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HomeMy WebLinkAbout8.2 Budget Study SessionCITY CLERK Foie # D35la-26 AGENDA STATEMENT CITY COUNCIL MEETING DATE: April 19, 2004 SUBJECT: 2004-2005 Budget Study Session Report Prepared by: Richard C. Ambrose, City Manager ATTACHMENTS 1. Analysis of Anticipated 2004-2005 Impacts on the City's General Fund 2. Background Financial Information 2A-2E 3. Summary of 2004-2009 Capital Improvement Program by Program Area 4. Resolution No. 80-93 (Policy for Management & Use of General Fund Assets) 5. Budget Issues Worksheet RECOMMENDATION: 1. Receive Staff Report. 2. Review Budget Issues Worksheet and provide Staff with direction on each of the issues identified in the Worksheet. 3. Establish Budget Hearing Date to consider 2004-2005 Annual Budget and Five Year Capital Improvement Program FINANCIAL STATEMENT: See attached. DESCRIPTION: The City's Annual Budget Study Session provides the City Council with an opportunity to identify those programs, services, and projects the Council would like Staff to analyze as part of the development of the City's Annual Operating Budget and the Five Year Capital Improvement Program for the upcoming year. The Budget Study Session also serves as a means of providing the Council with early information regarding those items that may have a significant impact (positive or negative) on the City's expenditures and revenues in Fiscal Year 2004-2005. The Study Session is also designed to minimize last minute budget issues for which there would be insufficient time to evaluate. The Study Session will be most productive if individual Councilmembers review the Fiscal Year 2003-2004 Budget and 2002-2007 Capital Improvement Program documents prior to completing the Budget Issues Worksheet and bring the completed Budget Issues Worksheet to the Council meeting for purposes of discussion. COPIES TO: H:\Budget\Goals & Objectives\AGENDA ST-!'budget study session4-19-04.doc ITEM NO. • ANALYSIS OF ANTICIPATED FUTURE IMPACTS ON THE FISCAL YEAR 2004-2005 BUDGET Staff has identified a number of items that could potentially impact the City's Budget for Fiscal Year 2004- 2005. The information presented below is preliminary and is based upon the data available at this time. REVENUE Staff anticipates there could be the following positive and negative impacts on the City's revenue for the upcoming Fiscal Year: 1. Effects of the Economy - Continued economic uncertainty has resulted in a downturn for the City in sever, al revenue areas, including interest income and transient occupancy tax during Fiscal Year 2003-2004. Several other major revenue sources will be discussed in more detail below. Building Permit revenue has increased. The City has exceeded building valuation estimates for the current year. There is also an expectation that the City's transient occupancy tax revenue will experience some growth in the next fiscal year, as the City hotels recently report a gradual upturn in business. 2. Property Tax - At this time, Staff anticipates modest growth in the City's property tax as a result of projects that are already in process and will result in additional assessed valuation for the upcoming Fiscal Year. The City is still faced with a potential additional shift in the amotmt of the Educational Revenue Augmentation Fund (ERAF). The Governor's initial proposal would result in a potential City loSs of $275,000 to $300,000 - Dublin's estimated "share" of the total $1.3 billion dollar proposed shift. If this legislation is passed in its current form, it is estimated that this could create a PERMANENT additional reduction to the City's property taxes on an annual basis beginning in Fiscal Year 2004-2005. In addition, property taxes will be impacted by the "Triple Flip" discussed below. 