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HomeMy WebLinkAboutFin Preliminary Budget FY2015-16CITY OF 154,OK Agenda Item No: 6.c Meeting Date: May 4, 2014 SAN RAFAEL CITY COUNCIL AGENDA REPORT Department: Finance (e Prepared by: Mark Moses, Finance Director City Manager Approval • 6r SUBJECT: REVIEW OF THE PRELIMINARY CITY OPERATING BUDGET FOR FISCAL YEAR 2015-2016 RECOMMENDATION: REVIEW REPORT AND PROVIDE DIRECTION TO STAFF TO RETURN WITH FINAL BUDGET FOR ADOPTION BACKGROUND: The purpose of this report is to provide the City Council and community with an update on the City's general fund fiscal status, the status of other key funds, and a preliminary operating budget for fiscal year 2015-2016. Staff presented the City Council with a five-month budget review of the General Fund on December 1, 2014, and a subsequent nine-month budget review of all City funds on April 20, 2015, covering the status of current year (FY14-15) fiscal performance. During these two reviews, revenues were increased by approximately $953,000, mostly from one-time sources. This represents a 1.4% increase of the original projections set at $67.9 million. The City Council also made minor adjustments to expenditures, in order to fund the Marin County Major Crimes Task Force, provide for the spending of newly acquired grants, and authorize the expenditure of funds for the acquisition of the property at 1309 Fifth Ave for which funds had been previously set aside. Reflecting the generally stable, economic environment, no other adjustments were recommended or required. The respective, predominantly one-time, adjustments to revenues, expenditures and transfers resulted in a net increase in resources of approximately $750,000. As this report is being prepared, it does not appear that the State budget will have any significant, detrimental impacts on the City's budget. This report will cover the following: 1. Update on current year (fiscal 2014-2015) financial performance 2. Preliminary, fiscal year 2015-2016 General Fund operating budget 3. Preliminary, fiscal year 2015-2016 budgets for other City Funds 4. Next steps for adoption of fiscal year 2015-2016 budget. The key elements, assumptions and recommendations contained in this report were reviewed and discussed at the Finance Committee meeting of April 23, 2015. The Finance Committee requested that staff bring this report to the City Council for consideration. FOR CITY CLERK ONLY File No.: -g S Council Meeting: 1 ['2_0 Disposition: Q CC_Q ��p2� SAN RAFAEL CITY COUNCIL AGENDA REPORT / Page: 2 ANALYSIS: The City's financial position has improved significantly over the past few years. Based on the planned allocation of $1 million to the General Fund Emergency and Cash Flow Reserve, coupled with some residual operational savings, the City will close fiscal year 2014-2015 with its target emergency reserve level met for the first time in a decade. This milestone is being reached a full year ahead of what had been projected at this time last year, as the current budget was being developed and adopted. The Emergency and Cash Flow Reserve is set at 10% of General Fund expenditures, which are currently projected to be $63.2 million for fiscal year 2014-2015. The City has also re-established adequate reserves for worker's compensation and general liability claims and has been fully funding its employee and retiree benefit costs since fiscal year 2012-2013. Following years of deferring critical maintenance and upkeep of City facilities, the City has executed approximately $2.3 million over the past three years in projects designed to maintain and extend the life of its facilities. During the same period, the City has invested substantially in the replacement of critical vehicles and equipment. Although a number of needs remain inadequately funded, particularly in the area of City buildings, public infrastructure, and technology, the passage of Measure E has provided additional revenues of which the City Council has dedicated a portion (`/4 percent from the 3/4 percent transactions and use tax) to address critical public safety buildings and infrastructure needs. Operationally, the City's staffing level is equivalent to that of the late 1990s, and its technology short of current industry standards. These issues are being addressed incrementally, and within the confines of available resources. PROJECTED FISCAL YEAR 2014-2015 OPERATING RESULTS Fiscal Year 2014-2015 is projected to close with positive General Fund operating results of $5.2 million, of which $3.5 million is dedicated to the Measure E set-aside for public safety facilities and $1.0 million was allocated to the Emergency reserve, leaving $757,244 unallocated and unassigned. The City Manager recommends that the $757,244 be allocated as follows: Recommended areas of funding Amount Reason Commitment to support county -wide Transportation Authority of Marin $125K transportation planning, modeling & Limited Term Fee Adjustment monitoring (5 years g $25K/yr) Assess Workers Comp & Liability Risk Management Contractual Support $ 67K Trends / Develop Strategies to Reduce