Departmental work plan items for the upcoming budget year were presented and discussed with the City Council at a study session on May 18th. Major work plan items, in addition to a list of the ongoing responsibilities of each department, can be found within the department program sections of the budget document. FY 10 SIGNIFICANT ACCOMPLISHMENTS Despite the ongoing constraints of the budget and lower number of employees, the City was able to realize numerous significant accomplishments during the past year. The key accomplishments, summarized by department, are shown in Exhibit 1 to this budget message. STRATEGIC PLAN AND PERFORMANCE REPORTING In addition to allocating necessary resources for the provision of ongoing services and work plan activities, the budget serves as the financial plan for accomplishment of the Strategic Plan vision and objectives, which are summarized within the City and Community Information section of the document. At the beginning of each program budget section, the individual program mission statement, on- going and major work plan items are listed, and the total program budget is detailed by type of expenditure and by line item. Once the major work plan items have been identified, the departments proceed with development of budgetary resources necessary to accomplish the ongoing objectives and annual work plans. Many of the major work plan items are based on meeting Strategic Plan objectives and, therefore, are the link between the Strategic Plan and the annual budget. Performance measures, which track and report work input and related outcomes, are located within each respective program budget section of the document and help Council, staff, and the community to assess trends and strive for continual improvement. Performance reporting assists the Council in establishing policies and priorities related to the quantity, quality and appropriateness of municipal services provided by the City of Campbell. Changes in resource levels can often also be articulated in terms of the impact on performance measures. FINANCIAL POLICIES The City of Campbell’s Financial Policies were last updated by the City Council in FY 09. Their purpose is to enable consistent management of the City's fiscal resources, establish criteria in which to evaluate the City's financial condition, create a sound financial basis for City operations, promote public confidence, and increase the City's credibility in the eyes of bond rating agencies and potential investors. The policies are detailed in Exhibit 2 of this budget message. BASIS OF BUDGETING The City budgets on a modified accrual basis for all funds except for its internal service funds which are budgeted on a full accrual basis. This is consistent with the City’s basis of accounting as reported in its Comprehensive Annual Financial Report (CAFR). The City's Governmental Funds consist of the General Fund, special revenue funds, debt service funds, and capital project funds for both the City and the RDA. To summarize, under this basis, revenues are ---PAGE BREAK--- - xviii - estimated for the fiscal year if they are susceptible to accrual, e.g. amounts can be determined and will be collected within the current period. Principal and interest on general long-term debt are budgeted as expenditures when due, whereas other expenditures are budgeted for liabilities expected to be incurred during the current period or shortly thereafter to pay current liabilities. Proprietary fund budgets are adopted using the full accrual basis of accounting whereby revenue projections are developed recognizing revenues expected to be earned in the period, and expenditure estimates are developed for all expenses anticipated to be incurred during the fiscal year. The City's proprietary fund type consists only of internal service funds, as the City has no municipally owned utilities or other enterprise activities. Level of Budgetary Control: The City’s budget is a working document that is utilized throughout the organization. Although the expenditure budget is legally adopted by resolution of the City Council at the total City and Redevelopment Agency (RDA) levels, it is important to note that the administrative level of accountability is at the line-item level within each program and fund. The City’s financial policies authorize budget adjustments within the adopted budget up to $10,000 or requiring transfers from reserves of less than $5,000 