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City Council Budget Study Session April 22, 2014 CITY OF EL CERRITO Agenda Item No. 7 ---PAGE BREAK--- Explain the basis for the current budget challenges Describe the community engagement effort Provide a Fiscal Year 2015 overview Identify budget challenges and possible solutions Discuss and prioritize future funding PURPOSE ---PAGE BREAK--- HOW DID WE GET HERE? Loss of Redevelopment Limited or decreased growth in tax revenues Miscalculation of Property Tax Revenues Redistribution of Home Depot Revenues Shortfall in FY 2013 in UUT expenses Reliance on one-time funds to cover operating expenses Significant increase in insurance costs Significant increase in benefit costs with limited employee contributions Over reliance on special funds to offset GF shortfalls ---PAGE BREAK--- IMPACT OF REDEVELOPMENT ON THE GENERAL FUND Changes due to RDA-Related Rev & Exp FY 2008-09 Actual FY 2009-10 Actual FY 2010-11 Actual FY 2011-12 Actual FY 2012-13 Actual FY 2013-14 Projected FY 2014-15 Projected Administrative Overhead (for Administrative Costs) $1,210,178 $1,210,178 $726,366 $562,419 $0 $0 $0 MSC Program Fees $0 $0 $508,016 $653,000 $757,000 $15,000 $0 Successor Administration Allowance $0 $0 $0 $250,000 $250,000 $250,000 $250,000 Total General Fund Revenues $1,210,178 $1,210,178 $1,234,381 $1,465,419 $1,007,000 $265,000 $250,000 Administrative Costs $1,210,178 $1,210,178 $1,234,381 $1,210,069 $1,246,371 $1,283,762 $1,322,275 Ec Dev Staff & Prof Services $0 $0 $0 $61,998 $145,139 $149,493 $153,978 RDA Staff & Prof Services $0 $0 $0 $94,576 $195,562 $117,337 $120,857 Environmental Services Staff $0 $0 $0 $0 $0 $64,214 $66,140 Total Expenses $1,210,178 $1,210,178 $1,234,381 $1,366,643 $1,587,072 $1,614,806 $1,663,250 Annual Balance/(Shortfall) $0 $0 $0 $98,776 ($580,072) ($1,349,806) ($1,413,250) Use of One-Time Funds (MSC Grant) $0 $0 $0 $0 $408,043 $598,957 $0 Net Impact to General Fund $0 $0 $0 $98,776 ($73,253) ($824,102) ($2,237,352) Backfill $2,925,016 ---PAGE BREAK--- HISTORICAL SPENDING BY DEPARTMENT – ALL FUNDS Department Actual Actual Actual Actual Adopted FY2009-10 FY2010-11 FY2011-12 FY2012-13 FY2013-14 City Management 2,424,604 2,557,086 2,685,267 2,822,685 2,762,692 Finance 3,203,598 3,269,461 4,333,064 6,137,636 3,466,881 Police 8,700,371 9,236,699 10,106,417 10,546,965 10,507,068 Fire 7,364,612 7,330,512 10,708,768 11,037,456 8,146,261 Public Works 4,806,036 5,129,460 5,311,382 5,284,964 4,424,688 Community Development 7,651,815 5,523,711 2,983,548 2,673,464 2,200,594 Recreation 4,056,059 4,099,377 4,168,183 4,143,703 4,175,483 Capital Outlay 12,945,489 8,950,897 1,709,469 2,945,720 5,763,815 ---PAGE BREAK--- HISTORICAL GENERAL FUND SPENDING Department Actual Actual Actual Actual Adopted FY2009-10 FY2010-11 FY2011-12 FY2012-13 FY2013-14 City Management 2,360,624 2,490,143 2,614,045 2,752,049 2,631,140 Finance 813,134 876,950 923,606 929,669 1,119,705 Police 8,474,787 9,075,229 9,910,485 9,982,363 10,384,068 Fire 7,033,543 7,134,729 7,935,101 8,323,854 7,977,729 Public Works 972,529 997,709 986,862 896,970 392,225 Community Development 1,513,424 1,598,718 1,432,331 1,604,559 1,326,688 Recreation 3,898,641 3,957,215 4,010,750 3,964,611 3,890,629 T t l B f T f 25 066 680 26 130 693 27 813 179 28 454 074 27 722 184 ---PAGE BREAK--- RECREATION AND THE GENERAL FUND The Recreation Department’s impact on the General Fund has continued to decrease each year. In eight years, the General Fund subsidy has been reduced by nearly $1 million. ---PAGE BREAK--- MEASURE R SPENDING Measure R revenues have been used to maintain staffing levels and to offset Public Safety wage increases and other costs in an effort to remain