Claims and Exposure Reserve for future programming of General Fund Infrastructure Reserve $200K CIP and Technology Anticipation of higher reserve Pre -fund Emergency & Cashflow Reserve $365K requirement in future fiscal years as expenditures grow Total $757K Other Funds are generally on target to finish the year within their current budgeted appropriations. One exception is where increased revenue -generating activity has resulted in increased expenditures. SAN RAFAEL CITY COUNCIL AGENDA REPORT / Page: 3 FISCAL YEAR 2015-2016 GENERAL FUND BUDGET DEVELOPMENT The preliminary fiscal year 2015-2016 budget projects approximately $3.5 million in additional resources and approximately $4.4 million in additional, planned spending (uses), compared to the projected results of the current fiscal year. The $4.4 million in additional uses includes $1.0 million of capital transfers to support the Capital Improvement Program. The following table presents the projected, current year activity (FY2014-15) and provides a comparison to the preliminary General Fund budget for the upcoming year (FY2015-16): General Fund Projected FY 2014-15 Preliminary FY 2015-16 (rounded) $ % Change from Change previous from year previous year Revenues (ongoing sources) $68,007,320 $70,871,000 $2,863,680 4.2% Revenues (special/one-time) $820,000 1,400,000 Transfers in 1,290,207 1,308,000 Total Resources $70,117,527 $73,579,000 $3,461,473 4.9% Expenditures (baseline) $62,928,953 $66,341,000 $3,412,047 5.4% Measure E Spending 275,295 380,000 Transfers out — operating 1,447,664 1,400,000 Transfer out — Homeless 100,000 60,000 Transfer out — massage program 150,000 100,000 Transfer out — capital (CIP) 0 1,000,000 Total Uses $64,901,912 $69,281,000 $4,379,088 6.7% Operating Results $5,215,615 $4,298,000 Measure E set-aside $3,458,371 3,468,000 Emergency reserve $1,000,000 348,000 Recommended: Infrastructure 400,000 Recommended: GREAT/Other* $69,000 CM Recommendations FY 14-15 (from above) $757,244 Net After Allocations $0 $13,000 * - discussed on page 7 of the staff report A detailed schedule of revenues, expenditures, and transfers in and out for the General Fund is attached to this report (Exhibit I). Revenue Factors In fiscal year 2015-2016, General Fund revenues from ongoing sources are projected to grow by $2.9 million, or 4.2%, over those of the previous year, reflecting local economic growth. Property Tax is projected to increase by approximately 5.0%, and provide $700 thousand in additional revenues over the previous year. Sales Tax from ongoing sources is projected to increase by approximately 4.0%, and contribute an additional $800 thousand over the previous year. After adjusting for timing of receipts, Transactions and Use Tax (Measure E) is projected to increase by SAN RAFAEL CITY COUNCIL AGENDA REPORT / Page: 4 approximately $400 thousand, or 3.6%. All other revenues, including business tax, franchise tax, charges for services and permit fees are expected to experience modest increases ranging from 2.0-4.0% There are two, major one-time revenues projected for fiscal year 2015-2016, both of which are related to delays in revenues imposed by the State. In order to manage its deficits in the early 2000's, the State imposed a ten-year restructuring of the remittance of sales taxes to local jurisdictions (known as the "Triple Flip"). When this expires in 2016, the City will recover approximately $1.2 million in delayed sales tax revenues. The State has also deferred reimbursement payments for State mandated programs: A portion of these deferred payments from pre -2004, estimated at $200 thousand, is expected to be made during the first half of fiscal year 2015-2016. Expenditure Factors Expenditures are projected to grow by 5.4%, or $3.4 million, in fiscal year 2015-2016. The growth in expenditures is fueled by personnel costs, including step increases and contractual commitments, of $2.5 million, technology projects of $400 thousand, Marin County Major Crimes Task Force contribution of $148 thousand. Also included in the expenditure assumptions is $100 thousand (net of revenues generated) for the continuation of massage ordinance enforcement. MCERA pension contributions increased by approximately 3% of eligible payroll, which also increased by a modest amount over the previous year. This resulted in a 4.7%, or $676 thousand increase in pension contributions over those of previous year. Staff anticipates continued, upward pressure on future MCERA rates, based on the results of the recent review of mortality trends. Measure E set-aside for public safety facilities In May 2014, the City Council directed staff to establish a reserve within the General Fund for public safety facilities improvements. This reserve is to be funded by the additional one-quarter percent transactions and use tax (TUT) provided by the Measure E (three-quarter percent TUT) over that of Measure S (one-half percent) which Measure E supplanted on April 1, 2014. As of June 30, 2015, this reserve is projected to have collected $4.6 million, and spent $275 thousand, leaving a balance of $4.3 million. The