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AGENDA BILL Agenda Item No. 7(A)(2) Date: June 17, 2014 To: El Cerrito City Council/Pension Trust Board/ Public Financing Authority Board From: Scott Hanin, City Manager Lisa Malek-Zadeh, Finance Director/City Treasurer Subject: Adoption of the City’s Biennial Budget for Fiscal Years 2014-15 and FY 2015-16, Approve FY 2014-15 Spending Authority by fund for the City, Employee Pension Board and Public Financing Authority and Approve the FY 2014-15 annual Gann appropriation limit. ACTION REQUESTED Staff requests that the City Council approve the following actions this evening: 1. Adopt a resolution approving the Biennial Budget for Fiscal Years 2014-15 and FY 2015-16 and authorizing FY 2014-15 spending authority by fund for the City of El Cerrito; 2. Adopt a resolution approving the Biennial Budget for Fiscal Years 2014-15 and FY 2015-16 and authorizing FY 2014-15 spending authority by fund for the El Cerrito Public Financing Authority; 3. Adopt a resolution approving the Biennial Budget for Fiscal Years 2014-15 and FY 2015-16 and authorizing FY 2014-15 spending authority by fund for the El Cerrito Employee Pension Board; and 4. Adopt a resolution approving the calculation and establishing the FY 2014-15 annual Gann Appropriation Limit. BACKGROUND At the June 9, 2014 City Council meeting, the City Manager presented the Proposed Biennial Budget for Fiscal Years 2014-15 and FY 2015-16 that includes both the operating and capital budgets for the City of El Cerrito, the Public Financing Authority and Employee Pension Board. The presentation provided an update on the implementation of the City’s strategic plan including the challenges and accomplishments in the current budget year, FY 2013-14, in each of the goal areas. ---PAGE BREAK--- Agenda Item No. 7(A)(2) Page 2 The strategic plan continues to provide the foundation for developing future year goals and aligning resources with these objectives as we developed the Biennial Budget for fiscal years FY 2014-15 and FY 2015-16 budgets. Discussions on the FY 2014-15 and FY 2015-16 budgets kicked off with a series of community meetings held in various locations throughout the month of March. The meetings were intended to provide the community with an overall understanding of the City’s budget, introduce and gather initial input on the challenges projected in FY 2014- 15 and provide a venue for the public to ask City staff questions about the budget and city finances. Over the course of the month, approximately 40 community members attended the meetings along with staff members from each of the City departments. On April 22, the City Council received an update on financial projections and the realities facing the City in the coming fiscal years. The loss of backfill funding for former redevelopment activities and programs such as economic development, deficits in some key operating funds impacting infrastructure maintenance, an estimated $2 million deficit in the General fund and a reduction in reserves are just some of issues the City will need to tackle in developing next year’s budget. The City Manager provided potential the City Council with balancing options that included increasing employee contributions toward pension costs, keeping vacant positions unfilled for another year, fee increases and service reductions. The total value of these potential measures totals $2.8 million. With Council direction, staff began analyzing each option in more detail including commencing discussions with each of the labor groups. Biennial Budget During the budget development process, it was determined that there were several advantages for the City by adopting a two year budget. Biennial budgets provide greater opportunity to determine effectiveness and success of programs and services and can provide more emphasis on long-term planning and forecasting. Additionally, a two year budget aligns with the City’s goal to implement efficiencies wherever possible by producing a budget book once every two years. Time spent producing a budget book each year can now be spent working on projects that provide greater value such as the implementation of technology solutions. The budget provides a plan that outlines how resources will be utilized to achieve the City’s goals; however, adoption of the spending authority provides the legal authority to expend City revenues to realize these objectives. For this reason, Council is being asked to adopt the 2-year plan, the Biennial Budget for FY 2014-15 and FY 2015-16, but only