Document elcerrito_gov_doc_1f1fc12930

13 SECTION 1: BUDGET OVERVIEW The City of El Cerrito’s Fiscal Year 2012-13 Budget presents accurately and clearly the City’s projection of revenues and expenditures for the next fiscal year. It also describes in detail the mission and goals of the City, each of its departments and divisions, and the City’s separate legal entities: the Employee Pension Board and the El Cerrito Public Financing Authority. BUDGET STRUCTURE AND APPROACH The budget document is intended to help the City Council, residents, businesses, and other interested parties understand the overall responsibilities and goals of the City and to enable the departments to present financial plans and workload data. Each year staff aims to improve the budget document in a significant way. As in previous years, this budget document includes Ten-Year Financial Plans for the General Fund and Integrated Waste Management Fund. The purpose of these long term plans is to allow the residents, City Council, and the public to evaluate the results of actions taken today by projecting out ten years into the future. Using this planning tool on an on-going basis will help the City refine projections and develop long-term stability. CSMFO Award City staff is very proud to include in this Budget Overview Section a copy of the award for Excellence in Operational Budgeting from the California Society of Municipal Finance Officers (CSMFO) for our FY 2011-12 operating budget. This is the City’s seventh consecutive year of receipt of this award. GFOA Award This past year, the City of El Cerrito was honored with its second consecutive Government Finance Officers Association of USA/Canada (GFOA) Distinguished Budget Presentation award. This achievement was a goal of City Management, and staff is extremely proud to continue to receive this award that reflects a nationally recognized standard for budget documents prepared by local agencies. Over the past 11 years the City has been working steadily to improve this document. This award represents a culmination of those efforts and provides motivation to continue to improve this important document. Reporting Entity Throughout this budget document, reference is made to the City. As appropriate, such three separate entities covered under this budget: City of El Cerrito, El Cerrito Employees’ Pension Board, and the El Cerrito Public Finance Authority. Per AB1x 26 the El Cerrito Redevelopment Agency (RDA) was dissolved as of February 1, 2012 along will all California Redevelopment Agencies, and in El Cerrito a Successor Agency was created to finalize the RDA’s commitments. Historical budget and actual data for the former RDA is shown in this budget in the Successor Agency, Section 10, but since the ---PAGE BREAK--- 14 Successor Agency has no budget authority one is not being presented in this document. The events leading up to actions since the dissolution of the RDA are discussed in detail in Section 10. The El Cerrito Municipal Services Corporation (MSC) is a non-profit organization whose purpose is to support the City in expanding economic opportunities, eliminating blight, as well as assisting and implementing programs and activities that will lessen neighborhood tensions and combat community deterioration. The FY 2012-13 budget for the MSC was adopted at the May 1, 2012 meeting of its Board of Directors and is therefore, not included in this document. Report Structure The Operating Budget for FY 2012-13 contains the City Manager’s transmittal letter, which is intended to provide an executive summary of the city’s priorities, major projects, general philosophy, and discussion on the citywide financial outlook and budget. The Budget Overview section provides information on the structure and policies of the City and detail of the budget on a Citywide basis. Following the Overview is a detailed look at the General Fund, including the Ten-Year Plan and major revenue and expenditure assumptions associated with this plan. The City departments each present reports including history and budget for line-item expenditures from all revenue sources, as well as descriptions of core responsibilities, service indicators, and goals and accomplishments. A section has been added this year for the Successor Agency to the Former Redevelopment Agency, and the City’s other entities are presented separately after that discussion. The remainder of the Operating Budget includes sections discussing the Capital Improvement Program, Long Term Debt obligations, and other statistics. EL CERRITO PROFILE The City of El Cerrito is a general law city that was incorporated in 1917. El Cerrito is located in western Contra Costa County and forms part of the highly urbanized area along the eastern shore of San Francisco Bay. El Cerrito has a population of 23,440 and covers an area of 3.9 square miles. It is a community of highly educated residents due primarily to the proximity to UC Berkeley and the San Francisco Bay Area high-tech economy. It is known for its temperate climate and breathtaking views of San Francisco Bay and the Golden Gate Bridge from the hillside areas. Interstate Highway 80 passes near the western boundary of the community, while the crest of the Berkeley Hills and Wildcat Canyon Regional Park define the eastern boundary. The community is served by AC Transit and the Bay Area Rapid Transit (BART) system, with stations near both the northern (El Cerrito Del Norte station) and southern (El Cerrito Plaza station) boundaries of the city. In addition, several transit agencies including Golden Gate Transit, Fairfield-Suisun Transit, Vallejo Transit, and WestCAT also serve the El Cerrito Del Norte BART station. The combination of services from these agencies provides excellent public transportation to the entire Bay Area. The City is organized as a Council-Manager form of local municipal government. The City Council consists of five members elected at large for four-year, overlapping terms. The Council selects the Mayor for a one-year term from among its members. The Mayor and City Council provide community leadership, develop policies to guide the City in delivering services and achieving community goals, and encourage citizen understanding and involvement. The Council Members also serve as the governing body of the El Cerrito Employees’ Pension Board (PB), and the El Cerrito Public Financing Authority (PFA). The City Manager is appointed by the City Council and is responsible for administration of municipal affairs. All municipal departments operate under the supervision of the City Manager. Through the City Manager, City staff uses the resources appropriated by the ---PAGE BREAK--- 15 Council in the budget to achieve desired service results in the community and carries out the policies of the Council. The City Council also appoints the City Attorney to advise them and City staff on legal affairs, to see that all laws are effectively enforced and, when necessary, to defend the City in litigation. The City provides police and fire services as well as recreation, streets and roads, recycling, economic development, public improvements, building, planning and zoning and general administrative services. Residents are provided water by East Bay Municipal Utility District and sewer services through Stege Sanitary District. Garbage collection service is provided by East Bay Sanitary, and both Comcast and AT&T provide video, internet and telecommunication services. ORGANIZATIONAL OVERVIEW Chart 1-1 provides a graphical overview of the structure of City Government. There are no changes to the structure from the prior year. Chart 1-1 El Cerrito City Government Organization Chart Overall Position Listing Table 1-1 shows the authorized Citywide position listing. The listing shows there were one position change from the prior year that relates to the Environmental and Development Services Department. Table 1-1 Citywide Position Listing FY 09-10 FY 10-11 FY 11-12 FY12-13 City Council 5.00 5.00 5.00 5.00 City Management 7.00 7.00 7.00 7.00 Administrative Services 7.80 7.80 7.80 7.80 Economic Development 5.00 4.00 4.00 4.00 Environmental and Development Svcs 22.00 20.00 20.00 21.00 Fire 37.00 37.00 37.00 37.00 Police 56.55 56.55 56.55 56.55 Public Works 14.25 14.25 14.25 14.25 Recreation 38.00 38.00 38.00 38.00 Total 192.60 189.60 189.60 190.60 Residents of El Cerrito City Council City Attorney City Manager City Management Fire Department Administrative Services Police Department Environmental and Development Services Public Works Recreation Boards and Commissions ---PAGE BREAK--- 16 FINANCIAL OVERVIEW Fund Balance Each department has reviewed its budget and made decisions proposing how funds should be allocated, what new