competitive in recruitment and retention but within the City’s median compensation policy. ---PAGE BREAK--- HISTORICAL GENERAL FUND RESERVES $3.3 $3.0 $2.5 $3.3 $2.3 $1.4 13% 12% 9% 12% 7% 5% $0.0 $0.5 $1.0 $1.5 $2.0 $2.5 $3.0 $3.5 FY 2008-09 Actual FY 2009-10 Actual FY 2010-11 Actual FY 2011-12 Actual FY 2012-13 Actual FY 2013-14 Projected Millions General Fund Reserve Versus 10% Reserve Goal FY 2008-09 to FY 2013-14 Actual Reserve (Year-End Balance) Minimum Reserve Goal (10% of FY Expenditures) ---PAGE BREAK--- FY15 Budget Planning LOOKING FORWARD ---PAGE BREAK--- COMMUNITY BUDGET MEETINGS Four meetings in March, held in various neighborhoods throughout the City 37 residents (plus two children and two dogs) Staff presentation followed by activities for residents to provide feedback and ideas ---PAGE BREAK--- BUDGET PRIORITIES ACTIVITY ---PAGE BREAK--- FEEDBACK AND RESULTS Exemplary Government Services Financial Sustainability Sense of Place & Community Identity Public Facilities Public Health & Safety Environmental Sustainability $0 $50 $100 $150 Goal A Goal B Goal C Goal D Goal E Goal F Average Budget Allocation—All Participants Public Safety was highest priority Many residents felt the goals were inter-related Brainstorming, suggestions and comments centered on strengthening community, embracing technology, focusing on economic development, and financially stability ---PAGE BREAK--- Vacancies in Police related to recruitment and retention issues; most other cities are also actively recruiting $600,000 decrease in General Fund support for Public Works; offsets by special funds have helped General Fund but need to focus more on the missions of the special funds Likely use of significant vacancies to balance the budget will impact police, field/park/trail maintenance, code enforcement and overall responsiveness Loss of Redevelopment backfill funds for economic development activities and General Fund support Significant increase in CalPERS rates in FY16 Returning reserves to desired levels CURRENT CHALLENGES ---PAGE BREAK--- FY 2014-15 BUDGET OVERVIEW – ASSUMES ALL POSITIONS FILLED General Fund Summary Revenues + Expenditures FY 2012-13 Actuals FY 2013-14 Adopted FY 2013-14 Projected 3rd Qtr FY 2014-15 Projected FY 2015-16 Projected Beginning Restricted Fund Balance $598,957 $1,059,976 $0 $0 Beginning Unassigned Fund Balance $2,608,745 $2,909,552 $1,281,566 $1,360,383 ($353,414) Total Revenues $29,366,108 $28,479,079 $28,823,152 $29,270,996 $29,867,340 Total Expenses $30,081,722 $28,453,592 $28,748,553 $30,984,794 $32,413,278 Personnel $22,728,201 $23,649,427 $22,254,761 $24,854,564 $26,283,443 Salary Savings ($28,480) ($1,467,048) ($25,858) $0 $0 Non-Personnel $7,382,001 $6,271,213 $6,519,651 $6,130,230 $6,129,834 Annual Balance/Shortfall ($715,614) $25,487 $74,599 ($1,713,797) ($2,545,938) Transfer Out Grant $0 $598,957 $0 $0 Transfer Out - Solar CIP $0 $456,801 $0 $0 Total Transfer out of Restricted Funds $0 $0 $1,055,758 $0 $0 Ending Fund Balance/Deficit $2,492,088 $2,935,039 $1,360,383 ($353,414) ($2,899,352) Unassigned Ending Fund Balance/Deficit $2,492,088 $2,935,039 $1,360,383 ($353,414) ($2,899,352) Ending Unassigned Reserve Percent 8% 10% 5% ---PAGE BREAK--- BUDGET BALANCING GOALS Summary Annual Revenues & Expenditures FY 2014-15 Projected Annual Revenues $29,270,996 Annual Expenditures $30,984,794 Annual Shortfall (Before Balancing Measures) ($1,713,798) Balancing Measures Required for Annual Shortfall ($1,713,798) Annual Shortfall (After Balancing Measures) $0 Goal 1: Align Annual Revenues with Annual Expenditures Will require $1.7 million in balancing measures Current Fiscal Year budget assumes $1.5 million in vacancies ---PAGE BREAK--- BUDGET BALANCING