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HomeMy WebLinkAboutFin Budget Proposed FY2012-13CITY OF,r'��Z Agenda Item No: 5 a. Meeting Date: June 18, 2012 SAN RAFAEL CITY COUNCIL AGENDA REPORT Department: Finance Prepared by: Mark Moses, Interim Finance Director City Manager Approval) iw"4 SUBJECT: REVIEW OF THE PROPOSED CITY BUDGET FOR FISCAL YEAR 2012-2013 RECOMMENDATION: Accept report. BACKGROUND: The purpose of this report is to provide the City Council and community with the proposed city-wide budget for fiscal year 2012-2013. The City Council conducted budget workshops on April 2, April 16, and May 14, 2012. The purpose of these workshops was to review the City's three-year forecast, and to discuss program priorities and key fiscal policies that should shape the development of the fiscal year 2012-2013 budget. One significant outcome is that staff was directed to prepare the preliminary general fund budget without resorting to the use of reserves or borrowed funds to balance the budget. A number of potential programs that could be reduced or eliminated to preserve resources were also discussed. At the City Council meeting of June 4, 2012, staff presented a preliminary general fund budget with a $1,062,000 deficit, and provided recommended solutions totaling $1,095,000. Following discussion by and direction from City Council, a $327,000 deficit remained. Staff was directed to return with a proposed balanced budget that would preserve the street crimes unit in the Police Department. This report will focus on the following key areas. 1. Proposed, balanced budget for General Fund. 2. Proposed budgets for other City Funds. 3. Next steps for adoption of fiscal year 2012-2013 budget. File No.: 1 - Council Meeting: %t�d Disposition: FOR CITY CLERK ONLY SAN RAFAEL CITY COUNCIL AGENDA REPORT l Paze: 2 ANALYSIS: GENERAL FUND Of the $1,095,000 in proposed budget -balancing solutions that were presented at the June 4, 2012 City Council meeting, $735,000 were accepted; this direction reduced the deficit from $1,062,000 to $327,000. Since that time, staff identified the following two sources that, when taken together, successfully resolve the shortfall. 1. Since the preparation of the June 4, 2012 preliminary budget staff report, staff received additional information regarding revenue from fines and permit fees that will increase fiscal year 2012-2013 projections by $250,000. 2. After reviewing the likely gap between the police officer retirements and the start date of new hires to backfill these positions, there will be vacancy savings in the Police Department of approximately $90,000. These adjustments have a combined $340,000 impact on the general fund operating budget. When combined with the adjustments previously approved, the proposed budget has positive operating results of $13,000. Key budget assumptions for fiscal year 2012-2013: Although, in fiscal year 2012-2013, general fund revenues are projected to grow by $1.5 million, or 2.7%, expenditures have been reduced by $750K ($660K on June 4 and $90K on June 18) from the preliminary budget, in order to balance the budget without the use of borrowed funds or reserves. Revenue Factors Sales tax and the transactions and use tax (Measure "S") account for 75% of the $1.5 million increase in revenues over the previous fiscal year (from $54.5 million to $56.0 million). Sales tax is projected to increase by approximately $840,000, or 5%, from $1613 million to $16.97 million. Transactions and use tax is projected to increase by approximately $250,000, or 4%. from $6.20 million to $6.45 million. All other revenues, including business tax, franchise tax, charges for services and permit fees are expected to be flat or experience very modest increases. One exception is property tax, which is expected to decrease by approximately 0.5%, or $69,000. Preliminary FY 2012-2013 Budget Balancing June 4 Budget Balancing June 18 Proposed Budget Revenues 55,611,000 75,000 $250,000 55,936,000 Transfers in 1,378,000 0 0 1,378,000 Total Resources $56,989,000 $75,000 $250,000 $57,314,000 Expenditures 56,532,000 (660,000) (90,000) 55,782,000 Transfers out 1,519,000 0 0 1,519,000 Total Uses $58,051,000 $660,000 ($90,000) $57,301,000 Net Operating $1,062,000 $735,000 $340,000 $13,000 Key budget assumptions for fiscal year 2012-2013: Although, in fiscal year 2012-2013, general fund revenues are projected to grow by $1.5 million, or 2.7%, expenditures have been reduced by $750K ($660K on June 4 and $90K on June 18) from the preliminary budget, in order to balance the budget without the use of borrowed funds or reserves. Revenue Factors Sales tax and the transactions and use tax (Measure "S") account for 75% of the $1.5 million increase in revenues over the previous fiscal year (from $54.5 million to $56.0 million). Sales tax is projected to increase by approximately $840,000, or 5%, from $1613 million to $16.97 million. Transactions and use tax is projected to increase by approximately $250,000, or 4%. from $6.20 million to $6.45 million. All other revenues, including business tax, franchise tax, charges for services and permit fees are expected to be flat or experience very modest increases. One exception is property tax, which is expected to decrease by approximately 0.5%, or $69,000. SAN RAFAEL CITY COUNCIL AGENDA REPORT / Page: 3 Expenditure Factors Increases in pension contributions and retiree medical funding account for the entire $1.5 million increase in expenditures over the previous year (from $54.3 million to $55.8 million). OTHER FUNDS Successor Agency Prior to the State Legislature -initiated dissolution of the Redevelopment Agency, City Council met as the Redevelopment Agency, and approved its annual budget as part of the City-wide budget process. Under the current legislation, the City, as Successor