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HomeMy WebLinkAboutFin Budget Review FY2010-11a,rroF� Agenda Item No: 20 Meeting Date: June 7, 2010 SAN RAFAEL CITY COUNCIL AGENDA REPORT Department: FINANCE DEPARTMENT , Prepared by: Cindy Mosser, Finance Director City Manager Approvals 1 SUBJECT: Review of City of San Rafael Budget for Fiscal Year 2010-2011 BACKGROUND: The City must adopt a balanced budget for all funds for this coming fiscal year. This report will provide the City Council and community with an update on our budget picture for fiscal year 2009-2010 and steps in progress for fiscal year 2010-2011. Unfortunately, the City is not immune to the economic trends seen across the nation and world. The City Council has reviewed fiscal year 2009-2010 budget information on several occasions. Since November 2009, the City has held study sessions, budget workshops, public outreach meetings, and budget meetings outlining service reductions, cost saving, and staffing losses. The budget balancing decisions from January 4, 2010 and January 26, 2010 have been implemented in the City's 2009-2010 budget. These actions taken also provided balancing direction and have been built into fiscal year 2010-2011. Most recently, at the June 2, 2010 meeting, each Department provided an update of their goals and objectives for fiscal year 2009-2011. These objectives have been aligned with current staffing levels and resources. In the current economic environment, as government agencies at all levels (mainly the State) grapple with structural deficits and prepare their upcoming budgets for next fiscal year, some of their actions could have major impacts to cities. For example, the Courts upheld the State's action on shifting Redevelopment Funds for fiscal year 2009-2010 and fiscal year 2010-2011. For the State's cash flow purposes, our Highway Users Tax payments will be deferred until May 2011. Mandates have been suspended in the current fiscal year and will continue to be suspended in the next fiscal year. Below is the analysis of the proposed 2010-2011 budget and an update to fiscal 2009-2010 budget. File No.: g — s FOR CITY CLERK ONLY Council Meeting: */;.D/ey Disposition: APA,eOU.ED STi4FF / &OHN&11171." . SAN RAFAEL CITY COUNCIL AGENDA REPORT / Page: 2 ANALYSIS: City's Financial Condition At the mid -year budget review including the budget balancing actions taken in January 2010, the General Fund for fiscal year 2009-2010 estimated a deficit of approximately $770,000. City finances at the end of May appear to be tracking as predicted. The City Manager and Finance Staff reviewed departmental revenues and expenditures through May 2010. All departments' actual expenditures were at or below their May expenditure budget target. Revenue Trends: The major sources of funds required to pay for all of the services provided to the community continue to be taxes. Major tax trends for the upcoming year are highlighted as follows: Sales Tax: Sales tax trends are appearing slightly better than 2009. With the assistance of HdL Consultants, we are estimating a slight increase to $14.6 million. As a reminder, the State had overpaid $730,000 if the year ended June 30, 2009. This payment was refunded back to Sacramento in this year's budget, and is not needed for next year. As the years have gone by, sales tax, our largest tax revenue generator, became an increasing and necessary source of revenue for San Rafael. Property Tax: The City's second largest tax generator is property tax. While we are not experiencing the depth of property value declines as other areas of the state, we are not anticipating any major increases either. Accordingly, we are keeping property taxes relatively flat. We estimate $13.5 million in property tax revenues for fiscal year 2010-2011. Transaction & Use Tax (Also known as Measure S): The voter -approved transaction and use tax took effect in April of 2006. This tax is used to maintain essential City services. Another tough budget season would be even worse without Measure S revenues. We are estimating the transaction and use tax to be approximately $5.8 million for fiscal year 2010-2011. Another reminder, this figure is far below the peak of over $7 million collected as recently as fiscal year 2007-2008. As part of the oversight for this tax measure, the Measure S Committee will meet on June 8, 2010. The Committee will issue their report on July 6, 2010 as part of the City's budget adoption. Other notable revenues changes are presented below: Paramedic Tax: In November of 2006, the citizens of San Rafael, CSA #13, CSA #19, and Marinwood passed Measure P, which raised the tax rate cap to $85 per residential living units and $0.11 per non-residential building square footage. To cover the proposed costs of Emergency Medical Services for fiscal year 2010-11, we are proposing to raise the SAN RAFAEL CITY COUNCIL AGENDA REPORT / Paee: 3 rates to the cap of $85 per residential living unit and to $.11 per square foot