programs or activities should continue or begin, and what programs or activities should be changed. The two schedules shown as Tables 1-2 and 1-3 summarize the effects of current activity and its relation to the FY 2012-13 budget. Table 1-2 projects current year activity through June 30, 2012. Actual data as of February 29, 2012 were annualized using the trend activity for the different categories of revenues and expenditures and the FY 2011-12 budget. Estimating the current year-end fund balance provides the amount of fund balance anticipated at the start of the new fiscal year, and Table 1-3 applies that beginning fund balance to the adopted budget to determine the estimated fund balance at the end of FY 2012-13. Table 1-2 Projected Fund Balance Act. Fund Balance Revenues & Expenditures Net Est. Balance Fund Description at June 30, 2011 Contributions Transfer In Transfer Out Change at June 2012 Nonspendable and Restricted Fund Balance $3,950,000 $3,950,000 Restricted MSC Pre-funding Contribution 1,007,000 1,007,000 $1,007,000 Unassigned Fund Balance 2,549,487 2,798,705 101 Sub-total Total General Fund Balance 6,499,487 28,616,632 28,008,621 1,415,890 767,683 1,256,218 7,755,705 201 Gas Tax Fund 11,542 653,000 468,512 370,000 582,597 (28,109) (16,567) 202 NPDES (4,230) 340,994 291,605 60,000 103,535 5,854 1,624 203 Landscape and Lighting (36,871) 771,000 1,087,739 420,000 138,431 (35,170) (72,041) 204 Measure J Return to Source 4,014 484,950 124,012 362,966 (2,028) 1,986 206 Measure A Parcel Tax 289,232 438,100 115,000 365,053 (41,953) 247,279 208 Asset Seizure 133,752 31,789 24,800 6,989 140,741 209 Vehicle Abatement 180,894 40,965 59,276 (18,311) 162,583 210 Park In Lieu Fund 11,969 11,969 211 Street Improvement Fund (77,440) 1,375,715 465,039 744,036 166,640 89,200 213 Public Art Fund 48,000 48,000 221 Federal, State and Local Grants 186,922 3,978,400 4,251,400 273,000 186,922 232 City LMI Housing Fund 55,000 1,839,252 1,784,252 1,784,252 747,784 8,114,913 6,942,383 2,962,252 2,296,618 1,838,164 2,585,948 301 Capital Improvements (835,846) 2,043,730 1,627,793 57,600 473,537 (362,309) 205 Measure J Storm Drain 41,887 698,000 119,321 617,183 (38,504) 3,383 (793,959) 2,741,730 1,747,114 57,600 617,183 435,033 (358,926) 401 Storm Drain Debt Service 551,790 2,769 519,550 516,550 (231) 551,559 834 Finance Authority- Measure A 370,286 30 366,477 365,053 (1,394) 368,892 835 Financing Authority-City Hall 603,318 300 598,407 598,107 603,318 836 Financing Authority-Street Imp 741,205 118 744,152 744,036 2 741,207 2,266,599 3,217 2,228,586 2,223,746 (1,623) 2,264,976 501 Integrated Waste Management 1,137,929 1,786,245 1,478,994 302,184 5,067 1,142,996 601 Vehicle/Equipment Replacement 846,464 148,600 48,017 273,000 (172,417) 674,047 1,984,393 1,934,845 1,527,011 575,184 (167,350) 1,817,043 801 Redevelopment (1,309,708) 4,516,280 2,415,070 791,502 1,309,708 802 RDA-Low & Moderate Income 1,759,986 542,157 109,217 2,192,926 (1,759,986) 804 RDA Debt Service 695,771 803,188 107,417 (695,771) 814 RDA 2004 Series A&B Debt Service 811,854 1,137,545 325,691 (811,854) 1,957,903 5,058,437 4,465,020 433,108 2,984,428 (1,957,903) 701 Employees' Pension Trust Fund 148,500 148,500 Total $12,662,207 $46,469,774 $45,067,235 $7,241,096 $7,241,096 $1,402,539 $14,064,746 CITY OF EL CERRITO Projected Fund Balance Fiscal Year Ending June 30, 2012 Operating Transfers Table 1-2 indicates that Citywide there is projected to be a net increase in fund balance overall of $1,402,539. This increase is due primarily to the elimination of the fund ---PAGE BREAK--- 17 balance for the Redevelopment Agency funds, offset by the inclusion of fund 232, City Low and Moderate Income (both created as a result of dissolution of the Redevelopment Agency), the City’s acceptance of the required housing functions, and the MSC’s restricted contribution to the General Fund to backfill potential shortfalls of revenue from the Successor Agency. Table 1-3 shows the anticipated fund balances as of June 30, 2013, based on the revenue, expenditure and inter-fund transfers appearing in this budget. Table 1-3 Proposed Fund Balance Projected Revenues & Expenditures Net Est. Balance Fund Description at June 30, 2012 Contributions Transfer In Transfer Out Change at June 2013 Nonspendable Restricted Fund Balance $3,950,000 $3,950,000 Restricted MSC Pre-Funding Contribution 1,007,000 1,007,000 Unassigned Fund Balance 2,798,705 2,970,792 101 Sub-total Total General Fund Balance 7,755,705 $28,467,174 $28,285,923 $724,936 $734,100 $172,087 7,927,792 201 Gas Tax Fund (16,567) 660,000 603,649 663,000 700,675 18,676 2,109 202 NPDES 1,624 334,715 334,292 107,000 106,641 782 2,406 203 Landscape and Lighting (72,041) 771,000 1,149,695 595,000 142,584 73,721 1,680 204 Measure J Return to Source 1,986 495,421 128,028 371,786 (4,393) (2,407) 206 Measure A Parcel Tax 247,279 439,400 115,000 185,000 362,305 147,095 394,374 208 Asset Seizure 140,741 2,000 2,000 142,741 209 Vehicle Abatement 162,583 21,000 10,000 11,000 173,583 210 Park In Lieu Fund 11,969 500 500 12,469 211 Street Improvement Fund 89,200 1,425,000 754,232 740,000 (69,232) 19,968 213 Art in Public Places 48,000 48,000 221 Federal, State and Local Grants 186,922 464,461 464,461 186,922 232 City LMI Housing 1,784,252 781,152 1,013,134 (231,982) 1,552,270 2,585,948 5,394,649 4,572,491 1,550,000 2,423,991 (51,833) 2,534,115 301 Capital Improvements (362,309) 4,262,016 4,421,690 57,600 (102,074) (464,383) 205 Measure J Storm Drain 3,383 698,000 154,335 492,000 51,665 55,048 (358,926) 4,960,016 4,576,025 57,600 492,000 (50,409) (409,335) 401 Storm Drain Debt Service 551,559 100 523,974 (523,874) 27,685 834 Finance Authority- Measure A 368,892 300 372,050 362,305 185,000 (194,445) 174,447 835 Financing Authority-City Hall 603,318 300 600,000 599,000 (700) 602,618 836 Financing Authority-Street Imp 741,207 1,000 738,653 740,000 2,347 743,554 2,264,976 1,700 2,234,677 1,701,305 185,000 (716,672) 1,548,304 501 Integrated Waste Management 1,142,996 1,931,078 1,712,083 311,250 (92,255) 1,050,741 601 Vehicle/Equipment Replacement 674,047 146,100 48,017 98,083 772,130 1,817,043 2,077,178 1,760,100 311,250 5,828 1,822,871 701 Employees' Pension Trust Fund 112,500 112,500 Total $14,064,746 $40,900,717 $41,541,716 $4,146,341 $4,146,341 ($640,999) $13,423,747 Operating Transfers CITY OF EL CERRITO Proposed Fund Balance Fiscal Year Ending June 30, 2013 Overall fund balance is projected to decline in FY 2012-13 by $640,999. This decrease is primarily due to use of the fund balance reserve in the Storm Drain and Measure A debt service funds as a result of a proposed refinance of the bonds, and subsequent removal or reduction of the reserve requirement. For the Storm Drain Fund, the reserve will be eliminated; for the Measure A Fund the reserve will be reduced by half as a result of the proposed agreement. Also material is the City Low and Moderate Income Housing Fund projecting to use reserves for the continuance of projects that are no longer funded by Tax Increment due to the dissolution of the Redevelopment Agency, and the use of advance funding on CIP and Streets projects. The General Fund reserve shows a budgeted increase of $172,087 which brings reserves to 10.2%, just above the minimum allowed by City Council Policy. ---PAGE BREAK--- 18 REVENUES City programs are supported by a variety of revenue sources. The process of projecting revenues in the various categories can be difficult but is critical in developing an appropriate spending plan. Following is a discussion on the major revenue categories received by the City. Taxes Property taxes are an Ad Valorem Tax imposed on real property (which is defined as land and permanently attached improvements), as well as tangible personal property (which is movable property). Property tax is calculated on the assessed value of the property. Proposition 13, passed in 1978, created a cap on real property so that the tax would not exceed one percent of the full cash value of the property. The one percent is shared by the county, cities, school districts and special districts. Out of every $1.00 collected in property tax, El Cerrito receives only 22 cents. Assessed value of a property is determined by the purchase price and does not change until there is a change in title or major construction, except for an annual increase of 2% allowed for inflation, unless the assessor determines overall assessed values went down, as was the case last fiscal year in which the increase could be lower. If there is a significant drop in market value, the owner can request a reevaluation. In FY 2011-12 the Contra Costa County Assessor’s office continued to be very aggressive in its determination of the decline in property