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AGENDA BILL Agenda Item No. 7 Date: June 18, 2013 To: El Cerrito City Council/Employees Pension Board/ Public Financing Authority Board From: Scott Hanin, City Manager Lisa Malek-Zadeh, Finance Director/City Treasurer Subject: Adoption of the Fiscal Year (FY) 2013-14 Budget and Spending Authority for the City of El Cerrito, Public Financing Authority and Employee Pension Trust Board and Establish the Annual Gann Appropriation Limit ACTION REQUESTED Consider adoption of four resolutions which approve the following actions: 1. Adoption of the FY 2013-14 City Budget and Spending Authority By Fund 2. Adoption of the FY 2013-14 Budget for the Public Financing Authority 3. Adoption of the FY 2013-14 Budget for the Employee Pension Trust Board 4. Approve the calculation and establish the City’s FY 2013-14 annual Gann Appropriation Limit as $111,892,904. BACKGROUND At the June 4, 2013 City Council meeting, the City Manager presented the Proposed FY 2013-14 capital and operating budgets for the City of El Cerrito, the Employees Pension Board and the Public Financing Authority. The presentation provided an overview of the City’s fiscal health, a discussion on the expenditure and revenue assumptions included in the budget and how the recently adopted Strategic Plan provided a guide in developing this year’s budget. Total spending authority for all funds is $45,807,472. Discussions on the FY 2013-14 budget began with a City Council study session on April 16, 2013. The focus of this meeting was to provide the Council with an update on the status of the City’s finances and for the Council to provide staff with some direction in the development of the annual budget. In addition to the April study session, the Financial Advisory Board (FAB) met on May 28, 2013 to begin a review of the proposed budget numbers in line item detail and again on June 5, 2013 to provide comments and recommendations on the contents of the proposed budget book. The FAB made no requests for changes to the budget appropriations, but unanimously approved motions stating that they found the proposed budget to be appropriate and recommended that the General Fund 10-year plan include the dollar amount required to achieve the 15% reserve policy. Staff will make that addition in the final document. ---PAGE BREAK--- Agenda Item No. 7 Page 2 Additionally, the Board suggested adding language stating that the City had provided the public with an opportunity to comment on City Council compensation per the Contra Costa Grand Jury recommendations, which will also be done in the final document. It should be noted that per City Council direction, effective July 1, 2013, the City Council will pay the full 8% employee share of their CalPERS pension costs. Staff will work with the FAB over the next fiscal year to develop a formal procedure to review City Council compensation on an annual basis. The FAB also identified various typographical, formatting and clarification edits that will be incorporated into the final adopted document. As in the past, minor edits will be corrected prior to the final document being assembled as will any comments raised by the City Council prior to adoption. ANALYSIS The FY 2013-14 budget recommended for adoption represents the direction staff received from the City Council, the combined efforts and collaboration with City departments and the FAB, and provides a financial plan that balances the City’s expenditures with available resources while maintaining a 10% General Fund reserve. The budget complies with all adopted financial policies, and the budget document conforms to state and national guidelines for budget presentation. Unfunded Expenditures Identified during budget development were several important items that staff attempted to include in the final proposed budget. While these are considered high priority, with the loss of sales tax revenue this fiscal year and limited new revenue projected, balancing the budget focused on maintaining current operations as best as possible and doesn’t allow for new expenditures or significant increases to reserves. During the June 4, 2013 presentation of the proposed FY 2013-14 budget, the City Council requested that staff address the potential costs of each of these unfunded expenditures for further discussion. Each of these items is discussed in more detail below: Reserves: Estimated Cost Depends on Available Surplus Revenues City Council, the FAB and staff agreed that the City would be well served by having restricted reserves to be used for one-time needs, not cash flow, in addition to an overall increase in the percent of General Fund reserves towards the 15% goal. Unfortunately, the available revenues necessary to support FY 2013-14 expenditures does not have a surplus of funds that can be allocated to any additional reserves as this time, unless projects or services are reduced. Additionally, long term projections have not identified available funds necessary to increase the reserves much beyond the 10% threshold. ---PAGE BREAK--- Agenda Item No. 7 Page 3 Library Needs Assessment/Preliminary Architectural Services: Estimated Cost $50,000 The City completed a Needs Assessment and a Building Program for the El Cerrito Library in 2006 in anticipation of being able to apply for a statewide construction bond grant. Unfortunately, California voters did not pass the bond measure, and in subsequent years various circumstances including negotiations with the West Contra Costa Unified School District, loss of redevelopment funding, and finally dissolution of the Redevelopment Agency all served to work against the City in its efforts to fund a new Library building. In the meantime, the Library industry has continued to grow and change to the point where our Needs Assessment needs to be updated and refreshed. City staff believes that updating the Needs Assessment is an appropriate endeavor to begin during this fiscal year in that it can also help inform both the City and the Library staff as to the community’s needs and desires, not just for a