for non- residential buildings. We will bring to this action to the Council in the July 6, 2010 meeting. This action results in a $4 per year increase per household in the areas served by our Paramedics. Property Transfer Tax — Although this tax revenue is no where near the amount from several years ago, we do expect approximately a 5% increase to $826,000 in fiscal year 2010- 2011. Expenditure Assumptions: Currently, the City has estimated total appropriations in excess of $79.2 million for fiscal year 2010-2011. Several key elements have been included in building the "expense" side of the budget. The following items are incorporated into the proposed appropriations for fiscal year 2010-2011: ➢ The Fire Association and Fire Chief Officers Units are under contract until June 30, 2011. Their specific compensation package increases have been calculated into the salary and fringe benefit totals of the Fire department's budget. The Fire Association has delayed their increase by six months. All of the non -safety bargaining units and management contracts lapse on June 30, 2010 and are being presented to you today. No salary increases are included for these bargaining units. All non -safety personnel have agreed to no salary increase for fiscal year 2010-2011 and have agreed, once again, to a five percent reduction (furlough) in fiscal year 2010-2011. ➢ No percentage increases for cost of living adjustments is included in the operating expenses. The operating expenditures, for the most part, are held at the fiscal year 2007- 2008 levels. The only increases to operating expenditure are for known contract costs like animal control with the Humane Society, Marinet costs for the Library, single audit program charges due to grant compliance requirements, or other costs beyond our control like fuel. ➢ Vehicle replacement — The Fleet Committee meets periodically to review the fleet inventory and the policies used to maintain the City's fleet inventory. We have incorporated the $304,000 estimated cost in the Equipment Replacement Fund. As a cost saving measure, all non -safety vehicles purchases are deferred for one more year. Public Works is spearheaded a full review of our fleet. We expect to sell off several vehicles this summer and reduce our maintenance expenses as we head into next year. ➢ For a second year, City facilities will be closed for 13 days to implement a furlough. Effective July 2010 -June 2011, facility closures will be on the 2nd Monday of each month, plus one other day in December. Police, Fire, Childcare and Parking Services will remain in operation on these days. Examples of services not available on furlough days include • Planning • Building and Fire Plans & Inspection • Business License • Code Enforcement 0 Streets Maintenance SAN RAFAEL CITY COUNCIL AGENDA REPORT / Paee: 4 • Parks Maintenance • Engineering • Economic Development • Finance, Legal, Human Resources, and all other administrative functions General Fund: Finance staff is currently working countless hours with all the Departments and will obtain guidance from the City Council for service priorities to complete their number crunching. As of June 4, 2010, the City's General Fund, which accounts for most of the major services to our residents and businesses (such as police, fire suppression and prevention, planning, building, library, parks, streets, engineering, traffic enforcement and management, cultural programs) is projected to be approximately $52 million for fiscal year 2010-2011. Approximately seventy- eight percent, or $40.2 million of the appropriation, are for personnel costs. Finance staff will be working diligently to finalize these numbers within the next week and a half. The General Fund reserve is estimated to remain low at the end of fiscal year 2010-2011. We are estimating the reserves remain at $1.7 million to $2.0 million for fiscal year 2010-2011, which remains approximately 3 percent of expenditures. This amount is still well below the 10 percent goal in our approved financial policies. Operating Budget Items still tinder review: Several internal service funds are still under review. This review includes risk management funds like Workers Compensation Fund for the claims expense and required reserve, Employee Benefit Fund for the unemployment expenses (linked to Federal changes in law), and the Dental Fund for claims expense. Staff has mostly completed, with Departmental input, a final review of fees and charges for planning, building, recreation and other user based services. Other Impacts to Current Fiscal Year 2010-2011 Proiections: (items not accounted for in current budzet estimates) As happens in every budget preparation cycle, events have either occurred, or are expected to happen, which can impact the projections of our revenues and expenditures. Heading into the new fiscal year, this cycle of change continues. Our last comprehensive review in January resulted in substantial staffing and service level reductions. A