to be approved by the City Manager. These are referred to as administrative budget adjustments. All budget adjustments that increase appropriations or any adjustments to capital projects must be approved by the City Council. Budget Development: Development of the operating and capital budget is a process that takes place over six months and is summarized by the budget calendar located in the City & Community Information section of this document. The City’s financial policies establish a process whereby a budget study session is held with the City Council during the annual budget development process. This meeting is generally held during March/April timeframe. Council is presented with an overview of the City’s fiscal condition and proposed work plans for the upcoming year. Because of the significant deficit that confronted the City, the process was modified to include two community meetings, an on-line public survey and employee meetings. Additionally, a special Council budget workshop was convened to discuss possible strategies. A study session was held on May 4th to discuss the recommended Budget Correction Strategy that was ultimately adopted. This budget document is arranged by department/function, then by program. Each program budget consists of a series of exhibits that are presented at a summary level followed by additional levels of detail. A flow chart of the budget exhibits and narrative on each exhibit, along with a Program/Department/Fund matrix and other reference information, are contained within the budget reference materials section of the document along with an index to facilitate locating specific information. The City’s budget presentation and format incorporate many of the best features of fund order and program order budgets, and provide a document that is distinctive for its readability as well as its utility as a policy document, an operations guide, a communication tool, and a financial management instrument. It is a working tool that contains a considerable amount of information that is utilized at every level of the City organization throughout the fiscal year. BUDGET AND FINANCIAL AWARDS For the 17th consecutive year, the City's budget received national recognition by earning the Government Finance Officer's Association (GFOA) “Distinguished Budget Award”, a copy of ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- 08/09 09/10 % 10/11 % Actual Adopted Change Adopted Change Taxes: Property 17,023,987 $ 16,637,338 $ -2.27% 16,907,338 $ 1.62% Sales 9,625,398 11,280,000 17.19% 9,330,000 -17.29% Franchise 2,368,279 2,383,122 0.63% 2,588,000 8.60% Transient Occupancy Taxes 1,287,184 1,600,000 24.30% 1,476,000 -7.75% Other Taxes 424,792 415,000 -2.31% 395,000 -4.82% Total Taxes 30,729,640 32,315,460 5.16% 30,696,338 -5.01% Licenses & Permits 1,184,414 837,500 -29.29% 1,166,500 39.28% Fines & Forfeitures 315,701 312,500 -1.01% 319,500 2.24% Investment Income 2,214,339 1,595,039 -27.97% 1,394,652 -12.56% Intergovernmental Revenues: In-Lieu Tax 176,389 210,000 19.06% 130,000 -38.10% Gasoline Tax 936,798 731,000 -21.97% 731,000 0.00% Community Development Block Grant 133,214 129,067 -3.11% 136,452 5.72% Other 334,012 584,755 75.07% 655,553 12.11% Total Intergovernmental Revenue 1,580,413 1,654,822 4.71% 1,653,005 -0.11% Charges for Services 4,181,394 4,216,316 0.84% 4,702,716 11.54% Other Revenue 1,753,124 1,643,352 -6.26% 1,629,425 -0.85% Rentals/Leases 1,381,239 1,395,000 1.00% 1,409,840 1.06% Special Assessments 1,193,316 1,194,411 0.09% 1,186,740 -0.64% Charges to Operating Departments 2,721,992 2,432,121 -10.65% 2,038,642 -16.18% Operating Fund Reserves (Beg. Fund Bal.) - 1,609,753 100.00% 3,080,666 91.38% Interfund Operating Transfers 3,791,810 4,506,180 18.84% 4,126,791 -8.42% Total Operating Revenue 51,047,382 53,712,454 5.22% 53,404,815 -0.57% Capital Project Funding (Beg. Fund Bal.) - 1,435,850 100.00% 1,677,000 16.79% Capital Project Funding (Rev./Grants/Debt) 3,998,359 1,120,200 -71.98% 1,903,000 69.88% Interfund Capital Transfers 5,277,920 2,458,250 -53.42% 3,580,000 45.63% Total Revenue 60,323,661 $ 58,726,754 $ -2.65% 60,564,815 $ 3.13% Revenue Source Total City & RDA Revenue Summary Total City & RDA Revenue Summary - $60,564,815 Capital Funding Transfers 9% Investment Income 3% Rents & Leases 2% Operating Reserves 6% Other Revenue 4% Taxes 55% Licenses & Permits 1% Intergovernmental 3% Charges for Services 7% Operating Transfers 8% Special Assessments 2% - 23 - ---PAGE BREAK--- ---PAGE BREAK--- 08/09 09/10 % 10/11 % Fund Actual Adopted Change Adopted Change 101 General Fund 32,528,822 $ 33,357,479 $ 2.55% 31,652,781 $ -5.11% Special Revenue Funds: 204 Gas Tax 1,102,018 1,165,428 5.75% 1,041,587 -10.63% 207 Lighting District 2,717,745 2,613,459 -3.84% 2,512,562 -3.86% 208 Housing & Community Develop. 