Agency, is not required to prepare an annual budget. All funding of the Successor Agency follows a different process, which is specified in the law. Funding must be approved by an Oversight Board and the California Department of Finance for six month periods. Due to the Successor Agency's six month fiscal horizon and the fact that its legal status is different from that of the former Redevelopment Agency, a Successor Agency budget will not be submitted as part of the City- wide annual budget. The former functions of the Redevelopment Agency have been transferred to the City Managers office and the City Council approves the budget for that office. The Oversight Board has approved the minimum allowable administrative expenses of $250,000 annually for staff time involved in the dissolution of the former Redevelopment Agency. Therefore, $125,000 has been projected as available to the City for the first half of fiscal year 2012/13. The City as Successor Agency is scheduled to consider the budget for July 1, 2012 — December 31, 2012 on June 18, 2012, under a separate report. Capital Improvement Program The Capital Improvement Program will be covered in a separate report from Public Works on the City Council meeting of July 2nd. The new and carried -over appropriations for fiscal year 2012- 2013 are expected to equal approximately $4.4 million from special revenue, grants and other funding sources. The chief challenges of this activity include (1) project management capacity on active projects; (2) capital project funding shortages; (3) ensuring that grant -supported projects have sufficient project management and matching funds to take full advantage of the grants. Special Revenue and Grant Funds These funds have restricted uses, based on their respective sources. Significant funds in this group include Paramedic Tax, which as discussed at the May 7 City Council meeting, has a balanced budget for the upcoming fiscal year. Measure C, the Library parcel tax, is included in this group and is the subject of a separate study session on June 18. Other significant funds in this category include Gas Tax, Sewer Maintenance, Storm Water, Recreation, and Business Improvement District. These funds are balanced for fiscal year 2012-2013. Enterprise Fund The sole fund in this category is the Parking Services Fund. Although parking meter rates were last increased in 2007, the fund has remained fairly stable operationally, primarily as a result of reducing costs. The parking structures and lots have deferred maintenance issues that will need to be addressed over the next few years, in order to preserve these revenue -generating assets. Internal Service Funds and Capital Replacement Funds These funds are used to manage services that are delivered throughout the organization. For example, computer replacement, employee benefits, workers compensation, general liability and vehicle replacement are funded via internal charges to the funds that utilize these respective SAN RAFAEL CITY COUNCIL AGENDA REPORT / Page: 4 services. The internal service funds have sufficient resources to support services for fiscal year 2012-2013. The capital replacement funds (e.g., building maintenance and vehicle maintenance) are significantly underfunded with respect to long-term needs. CITY-WIDE FUND SUMMARY CITY OF SAN RAFAEL Q General Fund $57,301,000 Special Revenue and Grant Funds 25,667,376 Enterprise Fund (Parking Services) 4,716,861 Internal Service & Capital Replacement 11,146,920 Misc. Capital Project Funds 568,581 Adjustment for ISF Charges & Transfers (13,096,825) Total City-wide Appropriations $86,303,913 * Adjustment for charges and transfers included in other fund appropriations ORGANIZATIONAL CAPACITY As discussed in the prior budget presentations; while the City has achieved significant progress by balancing the general fund budget without the use of borrowed monies or reserves, the budget continues to rely on unsustainable withholding of resources that need to be addressed over the next two to five years: 1. Capital and maintenance budgets have been deferred for several years. This practice has severely limited funding for facility maintenance, repairs and replacement. City -owned buildings and city -operated public facilities, parks and open space risk severe reduction in their respective values, safety and utility if they are not properly maintained. In addition, grant funds are at risk, as a result of reductions in project management capacity. 2. The ongoing erosion of staffing levels has reduced the City's organizational capacity. The proposed budget provides funding for total staffing of 377, down 68 positions, or 15% from fiscal year 2007-2008. Currently, there is very little capacity to proactively manage emerging issues, or to ensure smooth and consistent continuity of services. Similarly, although the reduced workweek from 37.5 to 36 hours for the non -safety personnel has conserved general fund resources, it has come at a price, in the form of exacerbating the service delivery and organizational capacity related -challenges caused by the earlier staff reductions. NEXT STEPS: Staff is preparing to return to Council at the meeting of July 2. 2012, with the following items: 1. Fiscal Year 2012-2013 City-wide Budget Adoption 2. Capital Improvement Program 3. Fiscal Year 2011-2012 Adjustments 4. Measure "S" Transactions and Use Tax Committee Report SAN RAFAEL CITY COUNCIL AGENDA REPORT / Page: 5 FISCAL IMPACT: The preliminary fiscal year 2012-2013 budgets are balanced for all funds. The proposed General Fund budget does not use borrowed monies or reserves as resources with which to fund expenditures. RECOMMEDED ACTION: Direct staff to return on July 2, 2012 with a final citywide budget, incorporating modifications or changes discussed at the City Council meeting of June 18.