values. Many El Cerrito properties received a reduction in assessed valuation without requesting a reevaluation, even if they had owned the property for many years and El Cerrito received its first assessed valuation reduction of 1.41%. Current year sales prices, the volume of home sales and the low numbers of foreclosures continue to show a stable valuation but a very conservative approach was used in this budget because of the uncertainties in the County Assessors methodology. Other complexities in the projections of property tax have grown with the implementation of the “Triple Flip”. In 2004 the State of California needed a revenue stream to tie to the Economic Recovery Bonds and created a program where ¼ cent of the sales tax collected for a jurisdiction, along with the vehicle license fee backfill funds, was kept by the State. That amount was paid by the County to jurisdictions out of Educational Revenue Augmentation Funds (ERAF) as Property Tax and Motor Vehicle in Lieu funds but in June 2011 legislation was passed without any opportunity for hearings or discussions that terminated the allocation of the Motor Vehicle in Lieu fund funds to cities and counties. This legislation reduced revenue for El Cerrito by approximately $75,000 annually. Additional problems have arisen from this program in that the County has traditionally used the total assessed valuation and related ad valorem taxes as the basis for their administrative fees. Adding the amount disbursed to the jurisdictions as ad valorem taxes has significantly increased the amount the County receives in administrative fees from every jurisdiction without adding much in the way of additional effort. This method was protested but cities were not successful in changing the method of calculating the fee. Tax Increment funds were the primary source of funds for the El Cerrito Redevelopment Agency. With the dissolution of the Redevelopment Agency, Tax Increment will no longer be received. Property tax is budgeted to be allocated to the new City Low and Moderate Income (LMI) Housing Fund for commitments relating to its two existing projects. The Successor Agency to the Former Redevelopment Agency is classified as a Fiduciary Fund, and as such does not record a budget. ---PAGE BREAK--- 19 Sales Taxes are taxes imposed on the total retail price of any tangible personal property. In 1955 the State Legislature passed the Bradley-Burns Uniform Local Sales and Use Tax Law authorizing the State Board of Equalization to collect 1% to support the State General Fund. The current standard statewide Sales and Use Tax is 7.25%. In El Cerrito, the Sales and Use Tax is 9.25%, which includes a local jurisdiction component of .75% as well as .25% of funds for Countywide Measure J-Local Transportation funds as well as the two ½ cent local measures discussed below. • On February 5, 2008 El Cerrito’s voters approved the ½-cent Measure A-Street Improvement Sales Tax which resulted in the sale of $11,750,000 of Sales Tax Revenue Bonds on June 3, 2008 to be used for the Street Reconstruction and Repair Project. It is anticipated that collection next fiscal year will be approximately $1.5 million with $750,000 being used for debt service payments and the remainder for street maintenance. Collection of this tax began on July 1, 2008. • In November 2010, El Cerrito voters approved Measure R, a seven-year ½-cent Sales Tax that will be used to maintain services, including police, fire, recreation, parks, facilities and other programs that were in jeopardy without these additional funds. Collection began in April 2011. Utility User Taxes were initially approved by the voters in 1991 and when language changes in the ordinance were required, voters again approved the ordinance in 2004. The ordinance calls for an 8% tax to be assessed on gas, electric, cable, water and telephone utilities as a revenue measure necessary to pay the usual and current expenses of conducting the municipal government of the City. Other Taxes include Business License Taxes, Transient Occupancy Taxes and Franchise Taxes. In El Cerrito the base for Business License Taxes is the number of employees. The revenue generated from Business Licenses has been between $600,000 and $670,000 for the last four years, with the biggest fluctuation factor being the number of contractors doing business in El Cerrito. The Transient Occupancy Tax rate is 10%; with only two fairly small hotels this revenue has stayed around $80,000. Intergovernmental Revenues include Gas Taxes, Abandoned Vehicle Abatement and other revenues and grants that are distributed by the County, State and Federal Government. Charges for Services are the revenues generated by providing specific services to individuals or businesses instead of services to the general population such as police and fire or public works. These specific services include, but are not limited to, child care fees, recreation class participation fees and encroachment permits. The Council policy directs that Charges for Services shall be established at a level related to the cost of providing such service except where the City Council has determined there is a public benefit to subsidize the service with tax based revenue. The Master Fee Schedule details all of the City’s fees and is adopted each year in conjunction with the annual budget. Other Revenues include Licenses & Permits, including parking permits that are issued to certain neighborhood residents that are near BART stations; Fines & Forfeitures such as a portion of traffic tickets; and Use of Money and Property which includes interest earnings and rental income on City facilities. Major Revenue Assumptions Revenue estimations were determined by evaluating past years’ trends and receipts and applying that information to current year anticipated activity and economic conditions. ---PAGE BREAK--- 20 Following are the major assumptions related to projecting citywide revenues for FY 2012-13: • Property Taxes citywide are projected to be essentially flat; however they are shown as an increase primarily due to the budgeted receipts in the new City LMI Fund. The prior Housing Fund had Tax Increment as its funding source but it is discontinued due to the elimination of the RDA. • Sales Taxes are projected to increase due to increased business activity and an improving economy. • The budget amount for Fines and Forfeitures has decreased to come into line with actual collections. • Use of Money & Property is projected to decline due to the reduction of interest rates and the availability of funds, and other revenue sources are projected to remain flat. • The decline in Grant revenues is due to the completion of large infrastructure projects such as the San Pablo Avenue Streetscape Project and the Street Improvement Project in the prior fiscal year. • Charges for services have increased as programs in the Recreation Department expand and all departments attempt to recover actual costs for services rendered as described in the City’s Master Fee Schedule. Table 1-5 presents the City’s overall revenues and inter-fund transfers in. Table 1-5 Citywide Revenues by Classification Revenue Category Actual FY 2009-10 Actual FY 2010-11 Amended FY 2011-12 Proposed FY 2012-13 Taxes Property Taxes 5,616,124 $ 5,780,491 $ 6,025,000 $ 6,819,452 $ Sales Taxes 4,609,199 5,131,749 6,815,000 6,840,000 Utility User Tax 3,181,028 3,188,260 3,450,500 3,500,000 Local Parcel Taxes 1,896,445 1,908,127 1,907,000 1,908,000 Franchise Taxes 939,189 982,799 1,050,000 1,050,000 Business License Tax 625,461 673,257 675,000 675,000 Other Taxes 539,238 635,883 658,321 662,321 Total Taxes 17,406,684 18,300,566 20,580,821 21,454,773 Licenses & Permits 579,275 562,760 656,800 669,936 Fines and Forfeitures 352,866 267,673 341,000 265,000 Use of Money and Property 389,759 443,200 515,662 483,780 Intergovernmental Revenues 7,099,893 9,084,889 11,094,734 10,414,604 Charges for Services 5,387,839 6,069,034 6,693,281 7,113,224 Other Revenues 150,675 460,048 1,435,394 499,400 Total Revenues before Transfe 31,366,992 35,188,171 41,317,692 40,900,717 Interfund Transfers 7,326,894 8,615,766 5,041,205 4,146,341 Total 38,693,886 $ 43,803,937 $ 46,358,897 $ 45,047,058 $ Chart 1-2 depicts the projected percentage of Citywide revenues before transfers attributable to each classification for FY 2012-13. ---PAGE BREAK--- 21 Chart 1-2 Citywide Revenues by Classification FY 2012-13 Table 1-6 presents the Citywide actual revenue summarized by fund, including transfers in, for the past two fiscal years, the budget for FY 2011-12, and the proposed budget for FY 2012-13. Taxes 52.5% Intergovernment al Revenues 25.5% Charges for Services 17.4% Use of Money and Property 1.2% Licenses & Permits 1.6% Fines and Forfeitures 0.6% Other Revenues 1.2% ---PAGE BREAK--- 22 Table 1-6 Revenue Summary by Fund Actual Actual Budget Proposed Fund Name FY2009-10 FY2010-11 FY2011-12 FY2012-13 General Fund $25,474,799 $30,338,740 $30,235,309 $29,192,110 Special Revenue Funds Street Improvements 2,067,467 2,256,548 1,505,000 1,425,000 Low & Moderate Income Housing 1,139,093 998,750 1,021,500 City Low & Moderate Income Housing 781,152 Gas Tax 1,200,637 721,846 1,000,000 1,323,000 National Pollution Discharge Elimination 432,526 332,826 440,994 441,715 Landscape and Lighting Assessment 1,263,164 1,181,050 1,226,000 1,366,000 Measure J Return to Source 409,214 477,974 496,421 495,421 Measure J Storm Drain 693,695 697,882 698,000 698,000 Measure A Parcel Tax 442,863 439,623 438,100 624,400 Federal, State and Local Grants 596,881 477,765 4,251,400 464,461 Asset Seizure 2,501 415 2,000 2,000 Vehicle Abatement 27,288 23,124 21,000 21,000 Park in Lieu 389 34 500 500 Total Special Revenue Funds 8,275,718 7,607,836 11,100,915 7,642,649 Capital Projects Funds RDA Capital 4,268,120 4,032,433 4,083,000 RDA Bond-A Capital 2,333,804 1,973 Capital Improvements 1,932,381 2,584,407 1,720,190 4,319,616 Civic Center Construction 276 Senior Center Construction 4,010 Library Construction 3,427 Total Capital Projects Funds 8,542,018 6,618,812 5,803,190 4,319,616 Debt Service Funds Storm Drain Debt Service 512,704 515,613 519,550 100 RDA Debt Service 787,838 787,135 773,985 RDA A&B Debt Service 1,102,978 1,151,070 1,191,883 Municipal Services Corp. Financing Authority Measure A 362,157 363,604 371,305 362,605 Financing Authority Civic Center 599,098 596,165 598,407 599,300 Financing Authority Street Improvement 740,741 744,154 738,653 741,000 Total Debt Service Funds 4,105,515 4,157,741 4,193,783 1,703,005 Internal Service Funds Vehicle/Equipment Replacement 108,325 136,455 148,600 146,100 Enterprise Fund Integrated Waste Management 1,678,524 1,766,247 1,798,968 1,931,078 Fiduciary Fund Employees' Pension Trust 148,256 149,466 148,500 112,500 Total Funds $48,333,155 $50,775,297 $53,429,265 $45,047,058 ---PAGE BREAK--- 23 EXPENDITURES Expenditure Assumptions In preparing this budget, staff used a set of expenditure assumptions that include but are not limited to the following: • Overall expenditures and activity of the City remains flat as large capital projects such the Street Improvement Project, the San Pablo Avenue Streetscape project, and the Recycling and Environmental Resource Center were completed; no new material programs or services are proposed. • The Redevelopment Agency was dissolved and its financial history has been removed from current and prior year columns in all budget summary tables. • Activity in the Economic Development Division and the new City Low and Moderate Income (LMI) Housing Fund is included in the City Management Department. • The grant funding from FEMA acquired in FY 2011-12 by the Fire Department for the East Bay Regional Communication System increased the amended budget in that Department by over $3 million. • PERS employer’s costs continued to increase. The Public Safety rate increased from 29.928% in FY 2011-12 to 30.657% for the 3%-at-50 program and the Miscellaneous group changed from 19.013% to 20.012% for the 2.75%-at-55 program. • Contractually obligated COLAs of 2.1% for Public Safety non-management are budgeted, as are the 3% increased contribution to PERS employee costs from non-sworn unrepresented employees and the deferral of a COLA by the Public Safety Managers bargaining unit. Other actions are anticipated but as of this writing, labor negotiations continue. These and other cost reductions are only reflected in the General Fund Ten-Year Plan. • Health insurance rates are budgeted to increase by 9.35% and Dental rates by Table 1-7 presents the Citywide expenditures and transfers by Department: Table 1-7 Citywide Department Expenditures and Transfers Department Actual FY2009-10 Actual FY2010-11 Amended FY2011-12 Adopted FY2012-13 City Management 1,903,743 $ 1,990,357 $ 1,924,867 $ 3,174,892 $ Administrative Services 3,941,686 4,055,414 4,004,272 3,752,068 Police 8,700,371 9,236,699 10,939,165 10,626,313 Fire 7,364,612 7,330,512 11,458,995 8,013,462 Public Works 3,392,138 3,485,183 3,251,314 3,427,980 Environmental & Developm 2,851,104 3,039,231 3,674,472 3,423,320 Recreation 4,056,059 4,099,377 3,979,360 4,162,180 Capital Outlay 12,945,489 8,950,897 5,504,798 4,961,501 Total Before Transfers 45,155,201 42,187,670 44,737,243 41,541,716 Transfers 4,431,716 3,878,400 4,329,136 4,146,341 Total Expenditures 49,586,917 $ 46,066,070 $ 49,066,379 $ 45,688,057 $ ---PAGE BREAK--- 24 Chart 1-3 depicts the percentage allocations of each activity based on the new departmental structure: Chart 1-3 Citywide Expenditures by Department FY 2012-13 City Management 6.9% Administrative Services 8.2% Police 23.3% Fire 17.5% Public Works 7.5% Environmental & Developmt Services 7.5% Recreation 9.1% Capital Outlay 10.9% Transfers 9.1% Table 1-8 presents the Citywide expenditure summary by fund, including transfers out for the past two fiscal years, the budget for FY 2011-12, and the adopted budget for FY 2012-13. ---PAGE BREAK--- 25 Table 1-8 Expenditure Summary by Fund Actual Actual Budget Adopted Fund Name FY2009-10 FY2010-11 FY2011-12 FY2012-13 General Fund $25,841,051 $26,887,550 $28,962,996 29,020,023 $ Special Revenue Funds Street Improvements 8,108,195 3,323,956 1,292,653 1,494,232 Low & Moderate Income Housing 1,021,740 3,125,976 1,480,311 City Low & Moderate Income Housing 1,013,134 Gas Tax 1,045,733 930,353 1,167,937 1,304,324 National Pollution Discharge Elimination 359,134 346,819 442,477 440,933 Landscape and Lighting Assessment 1,178,675 1,281,248 1,255,797 1,292,279 Measure J Return to Source 831,957 564,566 565,958 499,814 Measure J Storm Drain 736,212 659,799 680,968 646,335 Measure A Parcel Tax 805,891 687,246 486,005 477,305 Federal, State and Local Grants 601,001 486,251 4,251,400 464,461 Asset Seizure 14,212 Vehicle Abatement 4,887 19,908 70,000 10,000 Park in Lieu 25,000 5,000 Total Special Revenue Funds 14,718,423 11,445,334 11,693,506 7,642,817 Capital Projects Funds RDA Capital 6,245,287 9,293,591 4,156,613 RDA Bond-A Capital 1,669,574 2,220,243 Capital Improvements 5,573,405 4,109,629 2,917,901 4,421,690 Civic Center Construction 75,648 Senior Center Construction 1,194,131 61,000 Library Construction 1,198,110 Total Capital Projects Funds 15,956,155 15,684,463 7,074,514 4,421,690 Debt Service Funds Storm Drain Debt Service 515,700 518,263 519,550 523,974 RDA Debt Service 776,446 776,571 773,485 RDA A&B Debt Service 1,054,900 1,093,343 1,191,383 Financing Authority Measure A 372,815 370,233 371,305 557,050 Financing Authority Civic Center 599,108 596,158 598,407 600,000 Financing Authority Street Improvement 740,233 744,153 738,653 738,653 Total Debt Service Funds 4,059,202 4,098,719 4,192,783 2,419,677 Internal Service Funds Vehicle/Equipment Replacement 434,829 460,834 321,017 48,017 Enterprise Fund Integrated Waste Management 1,589,189 3,910,427 4,274,855 2,023,333 Fiduciary Fund Employees' Pension Trust 148,256 149,466 148,500 112,500 Total Funds $62,747,105 $62,636,794 $56,668,171 $45,688,057 Inter-Fund Transfers Table 1-9 shows transactions between all funds and the purpose for the City’s $4.1 million in inter-fund transfers. This schedule details the amount of transfers, the funds that are exchanging funds and the purpose for the transfer. The cost recovery transfers have been adjusted for inflation at a rate of 3% over the previous year’s transfer and the debt service, pension funding and subsidy amounts are to repay specific charges of the City. The amounts transferred to Capital Projects are to more clearly account for life-to- date activity within the Capital Improvements Fund. ---PAGE BREAK--- 26 Table 1-9 Transfers Summary Fund Receiving Transfer Fund Making Transfer Purpose Transfer Amount General Fund Gas Tax Cost Recovery 105,675 General Fund NPDES Cost Recovery 106,641 General Fund LLAD Cost Recovery 142,584 General Fund Measure J-Return to Source Cost Recovery 58,786 General Fund Integrated Waste Mgmt Cost Recovery 311,250 Gas Tax Measure J-Return to Source Project Funding 278,000 Gas Tax Storm Drain Project Funding 385,000 NPDES Storm Drain Project Funding 107,000 LLAD Gas Tax Project Funding 595,000 Pension General Fund Pension Funding 112,500 Capital Improvement Measure J-Return to Source Various CIP Projects 35,000 Capital Improvement General Fund RecWare Project 22,600 Financing Authority-City Hall General Fund City Hall Debt Service 599,000 Street Improvement Debt Service Street Improvement Street Debt Service 740,000 Storm Drain D/S Storm Drain Storm Drain Debt