234,474 390,165 66.40% 396,056 1.51% Misc. Grants & Other Special Revenue 105,719 - -100.00% - 0.00% Total City Special Revenue 4,159,956 4,169,052 0.22% 3,950,205 -5.25% Misc. City Debt Service Funds 1,658,239 1,659,684 0.09% 1,652,644 -0.42% Redevelopment Agency Funds: 223 Low & Moderate Income Housing 370,428 1,268,662 242.49% 1,426,015 12.40% 364 RDA Debt Service 4,890,676 5,408,904 10.60% 7,692,782 42.22% 434 RDA Administration/Projects 376,851 410,873 9.03% 326,607 -20.51% Total RDA Funds 5,637,955 7,088,439 25.73% 9,445,404 33.25% Internal Service Funds: 641 Motor Vehicle Pool 1,126,035 1,073,933 -4.63% 946,953 -11.82% 647 Information Technology Pool 1,111,475 1,035,133 -6.87% 785,789 -24.09% 690 Worker's Compensation (123,570) 431,724 -449.38% 381,067 -11.73% Total Internal Service Funds 2,113,940 2,540,790 20.19% 2,113,809 -16.81% Misc. Interfund Operating Transfers 3,791,810 4,506,180 18.84% 4,126,791 -8.42% Total Operating Expenditures 49,890,722 53,321,624 6.88% 52,941,634 -0.71% Misc. Capital Projects & Capital Transfers 11,013,682 4,916,500 -55.36% 7,160,000 45.63% Total Expenditures 60,904,404 $ 58,238,124 $ -4.38% 60,101,634 $ 3.20% Total City & RDA Expenditure Summary Total City & RDA Expenditure Summary - $60,101,634 Fund Description Special Revenue Funds 7% Internal Service Funds 4% General Fund 58% Operating Transfers 8% Capital Projects 8% RDA Funds 15% City Debt Service Funds 3% - 25 - ---PAGE BREAK--- ---PAGE BREAK--- 08/09 09/10 % 10/11 % Actual Adopted Change Adopted Change Employee Services 23,991,852 $ 24,342,232 $ 1.46% 22,731,162 $ -6.62% Supplies, Services & Capital Outlay 21,254,560 19,932,874 -6.22% 20,388,255 2.28% Debt Service 6,607,364 6,998,588 5.92% 9,275,426 32.53% Transfers Out (Operating & Capital) 9,060,179 6,964,430 -23.13% 7,706,791 10.66% Total Expenditures 60,913,955 $ 58,238,124 $ -4.39% 60,101,634 $ 3.20% Description Total City & RDA Expenditures by Type Total City & RDA Expenditures by Type - $60,101,634 Supplies, Services & Capital Outlay 34% Debt Service 12% Employee Services 42% Transfers Out 13% - 27 - ---PAGE BREAK--- 08/09 09/10 % 10/11 % Actual Adopted Change Adopted Change Taxes: Property 8,882,191 $ 8,787,000 $ -1.07% 8,977,000 $ 2.16% Sales 9,625,398 11,280,000 17.19% 9,330,000 -17.29% Franchise 2,368,279 2,383,122 0.63% 2,588,000 8.60% Transient Occupancy Taxes 1,287,184 1,600,000 24.30% 1,476,000 -7.75% Other Taxes 424,792 415,000 -2.31% 395,000 -4.82% Total Taxes 22,587,844 24,465,122 8.31% 22,766,000 -6.95% Licenses & Permits 1,184,414 837,500 -29.29% 1,166,500 39.28% Investment Income 1,119,361 900,000 -19.60% 729,000 -19.00% Intergovernmental Revenues: In-Lieu Tax 176,389 210,000 19.06% 130,000 -38.10% Other 206,309 281,755 36.57% 296,853 5.36% Total Intergovernmental Revenue 382,698 491,755 28.50% 426,853 -13.20% Charges for Services 3,888,825 3,934,516 1.17% 4,346,834 10.48% Other Revenue: Rentals/Leases 1,381,239 1,395,000 1.00% 1,409,840 1.06% Fines & Forfeitures 315,701 312,500 -1.01% 319,500 2.24% Other Miscellaneous Revenue 1,142,645 768,762 -32.72% 807,705 5.07% Reserves (Beg. Fund Balance) - 1,171,000 100.00% 521,000 -55.51% Interfund Operating Transfers 1,128,479 1,255,712 11.27% 1,374,988 9.50% Total Other Revenue 3,968,064 4,902,974 23.56% 4,433,033 -9.58% Total Operating Revenue 33,131,206 35,531,867 7.25% 33,868,220 -4.68% Capital Project Funding 70,376 762,400 100.00% 1,577,000 106.85% Total General Fund Revenue 33,201,582 $ 36,294,267 $ 9.31% 35,445,220 $ -2.34% Revenue Source General Fund Revenue Summary General Fund Revenue Summary - $35,445,220 Investment Income 3% Inter- Governmental 1% Rents & Leases 4% Charges for Services 7% Transient Occupancy Taxes 4% Operating Transfers 4% Capital Funding Sources 1% Other Revenue 11% Licenses & Permits 2% Property Taxes 24% Other Taxes 1% Sales Taxes 31% Franchise Fees 7% - 28 - ---PAGE BREAK--- 08/09 09/10 % 10/11 % Actual Adopted Change Adopted Change City Council 254,409 $ 267,275 $ 5.06% 251,421 $ -5.93% City Manager 1,287,201 1,230,743 -4.39% 1,149,775 -6.58% City Clerk 