new building but also in the services that the Library provides. It is also timely, as the County Library is also embarking on their own strategic planning process and there is an opportunity to solicit and share public feedback. Following development of the Needs Assessment, the City Council will then be in a better position to discuss any additional one-time preparatory costs for a new Library building (such as an updated Building Program and then subsequent solicitation for architectural services). Staff proposes that the Needs Assessment update be funded through the City Manager’s professional services budget in an amount not to exceed $25,000, and that a budget amendment for these additional costs be brought back to the City Council during the fiscal year if necessary to stay within our appropriation limit. If comparable savings are not found elsewhere in the General Fund, this expenditure could reduce the projected General Fund balance by approximately 0.01%. Increased Library Hours: Estimated Cost ~$25,000 to $118,000 From 2003-2009, the City of El Cerrito funded additional Library hours in order to increase what was then the baseline 29 hours per week funded by the Contra Costa Library to 35 hours per week. The City paid $40,000 to $60,000 each year during this period. In 2010, the County worked with the cities to take over the maintenance of all facilities within their jurisdictions in order for the County’s funding to go completely toward Library services and open hours. In El Cerrito’s case, the City already owned the building, but only maintained the outside of the building roof, parking lot, landscaping, etc.) while the County funded essentially all of the inside (i.e. janitorial, technology, alarm systems, utilities, etc.). With the new arrangement, the City has assumed complete maintenance of the entire facility in exchange for the County’s funding going completely toward the open hours. As a result, the City does not pay an additional cost any longer for 35 open hours, but does have total responsibility for the building and all the associated costs. Staff is currently working with County staff on finalizing a lease that memorializes this arrangement. Because the City has assumed these responsibilities, any additional funding toward the Library would go above and beyond the costs the City is currently incurring on an annual basis. The County Librarian has provided prospective costs to City staff for a variety of scenarios for additional open hours, including opening additional days ---PAGE BREAK--- Agenda Item No. 7 Page 4 (currently the Library is closed on Wednesdays and Sundays) or later on days the Library is currently open. The costs range from approximately $25,000 to $118,000 depending upon the scenario. These costs, once implemented, would be ongoing for the City and as in previous years, are subject to the County’s staffing schedules and costs, including CPI or cost-of-living increases. Because the scenarios presented are so varied and no analysis as to their impacts have been performed, City staff is interested in learning more about the needs of the Library Community and would like to obtain data to help inform the discussion on what is the best scenario for the Library to be open and therefore what might be the most feasible for the City’s funding based on available resources. Staff believes that working with the Library staff and the community, through not only the City Needs Assessment update but also in conjunction with their Strategic Plan efforts, will help both agencies better understand the needs of the patrons of the Library and what scenario might fit El Cerrito best. To that end, staff recommends that the City Council postpone a decision on funding additional Library hours until City and Library staff can solicit and collect this information, and hold a study session of the Council later next fiscal year to discuss this concept in more depth and make decisions based on data from the El Cerrito and other libraries and within a context of a very tight operating budget which already has made small reductions to current service levels Facilities Reinvestment Fund and Additional Funding For Playfields & Playgrounds: Estimated Cost- Unknown City facilities are aging and are starting to show deterioration. A study by MACTEC was completed in 2004 which identified the various needs of these facilities, including buildings, clubhouses, and other City infrastructure. This study should be updated to reflect the current infrastructure needs and potential costs. To that end, identification of a source to fund capital repairs and replacement is needed. Likewise, additional support for playfields and playgrounds throughout the City would improve these facilities. At this time, the City has only identified funding of $15,000 for an upgrade of the Tom Bates Sports Fields as a part of the City’s obligation to the Joint Powers Authority (JPA) governing these fields. At City Council’s suggestion, staff intends to conduct a study session with the Council this calendar year to further discuss and identify our capital priorities, including those identified in our current Capital Improvement Program (CIP) as well as planning for and identifying potential funding sources for the necessary studies in the future. Cost of Living Adjustment (COLA)- Management & Unrepresented Employees: Estimated Cost ~$78,000-$105,000 The last adjustment received by management and unrepresented employees was in FY 2010, yet over the last two years, this group has picked up half of the employee’s portion of CalPERS pension costs This is higher than any other bargaining unit. To help offset this reduction in employee pay, staff looked at the feasibility of a COLA for FY 2013-14. However, this item could not be funded at this time. ---PAGE BREAK--- Agenda Item No. 7 Page 5 Updated Cost Allocation Model & Fee Study: Estimated Cost~ $25,000 The City hired MAXIMUS in 2003 to perform a city wide user fee study and develop a cost allocation model. This study created an empirical basis to fairly and equitably allocate