Service - Financing Authority Measure A Measure A Debt Service 362,305 Measure A Financing Authority Reserve Reduction 185,000 Total $4,146,341 City of El Cerrito Summary of Transfers Fiscal Year 2012-2013 BUDGET PROCESS The annual budget is the City’s service and financial plan for the next fiscal year: a planning tool that matches the services desired by the community to the resources required in order to provide those services. The development, adoption, and implementation of the City budget is a major decision-making process with several phases. This year in April, the City Council held a budget related priority setting session to provide better direction to staff in preparing this document. At the initial stage of the annual budget process, program managers propose to the City Manager those programs designed to provide essential services and which meet the City Council’s expression of community goals during the next fiscal year. At the same time, staff prepares estimates of available revenues for the same period. The City Manager and department directors balance the requested program expenditures with the anticipated resources, and develop a proposed budget and long range financial plan. The proposed document is reviewed by the Financial Advisory Board, and their recommendations and revisions are incorporated prior to the City Manager’s presentation of the proposed budget to the City Council for consideration. After presentation of the staff-prepared, proposed budget, the City Council holds public meetings on the budget to review the staff recommendations and is anticipated to adopt the proposed document with whatever changes are required by the fiscal year end. The City’s Fiscal Year is from July 1 through June 30. The City Council receives public testimony and reviews the service, expenditure, and revenue proposals contained in the ---PAGE BREAK--- 27 proposed budget. After discussing and making amendments, if any, to the proposed budget, the City Council adopts the budget and establishes appropriations. The appropriations are the legal authority to spend money. Copies of the various resolutions adopting this budget are provided in the Appendix of this budget document. Table 1-10 FY 2012-13 Budget Calendar DATE DESCRIPTION March 15, 2012 New World System (NWS) ready for departmental data entry. FY 2011-12 departmental narratives ready for updating. March 23, 2012 Staff completes NWS entry of revenues and non-payroll expenditures. April 20, 2012 City Manager review of overall financial position and departmental budget meetings held. Close budget input for departmental changes. April 24, 2012 Departmental narratives complete. Finance completes budget summaries and prepares proposed budget document. May – June Financial Advisory Board meets May 22th and June 7th to discuss proposed budget. June 5, 2012 Proposed Budget presentation to City Council. June 11, 2012 City Council holds public hearings/adoption of: • City Budget • Capital Improvement Program • Appropriation Limit Budget Authority Model During the Fiscal Year, the adopted budget is implemented through the provision of City services and the City’s daily fiscal operations. The budget provides legal spending limits and a planned allocation of resources, within which the City’s managers are expected to provide services and make the best use of public resources. The City Council provides staff with the authority to raise and expend monies within specific funds. The City Manager has the authority to shift resources within funds, but typically not across funds. From time to time throughout the year, the City Council receives periodic progress reports on how well the actual service and financial experience are conforming to the adopted service and financial plan, as expressed in the budget. Under certain circumstances, the City Council may adjust the budgeted appropriations for reasons unforeseen at the time of the adoption of the original budget. Such amendments are made by Council resolutions. Gann Limit Proposition 111 Proposition 4, known as the Gann Initiative, was approved by the voters in November, 1979. This measure requires that the City adopt an appropriations limitation each fiscal year. In June of 1990, the voters passed Proposition 111, which modified the previous appropriations limitation requirements of Proposition 4, as follows: The total annual appropriations subject to limitation of the State and of each local government shall not exceed the appropriations limit of the entity of government for the prior year adjusted for the change in the cost of living and the change in population.… ---PAGE BREAK--- 28 Now chaptered in Article XIIIB of the California Constitution and Government Code §7900-7914, these two measures specify that the new limit be based on the prior year’s appropriations limit, adjusted for cost of living and population. Each year, every city must select from two alternatives methods for each of these two adjustment factors, as follows: Cost of Living California Constitution Article XIIIB “Change in the cost of living” for an entity of local government, other than a school district or a community college district, shall be either the percentage change in California per capita personal income from the preceding year, or the percentage change in the local assessment roll from the preceding year for the jurisdiction due to the addition of local nonresidential new construction. Population Government Code §7901(b): A city or special district may choose to use the change in population within its jurisdiction or within the county in which it is located. These factors are applied to the established FY 1986-87 appropriations limit, as adjusted annually to determine subsequent year limits. Therefore, each year’s limit becomes the base for computing the succeeding year’s limit. To assist with these computations, the California Department of Finance produces in May of each year the population changes of all cities and counties, as well as the Statewide change in per capita income. In 1991, the California State Board of Equalization asked all County Assessors to compute the annual change in nonresidential new construction. For Contra Costa County, the Auditor-Controller’s Office provides cities with these figures. Analysis For FY 2012-13 the respective State and County offices have provided the City with the following optional factors to be used in the Gann limit computation: Cost of Living 1. California Per Capita Personal Income = 3.77% 2. Nonresidential New Construction, El Cerrito = -5.2% Population 1. Population Change, City of El Cerrito =.53% 2. Population Change, County of Contra Costa = .83% In order for the City to achieve the highest possible appropriations limit, it would choose the larger of the two figures in each category, California Per Capita Personal Income (3.77%) and County Population By choosing these two factors, the City’s appropriations limit will grow from $101,104,599 to $105,629,673. It should be noted that these appropriations limits apply only to tax revenues, not to revenues such as fees that recover operating costs. For FY 2012-13, only $18,286,259 of the City’s $29,892,174 projected General and Street Improvement Fund revenues, net of operating transfers, are subject to the Gann limit. Therefore, the City will be $87,343,414 under the Gann limit and it is anticipated the City will never be close to the limit. ---PAGE BREAK--- 29 Accounting and Evaluation The City of El Cerrito manages its finances according to Generally Accepted Accounting Principles (GAAP). During the Fiscal Year, expenditures and revenues are carefully documented to ensure compliance with the adopted budget. After the close of the Fiscal Year, an independent, professional auditor performs an audit, and the City publishes General Purpose Financial Statements, which are included in the Comprehensive Annual Financial Report (CAFR). The CAFR documents the City’s budgetary performance and the financial health of each fund, which offers managers and policy makers the opportunity to evaluate the City’s financial condition and assess the degree to which the City’s use of its resources has met the community’s goals and policies. The insights gained from this evaluation then can be used in future financial planning and budget decisions. SUMMARY OF SIGNIFICANT ACCOUNTING AND FINANCIAL POLICIES Reporting Entity The City is a municipal corporation governed by an elected five-member Council. As required by GAAP, the City’s financial statements present the City and its component units (entities for which the City is considered to be financially accountable). Although they are legally separate entities, blended component units are, in substance, part