the spending limit for FY 2014-15. This provides Council with an opportunity to make necessary adjustments, based on regular budget updates received throughout the year, before adopting spending authority for FY 2015-16 next year. ANALYSIS Proposed Biennial Budget FY 2014-15 and FY 2015-16 The proposed budget recommends expenditures of $41,702,257 in FY 2014-15 and $41,893,021 in FY 2015-16 and provides funding for all City services, including police, fire, recreation, community development, public works, and city management and ---PAGE BREAK--- Agenda Item No. 7(A)(2) Page 3 represents direction received from Council, input from the community and the efforts and collaboration of all City departments. General Fund The Proposed General Fund budget is in balance for FY 2014-15 with a very small surplus, the budget does not yet identify how to increase the City’s reserves further. The General Fund is balanced in large part by not filling vacant positions including the Human Resources Manager, Economic Development Program Manager and an Accounts Receivable clerk. The continued reliance on vacancies means it is that much harder for the City to achieve the goals adopted in the strategic plan. At the time of submittal of this budget, active negotiations are underway with all of the City’s employee groups to seek or require concessions to reduce overall staff related expenses. Certain assumptions have been included in the proposed budget, but numbers will likely need to be refined prior to adoption or even potentially after budget adoption. The FY 2015-16 Proposed General Fund budget is currently projected to run a deficit of approximately $100,000. Like the FY 2014-15 budget, assumptions related to negotiations have been included and will greatly impact these projections as will a potential revenue measure. Updates to these projections will be provided once the outcomes of these issues are known. Operating Funds Similar to the General Fund, some of the special funds faced operating deficits that have been balanced in the Proposed FY 2014-15 budget and forward. However, many of these funds are at their limits and have been used to back fill services that the General Fund can no longer support. Two of the City’s key operating funds, the Landscape and Lighting Assessment District (LLAD) and National Pollutants Discharge Elimination System (NPDES) are balanced in FY 2014-15 through one-time actions, but will require additional balancing measures to permanently align ongoing expenditures with annual revenues. Expenditure Spending Authority and Gann Appropriations Limit Included in the recommended actions for adoption of the budget are two items related to spending limits: 1) Approval of the calculation and establish the City’s FY 2014-15 Gann Appropriation Limit as $112,294,200; and 2) Establish spending authority by fund. Approved in 1979 and amended in 1990, the Gann Initiative sets an annual appropriation limit on City expenditures based on the amount of tax proceeds received. This amount is adjusted each year based on changes in population and inflation. The California Government Code requires that the City adopt the Gann appropriations limit by resolution on an annual basis. Unlike the Gann Initiative, there is no state requirement that Cities adopt a budget and the corresponding spending authority; however most Cities do. Budgets provide the fiscal plan outlining what the city wants to accomplish and the resources available to ---PAGE BREAK--- Agenda Item No. 7(A)(2) implement priorities resulting from a budget process. Establishing spending authority by fund approves the required expenditures as outlined in the adoption of the City's budget. LEGAL CONSIDERATIONS Approval of the attached resolutions is required to adopt the City's Biennial Budget for Fiscal Years 2014-15 and 2015-16. Additionally, there are separate resolutions the City Council must adopt for each of the City's component units: the Public Financing Authority and Pension Board as well as approval of the annual Gann Limit. Rcvic~ ~ Scott Hanin City Manager Attachments: 1. Resolution for Adoption of the Biennial Budget for FY 2014-15 and FY 2015-16 and authorizing spending by fund for FY 2014-15 2. Resolution for Adoption ofthe Biennial Budget for FY 2014-15 and FY 2015-16 and FY 2014-15 spending authority by fund for the Public Financing Authority 3. Resolution for Adoption of the Biennial Budget for FY 2014-15 and FY 2015-16 and FY 2014-15 spending authority by fund for the Employee Pension Board 4. Resolution Approving the