costs to the users of specific services. It also ensures that the City is compliant with state law that prevents cities from charging a fee in excess of providing the service. This study hasn’t been updated for several years. It is important to update the cost allocation model with current costs to ensure the General Fund is accurately being reimbursed for direct and indirect fee-based services provided to the public. Additionally, when applying for grants, an approved cost allocation model can enable the City to request eligible reimbursement for indirect costs of administering the grant. The Government Finance Officers Association (GFOA) has recommended updating cost allocation models every four years. Further, as noted during the June 4, 2013 presentation, fee revenue in some areas has declined, and staff would like to examine the fee structure to ensure that it is appropriate. While funding for a consultant to do this work wasn’t included in this year’s budget, staff is looking at alternatives to complete all or portions of this work in-house, over time. Expenditure Spending Authority and Gann Appropriations Limit Included in the recommended actions for adoption of the budget are two items related to spending limits: establish spending authority by fund and approval of the calculation and establishing the City’s FY 2013-14 Gann Appropriation Limit as $111,892,904. 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 City’s FY 2013- 14 calculation and Gann Limit is discussed in more detail on page 24 of the FY 2013-14 Proposed Budget. The 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 the services to be provided and how they will be funded, resulting from a budget process that identifies what a city wants to accomplish and the resources available to implement these plans. Establishing spending authority by funding source 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 operating budget for the City. 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. ---PAGE BREAK--- Agenda Item No. 7 Attachments: 1. Resolution for Adoption ofthe FY 2013-14 City Budget and Spending Authority By Fund 2. Resolution for Adoption of the FY 2013-14 Budget for the Public Financing Authority 3. Resolution for Adoption of the FY 2013-14 Budget for the Employee Pension Board 4. Resolution Approving Calculation and Setting the Gann Appropriations Limit for FY 2013-14 Budget Page 6 ---PAGE BREAK--- Agenda Item No. 7 Attachment 1 Page 1 of 2 RESOLUTION 2013–XX RESOLUTION OF THE CITY COUNCIL OF THE CITY OF EL CERRITO ADOPTING THE ANNUAL BUDGET REPRESENTING SPENDING AUTHORITY FROM ALL FUNDS OF THE CITY OF EL CERRITO FOR FISCAL YEAR 2013-14 WHEREAS, City staff have prepared, transmitted, and presented the proposed FY 2013- 14 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 2013-14 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 Fiscal Year 2013-14 Budget with spending limits across funds as follows: General Fund $28,453,592 Gax Tax Fund $1,253,937 NPDES Fund $454,725 Landscape and Lighting $1,314,327 Measure J Return to Source $518,741 Measure J Storm Drain $951,402 Measure A Parcel Tax $624,970 Asset Seizure $0 Vehicle Abatement $11,000 Park In Lieu Fund $0 Street Improvement Fund $3,015,684 Art in Public Places $0 Federal, State and Local Grants $914,783 City LMI Housing $140,838 Capital Improvements $3,478,220 Storm Drain Debt Service $521,530 Integrated Waste Management $2,174,295 Vehicle/Equipment Replacement $168,532 Employee Pension Trust Fund $112,500 Finance Authority- Measure A $365,308 Finance Authority- City Hall $596,308 Finance Authority –Street Improvement $736,780 TOTAL $45,807,472 ---PAGE BREAK--- Agenda Item No. 7 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/her 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 14, 2013, 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, 2013. Cheryl Morse, City Clerk APPROVED: Greg Lyman, Mayor ---PAGE BREAK--- Agenda Item No. 7 Attachment 2 RESOLUTION 2013–XX RESOLUTION OF THE CITY OF EL CERRITO PUBLIC FINANCING AUTHORITY ADOPTING THE FISCAL YEAR 2013-14 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 Year 2013-14. NOW THEREFORE, BE IT RESOLVED that the El Cerrito Public Financing Authority adopts the Fiscal Year 2013-14 Budget with spending limits across funds as follows: 834 Finance Authority- Measure A $365,308 835 Financing Authority-City Hall $596,308 836 Financing Authority-Street Imp $736,780 Total $1,698,396 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 18, 2013, 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 2013. Cheryl Morse, Authority Clerk APPROVED: Gregory B. Lyman, Chair ---PAGE BREAK--- Agenda Item No. 7 Attachment 3 RESOLUTION 2013–XX RESOLUTION OF THE CITY OF EL CERRITO EMPLOYEES’ PENSION BOARD ADOPTING THE BOARD’S FISCAL YEAR 2013-14 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 Year 2013-14. NOW THEREFORE, BE IT RESOLVED that the El Cerrito Employees’ Pension Board hereby adopts the Fiscal Year 2013-14 Budget with spending limits of $112,500. 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 18, 2013, 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 2013. Cheryl Morse, Secretary to the Board APPROVED: Greg Lyman, Chair ---PAGE BREAK--- Agenda Item No. 7 Attachment 4 Page 1 of 2 RESOLUTION 2013–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 2013-14 AND SETTING THE APPROPRIATIONS LIMIT AT $111,892,904 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 2012-13 appropriations limit: $105,629,673 Cost of Living Change Ratio: 1.0512 CA Per-Capita Personal Income Population Change Ratio: 1.0077 Contra Costa County Population Calculation Factor: 1.05929424 FY 2013-14 Appropriations Limit: $111,892,904 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 2013-14 shall be $111,892,904 which exceeds the City’s projected applicable appropriation amount by $$93,747,036. ---PAGE BREAK--- Agenda Item No. 7 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 18, 2013 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 2013. Cheryl Morse, City Clerk APPROVED: Gregory B. Lyman, Mayor