of the City’s operations; thus, data from these units are combined with data of the primary government. The El Cerrito Pension Board, and the El Cerrito Public Financing Authority and the El Cerrito Municipal Services Corporation serve the residents of the City. The Authority, Pension Board, and Corporation are governed by boards composed of the City’s elected Council. The City is acting in a fiduciary capacity to the Successor Agency of the former Redevelopment Agency it is not considered to be a component unit. Basis of Accounting & Measurement Focus The government-wide, proprietary funds and fiduciary funds financial statements and this budget are reported using the economic resources measurement focus and the full accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Private-sector standards of accounting and financial reporting issued prior to December 1, 1989, generally are followed in both government-wide and proprietary funds financial statements to the extent that those standards do not conflict with or contradict guidance of the Governmental Accounting Standards Board. Governments also have the option of following subsequent private-sector guidance for their business-type activities and enterprise funds, subject to this same limitation. The City has elected not to follow subsequent private-sector guidance. Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under this method, revenues are recognized when measurable and available. The City considers all revenues reported in the governmental funds to be available if the revenues are collected within sixty days after fiscal year-end. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on long-term debt, claims and judgments, and compensated absences, which are recognized as expenditures to the extent that they have matured. Capital asset acquisitions are reported as expenditures in governmental funds. Proceed of long-term debt and acquisitions under capital leases are reported as other financing sources. ---PAGE BREAK--- 30 Non-exchange transactions, in which the City gives or receives value without directly receiving or giving equal value in exchange, include property taxes, grants, entitlements, and donations. On an accrual basis, revenues from property taxes are recognized in the fiscal year for which the taxes are levied. Revenues from grants, entitlements, and donations are recognized in the fiscal year in which all eligibility requirements have been satisfied. Under the terms of grant agreements, the City may fund certain programs with a combination of cost-reimbursement grants, categorical block grants, and general revenues. Thus, both restricted and unrestricted net assets may be available to finance program expenditures/expenses. The City’s policy is to first apply restricted grant resources to such programs, followed by general revenues if necessary. Other revenues susceptible to accrual include other taxes, intergovernmental revenues, interest, and charges for services. Comprehensive Financial Policy The Comprehensive Financial Policy is reviewed annually and is intended to provide financial direction to staff and give assurance to the City Council on the processes and procedures taken to assure financial responsibility of the City. Fundamentals of the policy have been used in the development of the budget and references are made throughout to certain provisions, such as the fund balance requirements. The major categories include: • Long-term financial planning • Budget policies • General Fund reserve policies • Financial reporting policies • Operational management policies • Financial management policies • Capital improvement project policies • Debt management policies • Equipment Replacement Fund policies • Enterprise Fund policies The annual policy review was conducted by the Financial Advisory Board at their October 25, 2011 and November 8, 2011 meetings and a final revision was made at the February 2, 2012 meeting. The revisions were approved by the City Council at the February 21, 2012 meeting. There were no major revisions proposed for this year. The complete policy is included in the Appendices and Statistics section of this budget. FUND DESCRIPTIONS In addition to the General Fund, the City operates with a wide variety of additional funding sources. Most of these funding sources are dedicated to specific purposes. This year’s budget integrates these funding sources into the departmental budgets, as the departments are fully responsible for spending the fund balances. Gas Tax Fund The Gas Tax Fund supports street and road activities, such as the construction and maintenance of streets, roads and bridges. The revenue for this Fund is received from the State of California, which allocates monies to cities and counties through a formula based each year, in part, upon a per capita payment. This revenue source has increased only for El Cerrito over the past decade. ---PAGE BREAK--- 31 Section 2105 monies are apportioned based on population. Section 2106 monies are apportioned based on vehicle registration, assessed valuation and population, and can be used for any street or road purpose. Section 2107 monies are apportioned based on population and also can be used for any street or road purpose. Section 2107.5 monies are apportioned based on population and must be used for engineering costs and administrative expenditures only. NPDES Fund National Pollutant Discharge Elimination System (NPDES) related activities as mandated by the 1975 Federal Clean Water Act are funded through an assessment collected by the County Flood Control District on all developed properties within the City. These funds are disbursed to the City annually to carry out activities such as street sweeping, storm drain and catch basin cleaning, illicit discharge and pollution prevention inspections of the City's storm drain system and creeks, public awareness and education about storm water pollution, and inspection of new development sites to insure compliance with the City's Municipal Storm Water Permit. Landscaping and Lighting Assessment District Fund The proceeds from this Landscaping and Lighting Assessment District (LLAD) provide funding for such services as street lighting (which improves pedestrian and vehicle safety) and maintenance of parks, park buildings, and landscaping in public areas. The LLAD was created in 1988 and was affirmed by a majority vote of El Cerrito’s citizens in November 1996. The assessment rates have not been increased since the LLAD’s creation in 1988. A proposed Assessment District with increased rates was presented to the City’s property owners during a ballot proceeding in March/April 2006, but a majority protest was filed and the increased assessment rates were not imposed. The current LLAD remains in place and will continue to be assessed. The basic rates remain $72 per year per single-family dwelling unit, $54 per year per apartment, condominium, or other multiple dwelling units, with various rates for commercial properties. Measure J Return to Source (Formerly Measure C Fund) This Fund accounts for the revenue received by the Measure C and its extension, Measure J (2004), a ½ cent sales tax that is received from the County and is used to fund transportations projects as well the paratransit program. Measure J Storm Drain Fund The Measure J Storm Drain Fund was created to account separately for funds associated with the passage of Measure J by the voters of El Cerrito in March 1993. The special revenue bond election was necessary to provide needed funds to maintain, repair, and reconstruct the City’s storm drains. All properties in the City (residential and commercial) are assessed annually based on equivalent residential units (ERU). The ERU rate remains $58 per year per single-family dwelling unit and $43.50 per year per apartment, condominium, or other multiple dwelling units. Measure A Swim Center Fund The Measure A Swim Center Fund was created to account separately for funds associated with the passage of Measure A by the voters of El Cerrito in November 1999. The special revenue bond election was necessary to provide needed funds to pay for the renovation and reconstruction of the Swim Center and various other City facilities. Expenditures for capital improvements at the Swim Center facility are allowed to be paid from this fund. The maximum amount of the special tax which shall be imposed each fiscal year is $58.46 per single family dwelling unit, $45.00 per year for each multifamily residential unit and $410.00 per acre for non-residential property. No tax shall be imposed on vacant property. ---PAGE BREAK--- 32 Asset Seizure The Police Department acquires assets in the course of arresting suspects and a portion of these