Calculation and Setting the Gann Appropriations Limit for the FY 2014-15 Budget l .I Page4 ---PAGE BREAK--- Agenda Item No. 7(A)(2) Attachment 1 Page 1 of 2 RESOLUTION 2014–XX RESOLUTION OF THE CITY COUNCIL OF THE CITY OF EL CERRITO ADOPTING THE BIENNIAL BUDGET FOR FY 2014-15 AND FY 2015-16 AND SPENDING AUTHORITY FROM ALL FUNDS OF THE CITY OF EL CERRITO FOR FISCAL YEAR 2014-15 WHEREAS, City staff have prepared, transmitted, and presented the proposed biennial FY 2014- 15 and FY 2015-16 Budget to the City Council of the City of El Cerrito for its consideration, and it has been reviewed and analyzed in public review sessions; and WHEREAS, the City prepares and adopts a budget with the intent of providing a planned program for City services and a financial system to carry out the program of services; and WHEREAS, the proposed budget represents anticipated revenues and proposed expenditures, including interfund transfers, from all funds of the City of El Cerrito; and WHEREAS, proposed spending authority from tax proceeds are within the City’s Fiscal Year 2014-15 Gann Appropriations Limit, as defined the California State Constitution Article XIIIB. NOW THEREFORE, BE IT RESOLVED that the City Council of the City of El Cerrito hereby adopts the FY 2014-15 and FY 2015-16 Budget with FY 2014-15 spending limits across funds as follows: General Fund $29,252,065 Gas Tax $540,792 National Pollution Discharge Elimination $390,934 Landscape and Lighting Assessment $901,542 Measure J Return to Source $407,178 Paratransit $127,316 Measure J Storm Drain $556,710 Measure A Parcel Tax $686,436 Vehicle Abatement $11,000 Street Improvements $1,929,454 Federal, State and Local Grants $173,498 C.O.P.S. Grant $100,000 City Low & Moderate Income Housing $111,538 Capital Improvements $2,188,601 Integrated Waste Management $2,377,934 Vehicle/Equipment Replacement $128,533 Employees' Pension Trust $113,976 Financing Authority Measure A $369,574 Financing Authority Civic Center $597,768 Financing Authority Street Improvement $737,408 Total $41,702,257 ---PAGE BREAK--- Agenda Item No. 7(A)(2) Attachment 1 Page 2 of 2 BE IT FURTHER RESOLVED that the City Council of the City of El Cerrito hereby authorizes the City Manager or his designee to: 1. Create such appropriations into such new accounts as may be appropriate for proper accounting in the City’s financial system and to make any necessary non-material changes to finalize the budget document. 2. Apply correct accounting rules for the proper classification of interfund transactions, including transfers between funds, or other financial transactions, as may be necessary to address bond or loan covenants, or any other requirements imposed by formal, legal agreements between the City any other parties, as previously entered into by the City. 3. Approve payment of goods and services received by the City in accordance with the City’s approved budgets, programs, and policies, subject to a limitation of $25,000 for any single vendor in any one fiscal year, beyond which amount the City Council retains authority to approve payment with the exception of those items falling under other statutory authority public works, State purchasing). 4. Shift expenditure authority within funds among departments, as may be necessary to meet the City’s operational needs. I CERTIFY that at the regular meeting on June 17, 2014, the El Cerrito City Council passed this resolution by the following vote: AYES: NOES: ABSENT: IN WITNESS of this action, I sign this document and affix the corporate seal of the City of El Cerrito on June XX, 2014. Cheryl Morse, City Clerk APPROVED: Rebecca Benassini, Vice Mayor ---PAGE BREAK--- Agenda Item No. 7(A)(2) Attachment 2 PUBLIC FINANCING AUTHORITY RESOLUTION NO. 2014–XX RESOLUTION OF THE CITY OF EL CERRITO PUBLIC FINANCING AUTHORITY ADOPTING THE FISCAL YEARS 2014-15 AND FY 2015-16 BUDGET WHEREAS, the El Cerrito Public Financing Authority (Authority) provides for payment of long-term debt obligations; and WHEREAS, the Authority Board wishes to maintain funding levels to support payments of principle and interest on those long-term obligations; and WHEREAS, the Board wishes to adopt the Authority’s budget for Fiscal Years 2014-15 and 2015-16. NOW THEREFORE, BE IT RESOLVED that the El Cerrito Public Financing Authority adopts the Fiscal Years 2014-15 and 2015-16 Budget with spending limits in FY 2014-15 across funds as follows: BE IT FURTHER RESOLVED that this Resolution shall become effective immediately upon its passage and adoption. I CERTIFY that at the regular