full analysis over the last few months has provided further fiscal clarity to our fiscal year 2010-11. Routine adjustments have been noted elsewhere in this report. The projected budget figures presented have been modified, altered or validated through a customary thorough review of all funds. Budget meetings of Department management with the City Manager over the past two weeks have created several issues which will require tough and necessary budgetary decisions. These include: SAN RAFAEL CITY COUNCIL AGENDA REPORT / Paee: 5 ■ Unexpected injuries, and potential retirements of long term employees, necessitate additional one time public safety costs. In order to maintain basic staffing, and properly recruit replacement officers and firefighters, we will need to appropriate funds for Police and Fire staffing, to be spread across temporary help staffing while permanent position recruitments, including necessary training and orientation are completed. This effort will result in temporary `overhires' during the time transition. ■ As noted in a separate staff report on the City Council agenda, the Library operations review, and related recommendations, sets a course for adding several hundred thousands new dollars solely directed to Library operational and capital desires. The outcome of the June 8`h election determines whether this new fund is established, or if we must reduce the Library budget by $241,000 heading into next year. ■ A Working Group of elected officials and staff from Marinwood Community Services District and the City have been meeting for a few months to determine how to structure a modern, long term fire protection services agreement for both agencies. This work is interwoven with two parallel events. The first is the current District/City agreement lapses. The completion of the Matrix study in April, and the discussions needed study alternatives and a new solution, can not be completed by June 30`h. A `bridge' agreement is being developed to extend the current contract for one year, at a possible cost of $300,000. This extension contract is planned to be before the District Board this month. It should come before the City Council at your June 21 sc meeting. The second related component of the new District City contract is the impact on staffing, paramedic tax levels, and service provision enhancements. Given that the paramedic tax must be renewed and adjusted in November, important preliminary decisions concerning a newly restructured City and District contract must be completed by the end of July. ■ As stated at the June 2nd special budget meeting, we remain woefully underfunded on infrastructure repairs, renovations and replacements. This past year, you approved a two year Capital Improvement Program (CIP). Under the capable leadership of the Public Works staff, many of the streets, ADA, safe routes to schools and other projects are either completed, or under way. Public Works has been developing a five year CIP plan, which we hope to have ready for a study session within the next month. You will be given a preview of what we can do with internal and external resources. More importantly, the staff plan to highlight a number of unmet CIP needs, some of which are going to require attention in the near future At of this writing, specific CIP numbers have nor been finalized for our fiscal year 2010-11 budget. We expect to refine projects, costs and needed revenues to address our park, street, storm drain, public buildings and many other important investments into our City assets. ■ Just this week, the City was working with our consultants on the pricing of the normal cost pension obligation bonds. The final pricing should be known next week, and can assist staff in firming up the cost of debt, net proceeds, and determining how much will remain of the Retirement System reserve to be held for future retirement costs for fiscal years 2011-12 and beyond. We will be able to sharpen the budget figures once our rating is received and ultimate figures are calculated. SAN RAFAEL CITY COUNCIL AGENDA REPORT / Page: 6 FISCAL IMPACT: Staff plans to return to the City Council on June 21 st with final recommendations on outstanding cost challenges, on any final operational review items, and specific budget directives on the major cost and service challenges listed above. Given the number of outstanding issues, staff will be shifting final City budget adoption to the July 6th meeting in order to fully wind up this important financial planning effort. ACTION REQUIRED: Staff recommends Council direct staff to bring the 2010-2011 City budget back for review of the recommendations on June 21, 2010 with final adoption on July 6, 2010. Should the City Council wish to have specific information on budget projections, we would seek you direction at this meeting in order to properly prepare our responses. WAManagement Services- WorkFile\Finance- WorkFile'•Council Material\StaffReports\2010\City\10-11 city budget preview.doc