collections represent tax proceeds collected since April 1, 2014, and the expenditures represent pre -project identification and planning for safety facilities. It is estimated that during FYI 5-16, an additional $3.8 million will be collected and $380 thousand will be spent prior to the commencement of facilities construction. It is anticipated that the construction will be funded from a combination of accumulated funds and the issuance of debt. Any debt issued will be repaid from future Measure E revenues. OTHER FUNDS Successor Agency Prior to the State Legislature -initiated dissolution of the Redevelopment Agency in January 2012, the 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 Successor Agency is not required to prepare an annual budget. All funding of the Successor Agency follows a different process specified in the new law: Funding must be approved by the Successor Agency's Oversight Board and the California Department of Finance for six month periods. The economic development -related functions of the former Redevelopment Agency have been transferred to the General Fund. The San Rafael Successor Agency Oversight Board has approved the minimum administrative expenses of SAN RAFAEL CITY COUNCIL AGENDA REPORT / Page: 5 $250,000 annually for City staff time devoted to the dissolution of the former Redevelopment Agency. The General Fund continues to have some financial exposure to the activities of the Successor Agency. The Successor Agency Oversight Board, the Department of Finance and the State Controller's Office are charged with making decisions pertaining to the disposal of Successor Agency assets as well as the resources allocated to future funding the administration of the Successor Agency as it winds down. Thus far, decisions imposed on the Successor Agency have not had a detrimental impact on the General Fund. Capital Improvement Program The Capital Improvement Program (CIP) was covered in a separate report presented by Public Works and approved by the City Council on March 16. The appropriations to be carried -over into fiscal year 2015-2016 from previous years are expected to equal approximately $12.3 million and will be combined with new appropriations of approximately $7.2 million from special revenue, grants and other capital funding sources. Special Revenue and Grant Funds These funds have restricted uses, based on their respective sources. One significant fund in this group is the Paramedic Fund, which is presented to the City Council as a separate item in order to establish the Paramedic Tax rates for fiscal year 2015-2016. The fund has planned expenditures of $6.7 million for the upcoming fiscal year, of which $3.8 million, or 58%, comes from the Paramedic Tax. The balance of the funding of this activity comes from third -party billings and other cost recovery for emergency medical response services. The Homeless Initiative find was established to fiend the Downtown Streets Team and other efforts to support the actions recommended by the Homelessness Ad hoc Subcommittee and approved by the City Council. The source of funding includes contributions from the City, County of Marin and other local organizations. Fiscal year 2015-2016 marks the third full year of operations for this program. Measure A — Open Space is now in its second full year. Funding for this activity is primarily provided by a nine-year, county -wide sales tax that is managed by the County of Marin, with the City providing discretionary contributions as needed. The focus for fiscal year 2015-2016, for which $400,000 in revenues are projected, remains on recreational facility improvements and open - space enjoyment and safety. The fiscal year 2015-2016 Measure A — Open Space Workplan, will be presented to the City Council separately on May 18. Measure C, the Library parcel tax, is included in this group and is funded adequately to ensure continuity of service levels in the next fiscal year. The purpose of the tax is to "augment the capacity of the City of San Rafael to provide quality library services to its residents." The Recreation and Childcare Funds, operated by Community Services are anticipating spending plans of $4.11 million and $3.98 million, respectively. Fee income covers 69% of the Recreation budget, while fee and grant income cover 97% of the Childcare budget. Other significant funds in this category include Gas Tax, Sewer Maintenance, Storm Water, and Business Improvement District. These funds are adequately funded to execute their respective spending plans for fiscal year 2015-2016. SAN RAFAEL CITY COUNCIL AGENDA REPORT / Page: 6 Enterprise Fund (Parking Services) The sole fund in this category is the Parking Services Fund. Currently, operations are funded via parking fees and fines, and fiord balance is the only resource with which to cover capital improvements. 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. The operating and capital expenditure budgets for this fund are $4.53 million and $150 thousand, respectively. 