459,996 424,840 -7.64% 414,843 -2.35% City Attorney 251,484 239,980 -4.57% 226,568 -5.59% City Treasurer 14,144 15,182 7.34% 16,397 8.00% Recreation & Community Services 4,804,984 4,948,429 2.99% 4,716,121 -4.69% Finance 1,146,678 1,195,231 4.23% 1,137,540 -4.83% Non-Departmental 590,525 741,600 25.58% 859,092 15.84% Community Development 1,603,829 1,586,981 -1.05% 1,232,443 -22.34% Police 12,740,753 12,781,827 0.32% 11,880,145 -7.05% Fire 5,540,030 6,016,036 8.59% 6,256,685 4.00% Public Works 3,834,789 3,909,355 1.94% 3,511,751 -10.17% Interfund Operating Transfers 2,140,165 2,173,683 1.57% 1,821,174 -16.22% Total Operating Expenditures 34,668,987 35,531,162 2.49% 33,473,955 -5.79% Interfund Capital Transfers 714,671 689,600 -3.51% 1,577,000 128.68% Total Expenditures 35,383,658 $ 36,220,762 $ 2.37% 35,050,955 $ -3.23% Description General Fund Expenditure Summary General Fund Expenditure Summary - $35,050,955 Interfund Operating Transfers 5% Interfund Capital Transfers 2% Community Development 4% Finance & Non-Departmental 5% Recreation & Community Services 13% City Administration 6% Public Works 10% Police Services 35% Fire Services 17% - 29 - ---PAGE BREAK--- 07/08 09/10 % 10/11 % Actual Adopted Change Adopted Change Employee Services 20,323,341 $ 20,638,987 $ 1.55% 19,207,608 $ -6.94% Supplies, Services & Capital Outlay 12,205,481 12,718,492 4.20% 12,445,173 -2.15% Transfers Out (Operating & Capital) 2,854,836 2,863,283 0.30% 3,398,174 18.68% Total Expenditures 35,383,658 $ 36,220,762 $ 2.37% 35,050,955 $ -3.23% Description General Fund Expenditures by Type General Fund Expenditures by Type - $35,050,955 Employee Services 54% Transfers Out 10% Supplies, Services & Capital Outlay 36% - 30 - ---PAGE BREAK--- ---PAGE BREAK--- Actual Actual Actual Estimated Estimated Reserves & Designations 6/30/2007 6/30/2008 06/30/09 06/30/10 06/30/11 Operations 1,000,000 $ 1,000,000 $ 974,600 $ 1,000,000 $ 1,000,000 $ Emergencies 3,119,155 3,446,093 3,320,058 3,160,100 3,334,722 OPEB/PERS Retirement 1,000,000 1,350,000 1,232,000 1,082,000 773,000 Capital Improvement Plan 5,169,732 4,889,766 4,378,645 4,351,000 4,167,504 Long Term Vacation & Sick Leave 844,000 844,000 878,970 867,300 828,970 Future Advances to Redevelopment Agency 1,600,000 1,400,000 1,200,000 1,000,000 800,000 Economic Fluctuations 6,000,000 7,000,000 6,271,000 4,500,000 4,271,000 Carryover Capital Projects 4,165,393 3,860,597 3,750,339 3,172,000 2,285,000 The City's Financial Policies mandate the level at which most of the major reserves shall be maintained. Major General Fund Reserves & Designations - 6/30/11 (Estimated) Major General Fund Reserves / Designations - Comparative Statistics (Fiscal Years 06/07 thru 10/11) Carryover Capital Projects 13% Economic Fluctuations 24% Accrued Vacation & Sick Leave 5% Future Advances to Redevelopment Agency 5% Operations 6% Capital Improvement Plan 24% OPEB/ PERS 4% Emergencies 19% - 32 - ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- - 47- GANN APPROPRIATIONS LIMIT Article XIIIB of the California State Constitution as enacted by Proposition 4, the Gann initiative of 1979, mandates a limit on the amount of proceeds of taxes that state and local governments can receive and appropriate (authorize to spend) each year. The purpose of this law is to limit government spending by putting a cap on the total proceeds of taxes that may be appropriated each year. The original Article XIIIB was further modified by Proposition 111 and SB 88 approved by California voters in June of 1990. Proposition 111 allows cities more flexibility in choosing certain inflation and population factors to calculate the limit. The limit is different for each agency and the limit changes each year. Each year's limit is based on the amount of tax proceeds that were authorized to be spent in fiscal year 1978-79 in each agency, modified for changes in inflation and population in each subsequent year. Proposition 111 has modified those factors to allow cities to choose either the growth in California Per Capita Income or the growth in non-residential assessed valuation due to new construction in the City. Alternatively, the City could select a population growth factor represented by the population growth in Santa Clara County. Each year the City establishes its appropriations limit for the following fiscal year. The City of Campbell's appropriation limit for fiscal 2010-11 of $47.7 million was adopted