The URL can be used to link to this page

Home My WebLink AboutCM FY2009-10 General Fund DeficitsCITY OF�. LOSAgenda Item No: 7 f+ Meeting Date: December 21, 2009 SAN RAFAEL CITY COUNCIL AGENDA REPORT Department: CITY MANAGER Prepared by: Ken City Manager Approval: SUBJECT: Report on Timeline, Public Outreach and Decision Making Regarding General Fund Budget Deficits for Fiscal Years 2009-10 and 2010-11; Plus Initial Follow-up Regarding Proposed Service Losses RECOMMENDATION: Accept report and approve timeline for budget balancing decisions BACKGROUND: The current severe recession continues to have an extreme negative impact on the City of San Rafael's budget. In the past two years, the City Council has taken actions to reduce the General Fund budget by over $5 million and has reduced staffing levels by over 30 positions. On March 16, 2009, the Council approved the Recession Action Plan and the Economic Vitality Plan and directed staff to implement an employee work furlough program for 2009-2010. In April and May 2009, staff presented to the Council an overview of services and a variety of service reduction options. Through this historic financial recession and economic collapse of the past two years, key City actions and recent events have taken place over the past four months: X The Recession Action Plan estimated the steep economic decline to continue for at least 30 months. Now, approximately halfway through this period, we continue to see plummeting revenues beyond our most conservative projections due to the economy and the State's impact on our City budget. 1c On June 1, 2009, staff presented a comprehensive summary of the City's budget and the Council approved staffing reductions through the elimination of vacant positions, layoffs, and early retirements. On July 6, 2009, the Council approved a budget for 2009-2010 that relied on these staffing reductions and corresponding reductions in service, anticipated savings through programs such as mandatory and voluntary work reductions, no compensation increases for employees, deferrals of fleet replacement and other key purchases, use of special funds to the extent possible, suspension of key recruitments, use of City reserves, fee increases, and projections for future revenues that assumed no growth (e.g. Property Tax) or significant decreases (e.g. Sales Tax and Transaction and Use Tax). FOR CITY CLERK ONLY File No.: Council Meeting: Disposition: SAN RAFAEL CITY COUNCIL AGENDA REPORT / Page: 2 X Even given over $5 million in reductions over the past two years, the final audit results for Fiscal Year 2008-2009 and updated 2009-2010 projections produce a continued General Fund budget deficit. Our City auditors have recently completed their on-site work and the closing of Fiscal Year 2008-2009 required a heavier reliance on General Fund reserves than was projected. Going in to Fiscal Year 2009-2010, our General Fund reserves currently stand at approximately $1.7 million, or about 3% of the budget. This amount is well below the 10 percent goal in our approved financial policies. X Staff began the process of sharing budget challenges last month with our bargaining units and employees. On November 10th, staff met with representatives from SEIU, Local 1, the Western Council of Engineers, and management to review the current status of the budget and seek employee ideas and feedback for cost saving or revenue production measures. An all -bargaining unit meeting was also conducted November 17th for the same purpose. We also held an all -employee meeting on November 18th to provide as much transparency as possible on this topic, share ideas, and solicit employee input. ANALYSIS: At a study session of November 16th, staff summarized our current General Fund situation. Our deficit is projected at $3.2 million now, and is forecast to be $3.5 million heading into 2010- 2011. Next year's deficit assumes little or no tax increases, expected pension cost growth due to a historic June 30, 2009 investment loss in MCERA, and the existing lower levels of development activity remaining flat. A workshop was held on Tuesday, December 15th. The City Council received a packet of information, delineating both our current problem and well as a historical perspective on actions taken over the past few years to deal with budget deficits. When we arrived at the current status segment of the agenda and desire to 'close the gap' I recommended asking for an additional $500,000 beyond these figures so we can begin to rebuild our reserves, and provide additional buffers to negate any further erosion in these deficits. This translates to finding $3.7 million of solutions now, and $4 million for next year. As a reminder, to the extent the savings do not occur over the balance of this year, the