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 services. These fiends have sufficient resources to support services for fiscal year 2015-2016. The technology internal service find and the capital replacement funds (e.g., building maintenance, equipment and vehicle replacement) remain underfinded with respect to the City's long-term needs, but are adequately funded in the short-term. CITY-WIDE FUND SUMMARY The following table shows the projected July 1, 2015, beginning balance for all major fund classifications, and incorporates the projected revenues and planned expenditures that have been incorporated into this preliminary budget. STAFFING The City's current level of regular staffing, 386 FTE (full time equivalent), is 13 percent below the peak of 445 FTE that was supported in fiscal year 2007-2008. The erosion of staffing levels has significantly reduced the City's organizational capacity, and leaves few resources available to proactively manage emerging issues, or to ensure smooth and consistent continuity of services. The management team has considered the impact of the severe restructuring on the City's ability to effectively and sustainably deliver services upon which the residents depend. Sources Uses Fund Projected (Revenues (Expenditures Projected Balances Balance and and July 1, 2015 Transfers) Transfers) June 30, 2016 General Fund $11,013,794 $73,579,000 $69,281,296 $15,311,498 Special Revenue/Grant/Trust 26,289,944 22,396,588 25,765,517 22,921,015 Enterprise (Parking) 2,034,396 4,935,500 4,678,710 2,291,186 Internal Service / Capital Replacement 10,946,386 12,764,798 16,010,119 7,701,065 Debt Service 165,615 200 0 165,815 Misc Capital Project Funds 1,535,603 1,001,900 3,900 2,533,603 Adj for ISF Charges/Transfers 0 (15,342,534) (15,342,534) 0 City-wide Totals $51,985,738 599,335,452 $100,397,008 $50,924,182 STAFFING The City's current level of regular staffing, 386 FTE (full time equivalent), is 13 percent below the peak of 445 FTE that was supported in fiscal year 2007-2008. The erosion of staffing levels has significantly reduced the City's organizational capacity, and leaves few resources available to proactively manage emerging issues, or to ensure smooth and consistent continuity of services. The management team has considered the impact of the severe restructuring on the City's ability to effectively and sustainably deliver services upon which the residents depend. SAN RAFAEL CITY COUNCIL AGENDA REPORT / Page: 7 To address the most severe capacity deficiencies while tempering increases to annual operating costs, the City Manager has proposed allocating a net $69 thousand for modifications to staffing to address the following needs. Additional detail and recommendation rationale is provided below the following summary table: Department Personnel Action General Fund Funding Source Net Add'l Costs Community Eliminate 1.0 FTE Deputy Bldg Official Development Eliminate 1.0 FTE Associate Planner none Increase in -------------------------------------------- Building Fees Add 1 Planning Technician (separate action Add I Sr Building Inspector / on May 18, 2015) Plans Examiner Add I Permit Services Supervisor Add 1 Assistant Planner Finance — Business Convert 0.72 fixed -term to 0.72 negligible Business Tax Tax & Cashiering regular position. Police — HOME Convert 1.0 fixed -term Mental Health none $40K from Outreach to 1.0 regular position. Homeless Initiative allocation Management Reclassify Management Analyst $21,000 General Fund Services — (no impact on headcount) Communications Human Resources Add 0.5 FTE Human Resources $48,000 General Fund - Benefits Representative Total $69,000 The proposed actions add a net 4.22 regular FTEs, for a total of 390.15. Fixed -term positions are reduced under this plan by 1.72, from 7.98 to 6.26. Community Development. This department's proposed reorganization eliminates two recently vacated positions and adds four positions as presented in the table above. These changes are part of the Community Development Department Customer Service Strategic Plan to shift resources to provide more personnel to assist with counter service to the general public. Funding for these positions would be offset by the replacement of higher level positions with lower level positions, and a proposed increase in building permit fees (scheduled for City Council hearing on May 18), resulting in no net additional cost. These proposed actions would result in a net increase of 2.0 FTE in the Community Development Department. Finance (Business Tax, Customer Service & Cashiering). It is recommended that the current 0.72 fixed -term position be converted to a 0.72 permanent, regular position, to ensure continued capacity to expedite business license processing and adequately cover customer service and cashiering requirements for business tax and community development transactions. Police (HOME). As part of the City's Homeless Action Plan, the City created a Police Department unit called the Homeless Outreach and Mental Health Education Team or "HOME". Originally proposed as a three-year pilot or test, this effort (in its second year) has been proven quickly to be a SAN RAFAEL CITY COUNCIL AGENDA REPORT / Page: 8 very