by Council via Resolution #11179, on June 29, 2010. When a city’s proceeds of taxes (less statutory exclusions) exceed the legal limit, excess tax revenue must be returned to the State or citizens through a process of refunds, rebates, or other means that may be determined at that time. The fiscal 2010-11 calculations indicate the City of Campbell will again be significantly below the appropriations or spending limit. The City’s appropriations limit of $47.7 million for fiscal 2010-11 is approximately $0.6 million lower than the fiscal 2009-10 limit of $48.3 million. For fiscal 2010-11, the City’s proceeds of taxes are projected to be $20.2 million. This is $27.5 million or 42.4% under the legal appropriations limit. Any future amendments to the adopted appropriations from “proceeds of taxes” will be subject to the limit and will be calculated accordingly. As a result of the City’s Gann calculations being so far under the legal limit, restraints on current or future budget deliberations are not contemplated. Appropriations Subject To Limit (Ten Fiscal Years) $10 $20 $30 $40 $50 $60 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 Millions Appropriation Limit Subject to Limit ---PAGE BREAK--- Sales Tax Comparison With Other Jurisdictions FY 05-06 through FY 09-10 Actual Actual Actual Budgeted Budgeted City 2005-06 2006-07 2007-08 2008-09 2009-10 Campbell $9,346,984 $10,049,829 $10,334,830 $10,200,000 $11,280,000 % of General Fund 31% 31% 30% 28% 31% Per Capita 244.05 261.66 260.01 253.98 279.07 Cupertino $9,650,000 $11,252,341 $13,155,000 $13,390,000 $11,649,000 % of General Fund 32% 26% 31% 32% 29% Per Capita 180.54 203.99 238.84 241.04 208.61 Los Gatos $8,655,566 $9,509,947 $9,345,432 $8,700,000 $8,677,460 % of General Fund 27% 29% 28% 27% 27% Per Capita 298.72 328.05 318.28 288.37 284.53 Milpitas $16,227,888 $17,382,981 $16,173,366 $16,573,000 $17,302,000 % of General Fund 24% 20% 24% 23% 25% Per Capita 250.62 265.17 243.31 239.72 244.32 Mountain View $16,019,000 $17,223,000 $17,273,548 $17,400,730 $15,673,950 % of General Fund 20% 20% 20% 20% 18% Per Capita 222.38 239.22 235.78 235.36 209.07 Palo Alto $20,316,000 $22,194,817 $22,600,000 $22,400,000 $19,700,000 % of General Fund 16% 18% 18% 17% 16% Per Capita 325.58 354.46 356.65 350.00 301.78 San Jose $140,327,107 $149,962,080 $157,814,015 $152,536,000 $135,795,000 % of General Fund 18% 22% 23% 22% 20% Per Capita 149.11 153.97 160.17 169.77 134.87 Santa Clara $38,142,524 $43,271,143 $41,691,543 $40,307,000 $34,500,000 % of General Fund 31% 31% 28% 27% 23% Per Capita 349.59 388.93 364.95 348.97 294.26 Sunnyvale $21,316,412 $30,852,313 $29,705,343 $26,000,000 $26,000,000 % of General Fund 21% 25% 22% 23% 23% Per Capita 159.62 227.32 218.87 189.04 187.28 100 125 150 175 200 225 250 275 300 325 350 375 400 $ per Capita San Jose Sunnyvale Cupertino Mountain View Milpitas Campbell Los Gatos Santa Clara Palo Alto FY 09-10 Sales Tax - Per Capita - Comparison with Other Jurisdictions - 48 - ---PAGE BREAK--- Property Tax Comparison With Other Jurisdictions FY 05-06 through FY 09-10 Actual Actual Actual Budgeted Budgeted 2005-06 2006-07 2007-08 2008-09 2009-10 Campbell $6,517,562 $7,568,750 $8,322,288 $8,437,000 $8,787,000 % of General Fund 22% 24% 24% 23% 24% Per Capita 170.17 197.06 209.38 210.08 217.39 Cupertino $4,743,000 $6,480,283 $10,385,000 $11,272,000 11,190,000 % of General Fund 16% 15% 24% 27% 28% Per Capita 88.73 117.48 188.55 202.91 200.39 Los Gatos $7,755,200 $8,635,991 $9,178,819 $9,225,106 $9,248,120 % of General Fund 24% 26% 28% 24% 28% Per Capita 267.64 297.91 312.61 305.77 303.25 Milpitas $14,417,392 $15,750,192 $16,800,792 $17,056,000 $17,037,000 % of General Fund 21% 18% 25% 23% 25% Per Capita 222.66 240.26 252.75 246.71 240.58 Mountain View $21,135,000 $22,027,000 $23,681,223 $24,888,760 $25,985,220 % of General Fund 27% 26% 27% 28% 30% Per Capita 293.41 305.95 323.24 336.64 346.60 Palo Alto $18,754,000 $21,466,426 $23,100,000 $23,500,000 $25,800,000 % of General Fund 15% 17% 18% 18% 21% Per Capita 300.54 342.83 364.54 367.19 395.22 San Jose $166,559,696 $191,825,613 $208,878,360 $208,267,000 $193,468,000 % of General Fund 22% 28% 30% 30% 28% Per Capita 176.98 196.95 211.99 231.79 192.14 Santa Clara $22,032,336 $25,468,193 $27,591,808 $28,566,000 $29,254,000 % of General Fund 18% 18% 19% 19% 19% Per Capita 201.94 228.91 241.53 247.32 249.52 Sunnyvale $41,199,278 $35,815,933 $38,948,749 $41,259,440 $41,834,737 % of General Fund 40% 29% 29% 37% 37% Per Capita 308.51 263.89 286.98 299.99 301.35 City 50 75 100 125 150 175 200 225 250 275 300 325 350 375 400 $ per Capita San Jose Cupertino Campbell Milpitas Santa Clara Sunnyvale Los Gatos Mountain View Palo Alto FY 09-10 Property Tax - Per Capita - Comparison with Other Jurisdictions - 49 - ---PAGE BREAK--- Transient Occupancy Tax Comparison With Other Jurisdictions FY 05-06 through FY 09-10 Actual Actual Actual Budgeted Budgeted 2005-06 2006-07 2007-08 2008-09 2009-10 Campbell $1,132,495 $1,463,140 $1,617,111 $1,600,000 $1,600,000 % of General Fund 4% 5% 5% 4% 4% Per Capita 29.57 38.09 40.68 39.84 39.58 Cupertino $2,100,000 $2,511,184 $2,711,590 $2,660,000 $2,394,000 % of General Fund 7% 6% 6% 6% 6% Per Capita 39.29 45.52 49.23 47.88 42.87 Los Gatos $1,028,664 $1,108,257 $1,245,078 $1,100,000 $1,080,000 % of General Fund 3% 3% 4% 3% 3% Per Capita 35.50 38.23 42.40 36.46 35.41 Milpitas $4,535,325 $5,153,656 $5,755,842 $5,788,000 $4,793,000 % of General Fund 7% 6% 9% 8% 7% Per Capita 70.04 78.62 86.59 83.72 67.68 Mountain View $3,177,000 $3,936,000 $4,298,983 $4,200,160 $2,771,980 % of General Fund 4% 5% 5% 5% 3% Per Capita 44.10 54.67 58.68 56.81 36.97 Palo Alto $6,393,000 $6,708,199 $8,000,000 $8,400,000 $7,000,000 % of General Fund 5% 5% 6% 7% 6% Per Capita 102.45 107.13 126.25 131.25 107.23 San Jose $7,688,090 $8,600,000 $9,560,000 $9,972,000 $6,553,000 % of General Fund 1% 1% 1% 1% 1% Per Capita 8.17 8.83 9.70 11.10 6.51 Santa Clara $9,341,790 $10,306,555 $11,278,026 $11,794,000 $8,500,000 % of General Fund 8% 7% 8% 8% 6% Per Capita 85.62 92.64 98.72 102.11 72.50 Sunnyvale $5,633,159 $6,479,842 $7,350,255 $5,637,015 $5,796,280 % of General Fund 5% 5% 5% 5% 5% Per Capita 42.18 47.74 54.16 40.99 41.75 City 0 20 40 60 80 100 120 $ per Capita San Jose Los Gatos Mountain View Campbell Sunnyvale Cupertino Milpitas Santa Clara Palo Alto FY 09-10 Transient Occupancy Tax - Per Capita - Comparison with Other Jurisdictions - 50 - ---PAGE BREAK--- Franchise Fee Revenue Comparison With Other Jurisdictions FY 05-06 through FY 09-10 Actual Actual Actual Budgeted Budgeted 2005-06 2006-07 2007-08 2008-09 2009-10 Campbell $1,346,968 $1,685,456 $2,323,063 $2,225,000 $2,383,122 % of General Fund 4% 5% 7% 6% 7% Per Capita 35.17 43.88 58.44 55.40 58.96 Cupertino $2,200,000 $2,537,018 $2,547,000 $2,630,000 2,630,000 % of General Fund 7% 6% 6% 6% 6% Per Capita 41.16 45.99 46.24 47.34 47.10 Los Gatos $1,130,190 $1,162,038 $1,659,829 $1,665,600 $1,689,260 % of General Fund 3% 4% 5% 5% 5% Per Capita 39.00 40.09 56.53 55.21 55.39 Milpitas $2,643,392 $2,911,593 $2,967,817 $3,060,000 $3,145,000 % of General Fund 4% 3% 4% 4% 5% Per Capita 40.82 44.42 44.65 44.26 44.41 Mountain View $3,205,000 $2,936,000 $2,955,434 $3,046,912 $3,118,498 % of General Fund 4% 3% 3% 3% 4% Per Capita 44.49 40.78 40.34 41.21 41.60 Palo Alto $291,000 $511,546 $407,006 $500,000 $500,000 % of General Fund 0% 0% 0% 0% 0% Per Capita 4.66 8.17 6.42 7.81 7.66 San Jose $36,759,856 $40,415,138 $41,063,799 $41,621,000 $41,422,000 % of General Fund 5% 6% 6% 6% 6% Per Capita 39.06 41.49 41.68 46.32 41.14 Santa Clara $2,907,192 $3,166,797 $3,281,082 $3,000,000 $3,000,000 % of General Fund 2% 2% 2% 2% 2% Per Capita 26.65 28.46 28.72 25.97 25.59 Sunnyvale $5,531,248 $5,713,842 $5,855,124 $6,177,593 $6,227,378 % of General Fund 5% 5% 4% 6% 6% Per Capita 41.42 42.10 43.14 44.92 44.86 City 5 15 25 35 45 55 65 $ per Capita Palo Alto Santa Clara San Jose Mountain View Milpitas Sunnyvale Cupertino Los Gatos Campbell FY 09-10 Franchise Fee Revenue - Per Capita - Comparison with Other Jurisdictions - 51 - ---PAGE BREAK--- Building Permits Comparison With Other Jurisdictions FY 05-06 through FY 09-10 Actual Actual Actual Budgeted Budgeted 2005-06 2006-07 2007-08 2008-09 2009-10 Campbell $1,661,412 $818,163 $1,395,014 $750,000 $600,000 % of General Fund 6% 3% 4% 2% 2% Per Capita 43.38 21.30 35.10 18.67 14.84 Cupertino $3,370,000 $3,322,226 $2,656,000 $2,980,000 $3,210,000 % of General Fund 11% 8% 6% 7% 8% Per Capita 63.05 60.23 48.22 53.64 57.49 Los Gatos $1,552,466 $1,206,055 $1,277,288 $1,395,000 $1,205,270 % of General Fund 5% 4% 4% 4% 4% Per Capita 53.58 41.60 43.50 46.24 39.52 Milpitas $5,740,022 $4,933,979 $4,096,505 $3,856,000 $2,686,000 % of General Fund 8% 6% 6% 5% 4% Per Capita 88.65 75.27 61.63 55.77 37.93 Mountain View $2,282,000 $2,388,000 $3,177,783 $2,750,737 $1,558,500 % of General Fund 3% 3% 3% 3% 2% Per Capita 31.68 33.17 43.38 37.21 20.79 Palo Alto $5,224,000 $3,672,863 $3,400,000 $3,800,000 $3,300,000 % of General Fund 4% 3% 3% 3% 3% Per Capita 83.72 58.66 53.66 59.38 50.55 San Jose $23,955,292 $21,853,857 $19,700,000 $21,900,000 $17,000,000 % of General Fund 3% 3% 3% 3% 2% Per Capita 25.45 22.44 19.99 24.37 16.88 Santa Clara $1,969,172 $1,912,577 $1,785,221 $1,750,000 $1,500,000 % of General Fund 2% 1% 1% 1% 1% Per Capita 18.05 17.19 15.63 15.15 12.79 Sunnyvale $2,138,495 $2,696,569 $3,587,657 $1,843,457 $1,382,593 % of General Fund 2% 2% 3% 2% 1% Per Capita 16.01 19.87 26.43 13.40 9.96 City 0 10 20 30 40 50 60 $ per Capita Sunnyvale Santa Clara Campbell San Jose Mountain View Milpitas Los Gatos Palo Alto Cupertino FY 09-10 Building Permit Revenue - 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377 - ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- - 407 - Capital Improvement Plan This section of the budget contains the City’s Five-Year Capital Improvement Plan (CIP). It also provides specific capital project details (including projected operating budget impacts) and a listing of carry forward projects. In conjunction with the annual budget process, the City prepares a CIP that identifies anticipated project expenditures greater than $25,000 over a multi-year timeframe. The CIP provides the City with a strategic planning document that guides near- and medium- term expenditures for preservation of City infrastructure; major investments in existing or new facilities; and other asset maintenance and investment expenditures, including technology and communications systems. Projects shown in the first year receive budgetary appropriations as part of the FY 11 budget approval process. Summary As shown below, the proposed FY 2011-15 CIP contains 13 projects of which two are new and eleven which have been previously included in the City’s adopted CIP. The two new projects that are funded from the CIPR are Police Handgun Replacements in Year 4 and End User Radios for Interoperability in Years 4 and 5, critical and large costs that have not yet been budgeted for. Other changes compared to last year’s CIP include a reduction in half of CIPR funding for the biennial ADA Transition Plan Improvements from $50,000 to $25,000 every other year and a 59% reduction in 5-year CIPR funding for Annual Street Maintenance from $2.9 million to $1.2 million. New Capital Projects Total Budget Timing Source of Funds End User Radios for Interoperability $600,000 Years 4 and 5 CIPR Replacement of Handguns $125,000 Year 4 CIPR Pre-existing Projects Total Budget Timing Source of Funds Accessibility Ramps $100,000 Years 2 and 4 CT ADA Transition Plan Improvements $75,000 Years 1, 3 and 5 CIPR Annual Street Maintenance $3,220,000 Annual CIPR/Grants/VIF Bike/Ped. Traffic Safety Improvements. $125,000 Annual CT/Grants Building Renovation $95,000 Year 1 CIPR Hacienda Ave. Rehabilitation $1,500,000 Year 1 CIPR/CT/Envtl. Services Hamilton/Hwy 17. SB Off-Ramp $1,200,000 Year 2 Private/Grants L.G. Creek W. Trail Expansion $2,500,000 Year 3 Grants Misc. Storm Drainage Improvements. $145,000 Years 1, 3 and 5 Envtl. Services Stojanovich Family Park (Additional) $65,000 Year 1 County OSA Winchester Blvd. Improvements $1,120,000 Year 1 Grants The CIP Committee is recommending the cancellation of the Campbell Park Restrooms project which was previously approved for funding in Year 3 for $250,000 in Park Dedication Fees, due to the uncertainty of this revenue source in the ensuing years. Instead, the Committee recommends focusing any available level of Park Fees towards the completion of the Stojanovich Family Park project. Staff has also altered the traditional ---PAGE BREAK--- - 408 - annual funding of Bike/Pedestrian projects and shifted to biannual funding of ADA ramps and storm drain projects. Year 1 projects recommended for budget appropriations for FY 2010 are: Year 1 Projects Year 1 Budget Source of Funds ADA Transition Plan Improvements $ 25,000 CT Annual Street Maintenance 700,000 Prop. 42 Bike/Pedestrian and Traffic Safety Improvements 25,000 Grants Building Renovation 95,000 Grants/RDA Hacienda Avenue Rehabilitation 1,500,000 Grants/CT Miscellaneous Storm Drainage Improvements 50,000 Grants/CT Stojanovich Family Park 65,000 Grants Winchester Blvd. Improvements 1,120,000 RDA TOTAL $ 3,580,000 Project Funding Sources Revenue for project expenditures