meeting on June 17, 2014, the El Cerrito Public Financing Authority passed this resolution by the following vote: AYES: NOES: ABSENT: IN WITNESS of this action, I sign this document and affix the corporate seal of the El Cerrito Public Financing Authority on June 2014. Cheryl Morse, Authority Clerk APPROVED: Rebecca Benassini, Vice Chair Financing Authority Measure A $369,574 Financing Authority Civic Center $597,768 Financing Authority Street Improvement $737,408 Total $1,704,750 ---PAGE BREAK--- Agenda Item No. 7(A)(2) Attachment 3 EMPLOYEE PENSION BOARD RESOLUTION NO. 2014–XX RESOLUTION OF THE CITY OF EL CERRITO EMPLOYEES’ PENSION BOARD ADOPTING THE BOARD’S FISCAL YEARS 2014-15 AND 2015-16 BUDGET WHEREAS, the El Cerrito Employees’ Pension Board (Board) provides for retirement benefits for certain former City of El Cerrito employees and/or their beneficiaries; and WHEREAS, the Board wishes to maintain funding levels to support pension payments to plan members; and WHEREAS, the Board wishes to adopt the budget for Fiscal Years 2014-15 and 2015-16 and the spending limits for FY 2014-15. NOW THEREFORE, BE IT RESOLVED that the El Cerrito Employees’ Pension Board hereby adopts the budget for Fiscal Years 2014-15 and 2015-16 with spending limits for FY 2014-15 of $113,976. BE IT FURTHER RESOLVED that this Resolution shall become effective immediately upon its passage and adoption. I CERTIFY that at the regular meeting on June 17, 2014, the El Cerrito Employees’ Pension Board passed this resolution by the following vote: AYES: NOES: ABSENT: IN WITNESS of this action, I sign this document and affix the corporate seal of the El Cerrito Employees’ Pension Board on June 2014. Cheryl Morse, Secretary to the Board APPROVED: Rebecca Benassini, Vice Chair ---PAGE BREAK--- Agenda Item No. 7(A)(2) Attachment 4 Page 1 of 2 RESOLUTION NO. 2014–XX RESOLUTION OF THE CITY COUNCIL OF THE CITY OF EL CERRITO SELECTING THE COST OF LIVING AND POPULATION FACTORS TO BE USED IN CALCULATION OF THE CITY’S APPROPRIATIONS LIMIT FOR FISCAL YEAR 2014-15 AND SETTING THE APPROPRIATIONS LIMIT AT $112,294,200 WHEREAS, Article XIIIB of the California Constitution establishes a limitation on spending by cities of funds from proceeds of taxes; and WHEREAS, in accordance with Government Code Section 7910, annually the City Council must establish an annual appropriations limit, and select factors for changes in both cost of living and population to be used in calculating the appropriations limit; and WHEREAS, the appropriations limit has been calculated in accordance with applicable law as follows; and City of El Cerrito Gann Limit Calculation FY 2013-14 Appropriations Limit: $111,892,904 Cost of Living Change Ratio: .9977 CA Per-Capita Personal Income Population Change Ratio: 1.0059 Contra Costa County Population Calculation Factor: 1.03358643 FY 2014-15 Appropriations Limit: $112,294,200 WHEREAS, in accordance with Government Code Section 7910, the information on the calculation of the appropriations limit has been made available to the public at least 15 days prior to the date of adoption of this Resolution, and continues to be available for public inspection. NOW THEREFORE, THE CITY COUNCIL OF THE CITY OF EL CERRITO DOES HEREBY FIND, DETERMINE AND RESOLVE AS FOLLOWS: 1. In accordance with Article XIIIB of the Constitution and Government Code Section 7900 et seq., the adjustment factors to be applied to the appropriations limit for Fiscal Year 2013-14 shall be the California Statewide change in Per Capita Personal Income and the Contra Costa County change in population; 2. In accordance with Article XIIIB of the Constitution and Government Code Section 7902, the appropriations limit for the Fiscal Year 2014-15 shall be $112,294,200 which exceeds the City’s projected applicable appropriation amount by $93,647,550; and ---PAGE BREAK--- Agenda Item No. 7(A)(2) Attachment 4 Page 2 of 2 3. The City Council reserves the right to change or revise any adjustment factors associated with the calculation of the appropriations limit if such changes or revisions would result in a more advantageous appropriations limit in the present or future. I CERTIFY that at the regular meeting on June 17, 2014 the El Cerrito City Council passed this resolution by the following vote: AYES: COUNCILMEMBERS: NOES: COUNCILMEMBERS: ABSENT: COUNCILMEMBERS: ABSTAIN: COUNCILMEMBERS: IN WITNESS of this action, I sign this document and affix the corporate seal of the City of El Cerrito on June 2014. Cheryl Morse, City Clerk APPROVED: Rebecca Benassini, Vice Mayor