successfid program resulting in transitioning those in need to health resources, permanent housing and self-sufficiency. A unique non -sworn Police position, the Mental Health Outreach position is key to the success of HOME, linking clients to mental health services. It is recommended that the position be converted from fixed -term to a permanent, regular position. Management Services. The City Council recently adopted a Community Engagement Action Plan, which identified measures to be taken to improve communication and increase citizen engagement. To begin to move forward on this Plan, it is recommended that a new Senior Management Analyst position be created, as a reclassification of a current Management Analyst position in the City Manager's office. This new mid -management position would dedicate approximately 30% of staff time to efforts in the Plan, and the remaining time would continue to work on policy issues, research, new ordinances and/or regulations. This proposed change would have no impact on headcount. Human Resources. Some of the City's reductions during the Great Recession have proven unsustainable, especially as it relates to benefits administration and processing. In order to improve internal benefits and payroll processes, it is recommended that a 0.5 FTE Human Resources Representative be created to provide improved employee benefits administration. Staff is preparing to return to Council at the meeting of May 18, 2015 with the following items: 1. Fiscal Year 2014-2015 Final Budget Adjustments 2. Fiscal Year 2015-2016 City-wide Budget Adoption 3. GANN Appropriations Limit FISCAL IMPACT: The preliminary fiscal year 2015-2016 budgets have been prepared for all funds. Funding sources are sufficient to support the preliminary spending plans presented. The preliminary General Fund budget does not use borrowed monies or reserves as resources with which to fund current period operational expenditures. RECOMMEDED ACTION: Direct staff to return on May 18, 2015 with a final, City-wide budget, incorporating modifications or changes discussed at this City Council meeting. ATTACHMENT General Fund Preliminary Budget FY 2015-2016 GENERALFUND PRELIMINARY BUDGET FY 2015-2016 REVENUES & OTHER OPERATIONAL SOURCES Taxes Property Tax and related $ 16,658,000 Sales Tax / Triple Flip 22,343,000 Sales Tax -Measure E 11,544,000 Franchise Tax 3,481,000 Business Tax 2,803,000 Transient Occupancy Tax 2,493,000 Other Agencies CSA#19 Fire Service 1,696,000 VLF Backfill 4,844,000 Other Agencies (Prop 172, Owner Prop Tax, State Mandate, Other agencies) 994,000 Other Revenues Permits & Licenses (building, electrical, encroachment, use, alarm) 2,145,000 Fine & Forfeitures (traffic, vehicle, etc.) 473,000 Interest & Rents (investment earnings, rents, etc.) 277,000 Charges for Services (includes dev't fees and plan review) 2,062,000 Other Revenue (damage reimbursements, misc income) 457,000 ---------------------------------------------------------------------------------------------------------------------------- Sub -total: Revenues $ 72,270,000 ---------------------------------------------------------------------------------------------------------------------------- TRANSFERSIN from Gas Tax 400,000 from SRSD Sewer Maint Fund - Admin. cost 259,000 from Parking Services Fund - Admin. cost 374,000 from Employee Retirement Fund - POB debt payment 276,520 ---------------------------------------------------------------------------------------------------------------------------- Sub -total: Transfers In $ 1,309,520 ---------------------------------------------------------------------------------------------------------------------------- EXPENDITURES AND OTHER OPERATIONAL USES Expenditures by Department Finance 2,507,367 Non -Departmental 2,854,769 City Manager/City Council 2,097,803 City Clerk 487,671 Mgt Serv: Adm,IT,HR,Pkg.Emg 1,813,795 City Attorney 856,300 Community Development 3,562,058 Police 21,679,053 Fire 16,956,976 Public Works 10,960,429 Library ---------------------------------------------------------------------------------------------------------------------------- 2,945,075 Sub -total: Expenditures ---------------------------------------------------------------------------------------------------------------------------- $ 66,721,296 TRANSFERS OUT to Childcare Fund - Operating support 100,000 to Recreation Fund - Operating support 1,300,000 to Special Revenue Fund - Massage enforcement 100,000 to Special Revenue Fund - Homeless Initiative Project 60,000 to Capital Project Fund -Capital Improvement Projects - ----------------------------- - - --- 1,000,000 Sub-total: Transfers Out ---------------------------------------------------------------------------------------------------------------------------- $ 2,560,000 ---------------------------------------------------------------------------------------------------------------------------- TOTAL-OPERATIONAL?USES $ 69,281,296:: ------NET ---OPERATIONAL------------------RESULTS------------------------------------------------------------------------------------ ' $ 4__,_2_9_8,___2_2_4___ EXHIBIT 1