problem roles into next year. The bulk of the time at this workshop focused on service reduction and cost saving options. Each of the operating departments (Fire, Police, Library, Community Services, Public Works and Community Development), along with Administration, proposed a variety of expense savings and other means of closing the gap for this year and next. As stated last week, the significance of on-going budget deficits requires immediate steps, rooted in adequate information, sensitivity to employees at risk, and community outreach. At the conclusion of the meeting, direction was provided by the City Council. Next steps included: X Returning with follow up information and answers to a variety of questions raised as each Department provided service reduction options. Staff took notes on the range of needed information, and is in the process of preparing the needed data, responses, etc. X Develop at timeline to work through this process of budget balancing over the next few weeks. Included in this scope should be additional meetings, and an intentional reaching out to inform and involve the public, prior to formal decision making by the City Council. SAN RAFAEL CITY COUNCIL AGENDA REPORT / Page: 3 X Work with management and City bargaining groups to determine to what extent employee compensation concessions over the next 18 months could minimize layoffs and service reductions. In order to keep our employees informed, I held separate meetings with union representatives, and the employee workforce, on Thursday, December 17th. They were provided a summary of our process, and access to the same information presented at the workshop. I recapped for all in attendance the outcomes of the Tuesday meeting, direction from the Council and next steps. I committed to more employee meetings in January (and beyond) to keep the lines of communication and factual information flowing. Attachment "A" is an outline regarding the next steps for our budget decision making process. believe this reflects the key directions provided by the City Council at the conclusion of our workshop. You may wish to consider making alterations to this timeline. Staff is recommending an acceptance of this staff report, which includes ratifying the timeline, outreach and decision making process noted in the attachment. FISCAL IMPACT: No fiscal impact occurs with the acceptance of this report. Any formal actions concerning budget amendments will occur via separate staff reports and resolutions at future City Council meetings. ACTION REQUIRED: Adopt Report. OPTIONS: 1. Amend Timeline and Process elements, and take action to accept report 2. Do not accept report; direct staff to modify timelines and processes, and return for formal action at a later date. ATTACHMENTS WACity Managers- WorkFile\Council Material\Staff Reports\09\mid year budget timeline.doc Schedule of Next Steps on Budget Timeline, Outreach and Process As of December 21, 2009 Attachment A 1. December 16th through January. Staff developing responses to questions raised from Budget Study Session 2. Dec 21St - Present Timeline; get City Council acceptance of process, dates, outreach, etc. 3. Jan 0' — a. Initial progress report on meetings with Bargaining Units and Management concerning compensation reductions b. City Council to approve "Initial Actions" to close deficits — identify remaining gap, provide staff report and formal resolution 4. Week of Jan 4th (date tbd) — Afternoon session (2-3 hours) with City Council and public to respond to questions from December 15th 5. Week of Jan 11th (date tbd) — a. Public outreach meeting on budget options, possible service losses, to solicit community input. City staff to develop `invitation' to meeting, explaining situation, and extending invite to residents and business via different media outlets. b. Offer a "pre meeting primer" on public finance and background information on actions taken to date (details to be determined) 6. Jan 19`' a. Updated progress report on meetings with Bargaining Units and Management concerning compensation reductions; determination of savings to close remaining deficits b. City Council to consider "Remaining Actions" to close deficits — identify remaining gap, provide staff report and formal resolution. 7. Late January: Possible Council retreat on policy matters and other issues a. Include progress report on two year objectives and work accomplished to date 8. February — June 2010: Additional public input on city service reductions and priorities and the FY 10/11 budget. Longer term service and policy issues continue to be developed, deliberated and decided prior to formal action in June on FY 2010-2011 budget. WACity Managers- WorkFile\Meetings\Council Retreats\12-15-09\fy 09-10 midyear budget timeline and process.doc