assets become the property of the City when a guilty verdict is awarded. These funds are determined by State Health and Safety Code to be used by the Police Department to supplant but not supplement their budget. To assure correct usage, funds have been broken out into a separate fund. Vehicle Abatement This fund accounts for monies received from the County to support programs that remove abandoned vehicles from City streets. Park In-Lieu Fund This fund accounts for funds received through negotiations with developers to be used for park improvements. Grants Fund The grants fund accounts for all of the grant monies received from various regional, State and Federal agencies for various operational activities. Capital Improvements Fund This fund is utilized to account for all capital activities within the City regardless of funding source. Within the fund, each project is accounted for separately on a life-to-date basis for internal and external reporting purposes. Street Improvement Fund This fund is used to account for the collection of the Measure A ½ cent Sales Tax approved by the voters on February 5, 2008. Expenditures from this fund are to perform improvements of the City streets and transfer the required debt service to the debt service fund relating to the bond proceeds issued with a pledge on this revenue stream. Art in Public Places This fund was established to account for the public art in-lieu contributions and any and all other revenues appropriated or received for public art and/or public arts and cultural programs, including donations from the public. Storm Drain Debt Service This fund accounts for payments on the Measure J Storm Drain Revenue Bonds. Public Financing Authority--Measure A This fund accounts for the transfer of parcel tax revenue from Measure A Swim Center Bonds, which were used for the Swim Center Construction. Public Financing Authority--City Hall This fund accounts for the transfer of funds from the General Fund to make the debt service City Hall Lease Revenue Bonds. Integrated Waste Management Fund The Environmental Services Division (ESD) provides integrated waste management services for the entire City, including design and implementation of programs aimed at diverting waste from the landfill, compliance with State regulations, and participation in regional planning and waste reduction efforts. The ESD provides several recycling collection services in the community: weekly residential curbside recycling collection; collection at schools, public offices, parks, and businesses; newspaper collection at El Cerrito's BART stations, and the City’s Recycling Center. This Fund was created to account for the recycling portion of the Division’s revenues and expenditures separately in an enterprise fund. A detailed description of the ---PAGE BREAK--- 33 Division’s funds and activities can be found within the Environmental Services Division Section of this budget document. Vehicle and Equipment Replacement Fund The purpose of this Fund is to provide vehicles and equipment to the line departments and avoid financing costs associated with the acquisition of necessary capital assets. This Fund was originally created from a reserved portion of the City’s General Fund. Each Fiscal Year, most departments purchase necessary vehicles or equipment from this Fund and repay the Fund from their operating budgets. The ongoing charge to the operating department will cover the cost of the equipment plus a contribution toward future replacement of the equipment when such a replacement can reasonably be anticipated. The Fund’s primary objective is to provide financing for the purchase of equipment and vehicles with a cost of $5,000 and over and a useful life of three or more years. ---PAGE BREAK--- 34 Fiscal Year 2011-12 Budget Awards: In 2011-12 the City’s Operating Budget was prepared using the criteria published by the California Society of Municipal Finance Officers (CSMFO) required to receive their award for Excellence in Operating Budgeting. This was done in an effort to continue to improve the clarity and content of the budget document, as well as provide the City Council and the public with financial peer review in order to assure them that the substance and accuracy of the document meets their high standards. This is the seventh year in a row that the City has received this award. ---PAGE BREAK--- 35 This is the second year the City has won the Distinguished Budget Presentation Award from the Government Finance Officers Association (GFOA). The GFOA established the Distinguished Budget Presentation Awards Program in 1984 to encourage and assist state and local governments to prepare budget documents of the very highest quality that reflect both the guidelines established by the National Advisory Council on State and Local Budgeting and the GFOA’s best practices on budgeting and then to recognize individual governments that succeed in achieving that goal. This award represents many years of refinements and clarification of the budget document and represents a commitment to presenting a complete and concise report of the City’s overall mission and financial plan. ---PAGE BREAK--- 36 GENERAL FUND OVERVIEW While the previous discussion focuses on financial data and assumptions on a Citywide basis, the ability to maintain the current level of services in the City actually depends on the financial health of the General Fund. By definition, the General Fund is where all funds that are not restricted for specific use are recorded, and where the City funds and accounts for all major services. The City Council’s policy for General Fund reserves requires that the amount of the reserves not fall below 10% of projected General Fund operating expenses, except in case of financial emergency or some other unanticipated event, and to continually develop a plan to increase reserves to 15%. In the event the City Council were to authorize reserves to dip below 10%, a ten-year financial plan must be developed to project when the amount will return to 10% and eventually 15% of overall expenditures. During FY 2010-11, the City Council authorized the use of approximately $530,000 of reserves to balance the budget and maintain service levels. The General Fund Ten-Year Financial Plan projects a 10.2% reserve at the end of FY 2012-13 consistent with this policy. General Fund Revenues Table 1-11 and Chart 1-4 depict the revenue by category in the General Fund: Table 1-11 General Fund Revenues Actual Actual Amended Proposed FY 2009-10 FY2010-11 FY 2011-12 FY 2012-13 Taxes Property Taxes 5,616,124 $ 5,780,491 $ 6,025,000 $ 6,038,300 $ Sales Taxes 3,274,571 3,755,921 5,315,000 5,455,000 Utility User Tax 3,181,028 3,188,260 3,450,500 3,500,000 Franchise Taxes 939,189 982,799 1,050,000 1,050,000 Business License Tax 625,461 673,257 675,000 675,000 Other Taxes 148,993 169,373 174,900 179,900 Total Taxes 13,785,367 14,550,101 16,690,400 16,898,200 Licenses & Permits 579,275 562,760 656,800 669,936 Fines and Forfeitures 352,866 267,673 341,000 265,000 Use of Money and Property 267,607 301,328 339,500 331,080 Intergovernmental Revenues 4,675,711 4,592,543 4,731,000 4,818,362 Charges for Services 3,803,193 4,312,389 4,908,325 5,210,896 Other Revenues 66,427 331,258 145,394 273,700 Interfund Transfers 1,944,352 5,420,688 1,415,890 724,936 Total Revenues 25,474,799 $ 30,338,740 $ 29,228,309 $ 29,192,110 $ Revenue Category ---PAGE BREAK--- 37 Chart 1-4 General Fund FY 2012-13 Revenue Percentages by Category General Fund revenue assumptions include the following: • Property Taxes are projected to increase in relation to the amount received in FY 2011-12. • Sales taxes are projected to increase and reflect a somewhat improving economy in the City. • Utility user taxes also increase as both EBMUD and PG&E have announced projected rate increases for next fiscal year. • Licenses and Permits increase somewhat as overall activity remains constant. • Fines and Forfeitures reflect a decrease to more closely reflect what was actually received in the last two prior fiscal years. • Charges for services reflect increases in Recreation programs, as well as adjustments to fees in an effort to account for inflation and recover costs to provide the service. • Interfund transfers decrease as a result of the elimination of the cost recovery transfer from the Redevelopment Agency. GENERAL FUND EXPENDITURES Table 1-12 and Charts 1-5, 1-6 and 1-7 depict the expenditures in the General Fund. Table 1-12 and Chart 1-5 show the expenditures by department with $18,569,788 or 63.9% of the budget spent on Public Safety. Taxes 57.9% Intergovernmental Revenues 16.5% Charges for Services 17.9% Interfund Transfers 2.5% Licenses & Permits 2.3% Fines and Forfeitures 