3. Sales Tax -Auto sales have continued to provide the City with a strong sales tax income for Fiscal Year 2003-2004; total sales tax collections through March 2004 are approximately 4.5% ahead of last year. Staff anticipates that auto sales will remain solid, since it is expected that the rebates and low or no interest rates on auto sales will continue to be part of this industry landscape for at least a part of Fiscal Year 2004-2005. The City also now has some of the preliminary information on holiday sales, which show that the City experienced a strong holiday season, with sales up about 6.4% in the major business groups over the same quarter for the previous year. With these cun'ent trends, it is therefore anticipated the City may realize a slight increase in sales tax for Fiscal Year 2004-2005. In additiOn, sales taxes will be impacted by the "Triple Flip" discussed below. 4. Triple-Flip - The triple flip does not officially take place until July 1st of Fiscal Year 2004-2005. The triple flip would "swap" 25% (or 1/4 cent) of local sales tax revenues for an equal amotmt of property tax revenues. The 1/4 cent sales tax lost at the local level is then reenacted at the State level. The State would dedicate the "fliPped" proceeds to repay the deficit reduction bonds. This is a complicated accounting, repOrting and disbursement procedure. Even if the implementation is relatively smooth and the City is reimbursed for direct losses, the City will receive the backfill less often than its normal sales revenues. Thus, the City also anticipates a reduction in interest revenue due to the fact that property tax revenues are received on a much less .frequent basis than the monthly sales tax revenues. 5. Impact of the Projected State Budget Deficit - The State not only has a multi-billion dollar deficit for the current year, but is facing a deficit for Fiscal Year 2004-2005. The largest potential impact to the City cOntinues to be the Vehicle License Fee (VLF). The amount o£VLF received in the current Fiscal Year has declined from the prior Fiscal Year due to lower car sales statewide and due to the State not paying the backfill portion of the VLF for the first three months of Fiscal Year 2003-2004. ~,\~ \o'-~ ATTACHMENT 1 Unless the State passes a budget that provides funding to reestablish the payment of the backfill portion of the fee, the City could lose approximately $1.5 million in VLF for Fiscal Year 2004-2005. The Governor is proposing to include backfill in the 2004-2005 Budget. 6. New Development - In Fiscal Year 2004-2005, the City expects to see construction on the following commercial projects: · Enea retail project at the comer of Village Parkway and Amador Valley Blvd · Tmmark Commercial · Dublin Buick expansion · Ulferts · San Ramon Village Shopping Center It should be noted that none of the above-mentioned projects will create a full year of sales taxes, but, these businesses are expected to be open during the upcoming fiscal year. Also, Staff expects that the IKEA project will obtain its building permits during Fiscal Year 2004-2005. No additional sales tax revenues will be generated by IKEA until the latter part of Fiscal Year 2005-2006. Staff does not expect to see a softening in the Single Family residential market during Fiscal Year 2004~ 2005. 7. Booking Fees - As of this date, it appears that the City will not receive the State reimbursement for booking fees; this will reduce City revenues by approximately $60,700. 8. SB 90 State Mandated Cost Reimbursements - Due to the current suspension of State Mandate Cost Reimbursements, these revenues will not be received in the current fiscal year. The adopted budget for Fiscal Year 2003-2004 does not assume revenue from this source. Since this revenue remains deferred, Staff will not include this revenue in the proposed budget for Fiscal Year 2004- 2005. EXPENDITURES Staff has identified a number of items that are anticipated to have a significant impact on the City's budget for Fiscal Year 2004-2005. This analysis does not include inflationary increases associated with materials, supplies, equipment or increased costs associated with salaries and benefits for City employees. 1. City personnel - City Departments have expressed a need for additional staff in order to keep pace with development. These proposals are being explored and, subject to Council approval, would increase Salary and Benefit costs next year. The recruitment of an additional Senior Planner has been authorized by the City Council in Fiscal Year 2003-2004 and will be included as a new full time position in Fiscal Year 2004-2005, provided funds are available. 