GOALS Goal 2: Increase Fund Balance Reserve Will require additional balancing measures to reach 5% -10% goal Fund Balance Summary 5% Goal 10% Goal Projected FY 2014-15 Starting Fund Balance $1,360,383 $1,360,383 Fund Balance Goal $1,463,550 $2,927,100 Addl Balancing Measure To Increase Fund Balance ($103,167) ($1,566,717) ---PAGE BREAK--- Maintain or increase vacancies Reduction in staffing through layoffs or reorganization Increased employee contributions to benefit costs Reduction in work hours/open hours Furlough days Service reductions Further increases in efficiencies Reductions in professional services, part-time help, overtime, travel and training POTENTIAL BALANCING MEASURES ---PAGE BREAK--- Current Vacancies include: 3 Police Officers Police Records Specialist 3 Firefighters (over hire positions) Fire Secretary Building Inspector Recreation Teacher Pension contributions subject to negotiation Personnel reductions through reorganization or layoff Service cuts still being evaluated POSSIBLE BALANCING OPTIONS Item Current Vacancies (1,267,000) Additional Pension Contribution (574,000) Increased Purchasing Efficiencies (50,000) Possible Reduction in Personnel (500,000) Additional Police Vacancies (277,000) Service Reductions (70,000) Reduce City Attorney Services (26,500) New Fees/Fund Raising (55,000) (2,819,500) $ Balancing Options ---PAGE BREAK--- SUMMARY OF BALANCING MEASURES In order to balance the budget AND increase reserves, $1.8 million to $3.3 million in increased revenues or decreased expenses will be necessary Reserves are one-time money set aside, the balancing measures are only necessary until reserve target is met Summary of All Balancing Measures FY 2014-15 Projected 5% Goal FY 2014-15 Projected 10% Goal Balancing Measures To Balance Revenues & Expenditures ($1,713,798) ($1,713,798) Additional Measures Need to Increase Fund Balance ($103,167) ($1,566,717) Total of Balancing Measures ($1,816,965) ($3,280,515) ---PAGE BREAK--- Goal is to maintain a minimum of 10% reserves with a target of 15% Reserves can be used for a fiscal emergency but must be replaced to the base threshold of 10% within five years Financial Advisory Board is recommending that restricted reserves equal to two weeks expenditures be on hand at all times, with no use of short term borrowing—staff concurs as a goal, but will take many years to implement Short-term borrowing (as has been done the past two years and done by many cities) will be necessary for some time in order to properly manage cash flow Staff anticipates developing a budget that will increase reserves by at least one percent per year for each of the next five years GENERAL FUND RESERVE POLICY ---PAGE BREAK--- TWO-YEAR BUDGET Advantages Higher emphasis on long-term planning and forecasting Gives more time to ensure budget is being efficiently followed and properly funded Greater opportunity to focus on how well programs and services are working and comply with Strategic Plan Reduces resources associated with budgeting No loss of budget oversight by City Council Staff will continue to update periodically Council will continue to approve budget resolution for each fiscal year as well as mid-year amendments Allows for modeling the impact of any change to Measure R funding ---PAGE BREAK--- Present budget report to major labor groups on April 23 Provide a Capital Improvement Plan Study Session to the City Council in early May Meet and negotiate with bargaining units in April and May Present the budget to Council and Community on June 3 Budget discussions on June 17 and 24 if necessary Budget adoption on June 17 or 24 NEXT STEPS ---PAGE BREAK--- HAVING FUN YET? Questions, comments, concerns and possible direction?