0.9% Use of Money and Property 1.1% Other Revenues 0.9% ---PAGE BREAK--- 38 Table 1-12 General Fund Expenditures Department Actual FY2009-10 Actual FY2010-11 Amended FY2011-12 Adopted FY2012-13 City Management 1,839,763 $ 1,923,414 $ 1,852,595 $ 2,092,123 $ Administrative Services 1,551,221 1,662,903 1,613,107 1,390,141 Police 8,474,787 9,075,229 10,502,165 10,604,313 Fire 7,033,543 7,134,729 7,907,978 7,965,445 Public Works 809,894 828,960 764,095 644,846 Environmental & Development Servi 1,458,832 1,548,241 1,744,242 1,580,914 Recreation 3,898,641 3,957,215 3,809,607 4,008,141 Transfers 774,371 756,858 769,207 734,100 Total 25,841,051 $ 26,887,550 $ 28,962,996 $ 29,020,023 $ Chart 1-5 General Fund Expenditures by Department City Management 7.2% Administrative Services 4.8% Police 36.5% Fire 27.4% Public Works 2.2% Environmental & Development Services 5.4% Recreation 13.8% Transfers 2.5% Chart 1-6 depicts a comparison in General Fund expenditures by Department over the past four fiscal years. The largest increase has occurred in the Police Department, reflecting the City’s continued commitment to Public Safety. ---PAGE BREAK--- 39 Chart 1-6 Variance of General Fund Expenditures 34% 35% 37% 37% 28% 27% 28% 28% 16% 15% 14% 14% 6% 6% 6% 6% 7% 7% 7% 7% 6% 6% 6% 5% 3% 3% 3% 2% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Actual FY2009-10 Actual FY2010-11 Amended FY2011-12 Adopted FY2012-13 Percentage of Expenditures Fiscal Year General Fund Expenditures Before Transfers Public Works Administrative Services City Management Environmental & Development Services Recreation Fire Police As Chart 1-7 shows, 78.4% of the expenditures are related to Personnel. Within Personnel, salaries and benefits have traditionally been governed by the City Council’s policy to provide median compensation, which is intended to act as a ceiling for salaries and benefits as agreed upon in the memorandums of understanding with the various benefit groups. In the FY2012-13 budget efforts are being made to curb the costs of salaries and retirement benefits by having staff contribute more than in the past and forego COLA’s. Chart 1-7 Personnel 78.4% Professional Services 8.5% Property/Other Services 7.5% Supplies 2.2% Property/Capital 0.9% Transfers 2.5% Adopted General Fund Spending ---PAGE BREAK--- 40 Of the remaining General Fund expenses, very little are discretionary. For example, within Professional Services expenditures of approximately $2.45 million, over $1.3 million of those expenses are for contracted services such as Public Safety dispatch, Animal Control services, legal services, independent audit services, election services and criminalist services that the City could not provide as efficiently as other organizations can on our behalf. When other non-discretionary items are factored in such as insurance, medical supplies, utilities, vehicles, and a minimal level of supplies, staff estimates that nearly 95% of the General Fund is non-discretionary (including staff at current levels). TEN-YEAR PLANNING Since FY 2006-07, the City has presented Ten-Year Financial Plans for the General Fund, Integrated Waste Management Fund and the Redevelopment Agency. The schedules and assumptions used to create the plans provide elected officials, staff and stakeholders with data to analyze the long range effects of current actions, plan for actions that are anticipated years from now, and measure the City’s ability to comply with the City Council’s policies on a long range basis. Presented in this section is the Ten-Year Plan for the General Fund. The Integrated Waste Management Fund Ten-Year Plan is shown in the Environmental and Development Services Department in Section 4. Ten-Year Plans will no longer be prepared for the Redevelopment Agency due to its dissolution. General Fund Ten-Year Plan Assumptions The following General Fund Ten-Year Plan includes assumptions in revenues and expenses necessary to bring this fiscal year’s budget into balance and provide for the 10% reserve requirement. Included in the Salaries and Wages line item is over $300,000 relating to labor concessions currently being negotiated with bargaining units, as well as $130,000 of proposed additional cost reductions. Due to the confidential nature of negotiations these proposed actions are not reflected in other tables in this budget document. It is anticipated that these negotiations will be completed and the final actual changes will be brought back to the City Council for approval within the budget adoption process or soon thereafter. Revenue assumptions for Property Tax include conservative growth of 2-3% for all ten years, and sales and other taxes are expected to increase by an inflation rate of 3% for the full ten years. As the economy recovers, staff hopes to adjust these assumptions as development opportunities occur and sales and property taxes improve. Expenditures in general are projected to increase in accordance with the current labor agreements and economic indicators at a rate of approximately 2% and The assumptions presented in the Ten-Year Plan achieve the goal of a reserve of 15% by FY 2017-18 and maintain that percentage for the remainder of the Plan. In order to achieve these results, expenses related to employee benefits will need to be stabilized over time as employees pay a greater percentage of their pension costs and the City implements a second tier of pension benefits for new hires. ---PAGE BREAK--- 41 Budget Budget Budget Budget Budget Budget Budget Budget Budget Budget 2012-2013 2013-2014 2014-2015 2015-2016 2016-2017 2017-2018 2018-2019 2019-2020 2020-2021 2021-2022 Beginning Fund Balance $2,798,705 $2,970,792 $3,285,328 $3,654,731 $4,142,044 $4,721,942 $4,915,126 $4,163,585 $3,786,073 $3,797,968 Estimated Revenue: Property Taxes 6,038,300 6,159,066 6,282,247 6,470,715 6,664,836 6,864,781 7,070,725 7,282,846 7,501,332 7,726,372 Sales Taxes 3,910,000 4,027,300 4,148,119 4,272,563 4,400,739 4,532,762 4,668,744 4,808,807 4,953,071 5,101,663 Utility Users Taxes 3,500,000 3,605,000 3,713,150 3,824,545 3,939,281 4,057,459 4,179,183 4,304,559 4,433,695 4,566,706 Other Taxes 1,904,900 1,962,047 2,020,908 2,081,536 2,143,982 2,208,301 2,274,550 2,342,787 2,413,070 2,485,462 Interim sales tax 1,545,000 1,591,350 1,639,091 1,688,263 1,738,911 1,304,183 Total Taxes 16,898,200 17,344,763 17,803,515 18,337,621 18,887,749 18,967,487 18,193,202 18,738,999 19,301,168 19,880,204 Fees for Services 5,210,896 5,367,223 5,528,240 5,694,087 5,864,909 6,040,857 6,222,082 6,408,745 6,601,007 6,799,037 Interest, Transfers & Other Revenue 7,083,014 7,295,504 7,514,370 7,739,801 7,971,995 8,211,154 8,457,489 8,711,214 8,972,550 9,241,727 Total Other Revenues 12,293,910 12,662,727 13,042,609 13,433,887 13,836,904 14,252,011 14,679,571 15,119,959 15,573,557 16,040,764 Total Estimated Revenues 29,192,110 30,007,490 30,846,124 31,771,508 32,724,653 33,219,498 32,872,774 33,858,957 34,874,726 35,920,968 Appropriations: Salaries & Wages 14,236,371 14,521,098 14,811,520 15,107,751 15,485,445 15,872,581 16,269,395 16,676,130 17,093,033 17,520,359 Retirement Contributions 4,821,789 5,026,880 5,328,225 5,644,637 5,926,870 6,223,214 6,223,215 6,223,216 6,223,217 6,223,218 Insurance & Benefits 2,847,035 2,903,976 2,962,055 3,021,297 3,081,722 3,143,357 3,206,224 3,270,349 3,335,756 3,402,471 FICA/Medicare Taxes 470,325 479,731 489,326 499,113 509,095 516,731 524,482 532,349 540,335 548,440 Workers Compensation 384,385 392,072 399,914 407,912 416,070 422,311 428,646 435,076 441,602 448,226 Other Expenditures 5,638,518 5,751,288 5,866,314 5,983,640 6,103,313 6,225,379 6,349,887 6,476,885 6,606,423 6,738,551 Capital Outlay Transfer 22,600 22,600 22,600 22,600 25,000 25,000 25,000 25,000 25,000 25,000 Debt Service Transfer-City Hall 599,000 595,308 596,767 597,246 597,240 597,740 597,465 597,465 597,465 597,465 Total Appropriations * 29,020,023 29,692,954 30,476,721 31,284,195 32,144,755 33,026,314 33,624,315 34,236,470 34,862,830 35,503,730 Revenue Over(Under) Appropriations 172,087 314,536 369,403 487,313 579,898 193,184 (751,541) (377,513) 11,896 417,238 Ending Fund Balance 2,970,792 3,285,328 3,654,731 4,142,044 4,721,942 4,915,126 4,163,585 3,786,073 3,797,968 4,215,206 10% Contingency Reserve (2,902,002) (2,969,295) (3,047,672) (3,128,420) (3,214,476) (3,302,631) (3,362,431) (3,423,647) (3,486,283) (3,550,373) Fund Balance above/(below) 10% $68,790 $316,033 $607,059 $1,013,625 $1,507,467 $1,612,495 $801,154 $362,426 $311,685 $664,833 FB as a % of Expenditures 10.2% 11.1% 12.0% 13.2% 14.7% 14.9% 12.4% 11.1% 10.9% 11.9% Debt Service as a % of Expenditures 2.1% 2.0% 2.0% 1.9% 1.9% 1.8% 1.8% 1.7% 1.7% 1.7% Table 1-12 General Fund Ten-Year Financial Plan ---PAGE BREAK--- 42