2. Additional Police Costs - Staff anticipates for Fiscal Year 2004-2005 that there will be additional Police costs associated with salary and benefit increases for the Alameda County Sheriff's Department personnel. The City is also faced with significant increases proposed for Dispatch Services. It is expected that the Police Services Budget request, if funds are available, will be approximately $450,000 (or about 6%) above the approved budget amount for the current year, not including negotiated wage and benefit increases which are yet to be determined by the County for Fiscal Year 2004-2005. It is also projected that the estimated actual costs for Fiscal Year 2003-2004 could exceed the budget by $245,000, primarily due to increased benefit costs. 3. Fire Services - Fire Service costs 'are expected to increase in Fiscal Year 2004-2005 by approximately $905,000; these increases are due to increased salary and benefit costs for contract Fire Staff, including COLA's and a significant increase in the PERS retirement rate (fi:om 12.331% to 21.543%), which will become effective July 2004. 4. Maintenance - In Fiscal Year 2004-2005, it is anticipated that the City will experience additional park, civic center, street, sweeping, landscape, tree and signal maintenance costs associated with new infrastructure that in being completed in Fiscal Year 2003-2004. 5. Carryover Capital Projects from Fiscal Year 2003-2004 - As covered in the Fiscal Year 2003- 2004 Mid-Year Budget Update, it is expected that approximately $313,000 will be Carded over into Fiscal Year 2004-2005 for Capital Projects funded by the General Fund that were initiated but not completed in the current fiscal year. Additionally, the City's current 5-Year Capital Improvement Program identifies approximately $3.8 million in projects with fimding from the General Fund which are scheduled for Fiscal Year 2004-2005. If the negative impacts from the State budget/economy and/or other potential revenue shortfalls materialize, Staff projects that there may be insufficient revenues to finance all the Capital Projects scheduled for the upcoming fiscal year. H:~BudgetlGoals & Objectives~Future Impacts 04-05 version 2.doc I ATTACHMENT 2 fl suoql.q~ uI ~ ~ RESOLUTION NO. ~0 - 9.3 A RESOLUTION OF T~E CIT~ COUNCIL OF THE. CIT~ OF DUBLIN ' ESTABLISHING A POLICY FOR MANA~ANDUSE OF GENERAL FI~XD~S~S WHEREAS, the City COuncil of the City of Dublin recognizes the importance of General Fund Reserves; and W~R~AS, General Fund Reserves are an important asset of the City and it is prudent to have an established policy to guide 'their use; and W~%S, typically, General Fund monies are a discretionary funding source which can be' appropriated as enacted through the annual budget process; and -W~RREAS., interest earnings from City General Fund Reserves can provide an independent local revenue source; and wm~REAS, it is not possible to exactly predict, over time hoW economic conditions may impact either the interest earnings (income) or. the need to utilize reserves to provide the level of municipal services deemed adequate by City Council policy; and WHEREAS, prudent management would dictate that the City have a general policy for the management of its assets, including the anticipated purpose of General Fund Reserves. NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Dublin does hereby establish the attached Policy for the Management and Use of General Fund Reserves (Exhibit A), attached hereto and by reference, made a part hereof. BE IT FUR~ RESOLVED that City Staff are hereby authorized and directed to undertake all administrative steps necessary to implement said "Policy" and present periodic reports to the City Council. PASSED, APPROVED AND ADOPTED this 14th day of June, 1993. AYES: Councilmembers Burton, Houston, Howard, and Mayor Snyder NOES: None ABSENT: Councilmember Moffatt PSR/I ss a: Reso80. ah~e~a~l 2: EXHIBIT A CITY OF D~LII~ GENERAL ~D RESERVE POLIC]~ Pm~osE The purpose of this document is to formally outline the City Council policy of maintaining General Fund Reserves and designating 'the potential types of. uses for such reserves. General Fund Reserves shall not be considered as being readily available for appropriations towards operating expenses,.'except as .allowed for in this policy and thrOugh eXPlicit action by the city Council. AMOUNT OF RESERVES The amount of General Fund Reserves will fluctuate over time. The City Council recognizes that there are numerous events which could place a legitimate demand on the reserves. INTEREST ~RNINGS All interest earnings on the General Fund Reserves shall accrue to the City's General Fund Unreserved Fund Balance, for appropriation by the City Council in accordance with local and State laws, regulations and policies. ABILITY TO ACCOMMODATE CITY NRRnS The'City Council recognizes the importance of maintaining flexibility at this time as well as in the future. Proper maintenance of the City's General~ Fund Reserves will accommodate a response to economic conditions affecting earnings on said funds as well as unanticipated events which require an appropriation. POTENTIAL USE OF RESERVES Any appropriation of General Fund Reserves is subject to action by the City Council. The following events are the basis-for a policy to. protect and carefully plan for 'any expenditure from General Fund Reserves: · City Indebtedness: Reserves may be utilized to reduce or eliminate the need for current or future debt service payments. The limitation of debt service as an annual operating expense allows for available monies to be expended for other public purposes. This shall' be considered the highest priority for the use of General Fund Reserves. Economic Uncer~ainty~ A prudent reserve can be used' to finance municipal services in the event that economic conditions have deteriorated to the 'extent ~hat traditional revenue .sources can no longer support the services. · Response to RedUctions in Revenues: In recent Years, State Government has taken revenues which were previously.considered to be local revenues. Development of a locally controlled revenue source can be important. · Catastrophic Loss: The City currently participates in a pooled self--insured liability and property program. A catastrophic event may require additional appropriations in order to attain a full recovery. s' Preservation of ~unds as Revenue Generator: The preservation of General Fund Reserves provides revenue as-a result of investment income. T~is is an important discretionary, income source. · Economic Development Stimulus: A locally controlled- funding so,roe could, become one component of an investment plan, which would pr0vide, a positive return to the city and a public benefit. This listing, is not intended to be all inclusive; however, it' is' generally reflective of the types of considerations to be made when proposing, the use of such funds. Proposed uses which are inconsistent with this policy should demonstrate a public benefit and a finding that it is in the best interest of t~e City. REVISIONS Revisions to this policy shall be approved by the City Council in the form of a Resolution. I~;Lss a:F~Ex~.age~lZ BUDGET ISSUES WORKSHEET FISC 14-2005 1. OPERATING EXPENDITURE~ 1.A. The City CoUncil adopted a level of service for.eachBudget Activity (i.e., Police, Park Maintenance, Library, etc.) in Fiscal Year 2003-2004 (See 2003-2004 Preliminary Budget). For the purpose of developing the Fiscal Year 2004-2005 Operating Budget, should the service levels adopted in the 2003-2004 Budget be used as the starting point (i.e., base level of service)? YES or NO (Please circle.one) If you circle "NO, what .se~i~e_~.~.~_i..~.~t.i.o~..~r~.~w programs would you like to see added or dropped from the base level of service? ADDED SERVICES DROPPED SERVICES_ 1.B. To the. ext~nt ph~C_i~y Council's 2004-2005 Goals & Objectives require additional resources not i.n.c!ud.e~..~g~th~,,,~gE~g[~Edget, should the 2004-2005 Budget fund only High Priority Objectives? YES or NO (Please circle one) ATTACHMENT 5 1.C. community Group Funding Requests ' During Fiscal Year 2003-2004, the City funded a number of community groups which are identified below, along with the approved funding levels for Fiscal Year 2003~200~4 · Since several CommUnity Groups either reduced their requests for Fiscal Year 2004- ' 2005 'OR did no~"sfii~it a funding request, Staff has also included the Fiscal Year 20'04- 2005 information for ~0~}!'~s~°~n ~/) which community groUPs sho'ai i inc · of the Fiscal Year 2004-2005 Budget. .................................... 2003-2004 ~~ ~ Base Higher Funding ~ ~' _ ~ Level of Level Community Group Level* · Service of Service Drug Substance Xbus~' ~'b~TU~t.7~ ............................... ~i"'~ ~;~ Dry Grad Night $3,500 Red Ribbon Week ........................................... $2,500 Every 15 Minutes $4,000 Dublin Unified School~fs~tr:i~"'_"f f ff'i'i ............ '_[17_i~[~'~f~i $125;000 Bay Area Buy Recycled paPer c~i~'ai~ ................... $2,000 1 ~~1 Alameda County Green BusineS~'P~3'~ ................... $1,500 Child Care l.inks $15,000 Child Care Links (FY03?02~'3'~S-E~- ................. - $3,500 Emergency Serv~i'6~'-i(l~f A~ame a ountY ' $1,000 Dublin Fine Arts Found~t}S[~ ............... ~ $26,250 Pacific Chamber Symphony $10,000 Th-Valley Community T ~ie~;i'~-i~n- ..................... i'~'~-' $55,584 Dublin Partners In Education $10,000 Service Corp. of Retired g~i~i~-'~O'~T ...... $400 Tri-Valley Convention &"Vi~itbrs']3~iii ...... _i~"'~''.'I'''II}~ $62,231 ?' Tri-Valley Business C0ufi~]'f" $25,000 '~ Tri-Valley One-Stop Career Center . $10,000 Total Funding Requests" .._~.f~'_.~,' ....... ~i '~.__~'' ~". '-- $357,465 *This information is taken from the budget data for FY2003-04; as noted above, the FY2004:05 requested funding lewl-~ay differ from the FY2003-04 amounts presented. 2. CAPITAL IMPROV, EM~pROGR~_.M (CIP) 2.A. Attachment 3 (see attached) is a summary of the capital improvements adopted as part of the city's Five-Year CIP. Of those projects currently identified in the FiverYear CIP, are there any projects which you would like to see funded in Fiscal Year 2004-2005? [~f~so, please indicate below. -2- 2.B. Are there any new Capital Projects that are not in the current Five.¥~ar.,.C~..th~t. you would like to see incl~u~_irl.~,t,~e_ge_~_~i~y~e_~9~3~y~CIP~?~I~o, please indicate below. 2.C. In the 2003-2004 Budget (as adjusted), a total of $6,057,383 was allocated from~th~ General Fund for Capital Projects. If this funding is necessary for Operating Expenditures in 2004-2005, which of the following alternatives do you prefer for funding Capital Projects in 2004-2005? Please check preferred method. 1. Defer 2004-2005 Capital Projects to a later year. 2. Utilize unallocated ReserVes. 3. Utilize Debt Financing. 4. Other 3. CONTRACT SERVICES The following service contracts are sched, u!~d~.~tgb~_e.~Y~!~t~e~.at~nd~9~f~iscal Ye~..~ .. ~ _ ar .......................... 2003-2004. Are you interested in Staff evaluating any aspect of the service other than the cost of providing the service for Fiscal Year 2004-2005? If so, please indicate below. ......... If "Yes" CONTRACT Cost Only Identify (Yes/No) Other Issues A. Building & Safety 1) Linhart Petersen Powers & Ass$~ ............................ 2) 4 Leaf .............................................. B. Crossing Giia~a-S'~i~i~Xii~ ' C. Maintenance se~ces '(MCE} ......................... -3- 4. RESERVES The City's policy on use o£reserves (see Attachment 4, Resolution 80-93) establishes the appropriate use for these funds. ShoUld use of Reservesb¢ limited tg~Capital or other one-time expenditures? YES or NO (Please circle one) 5. BUDGET CALENDAR In order to ~figa~(~,~e~t~he bu~.~: dget calendar for preparation of the 2004-2005 Budget and Five- Year CIP update, it is necessary to establish a budget hearing date. In order to provide Staff with enough time to complete the bUdget, Staff would recommend that the Council identify a day during the week of June 28, 2004, as the Budget Hearing date. Please indicate preferred date below. H: lBudgetlGoals & Objectivesl~VORKSHEETbudget study sessionMASTER4-19-O4.doc -4-