comes from a number of funding sources, both restricted and discretionary. For the proposed FY 2011-15 CIP, the primary sources of funding for projects are the City’s Capital Improvement Plan Reserve (CIPR) at $1.4 million and Grants/Private Funds at $1.6 million. Other funding sources include Park Dedication Fees, RDA Bond Proceeds, Construction Tax, and Environmental Services Funds. The CIPR, which is part of the General Fund, is the City’s most flexible funding source and has historically been used for a wide range of project expenditures. By established Council Policy, the CIPR receives a portion of any available General Fund surplus at fiscal year- end. The availability of any funds for the CIPR is dependent on actual expenditures and revenues in a given fiscal year. In years where revenues are strong or expenditures are lower than anticipated, the CIPR increases. In years where revenues are lean and reserves are needed to balance the City’s budget, the CIPR does not increase and proposed projects are required to be deferred or placed on the City’s Unfunded Projects list. Due to the continued weak economy and the City’s ongoing budget challenges, no operating surplus is anticipated to be available for the CIPR for the foreseeable future leaving a funding gap for projects requiring funding from the General Fund. Accordingly, only those projects deemed most critical to the City, or projects that have other funding sources, such as grants or other restricted funds, are able to be recommended for the CIP. This is the predominant reason for the small number of projects being proposed as well as their timing over the ensuing 5-year period. Until such time as the General Fund begins to realize meaningful operating surpluses once again, the ability to fund needed capital projects will be severely constrained. Most significantly, there is not currently projected to be any available funding for projects from the CIPR beyond FY 2013/14. This does not take into account any possible transfer of existing funds in the CIP/CIPR to the operating budget to address the General Fund deficit. ---PAGE BREAK--- - 409 - Environmental Review On April 27, 2010, the Planning Commission held a Public Hearing to consider the proposed CIP. At this meeting, the Commission accepted the CIP, found it be consistent with the City’s General Plan, and recommended that the City Council find the projects in the CIP to be either categorically exempt under the California Environmental Quality Act (CEQA), or to have been considered under previous project approvals. Assumptions The 2011-15 CIP is prepared in accordance with certain assumptions about funding constraints, operating budget implications, City priorities, and work plans as summarized below: • Project and equipment costs, where applicable, are based on departmental estimates. Cost estimates are based on current market and contract experience on similar projects, where available, or order of magnitude cost estimates for larger projects in the early phases of design. Projects managed by Pubic Works include “soft costs” such as staff costs for project management, design, inspection and administration, and consultant services as necessary. • Ongoing operating costs for annual maintenance and technical support are projected for each capital project and as appropriate, are reflected in the operating budget. The only CIP project with significant new operating budget impacts is the development of Stojanovich Family Park. When completed and open to the public, it is estimated that the annual operating costs associated with maintaining this facility will be approximately $58,000 per year. These costs have been included in the City’s multi-year operating budget projections. • Existing work plans, ongoing programs and service level requirements were taken into consideration in project scheduling. Project Selection Criteria Criteria used in evaluating project requests include: • The project’s relationship to the City’s strategic goals and objectives. • The project’s impact on the operating budget (if any). • The nature of the project in terms of preservation of City assets versus new construction or acquisition. • Available financing. • Consequences of not completing the project employee and/or public safety, etc.) Exhibits: 1 CIP Summaries 2 CIP 5-Year Cash Flow Analysis 3 Capital Project Descriptions ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK---