HomeMy WebLinkAbout8.1 Budget & Financial Plan
STAFF REPORT CITY CLERK
File #330-20
CITY COUNCIL
DATE:March 29, 2016
TO:
Honorable Mayor and City Councilmembers
FROM:
Christopher L. Foss, City Manager
SUBJECT:
Preliminary FY 2016-17 and FY 2017-18 Budget and Financial Plan, 10-Year
General Fund Forecast Update, and Direction from City Council on Budget
Preparation
Prepared by Colleen Tribby, Administrative Services Director and Lisa Hisatomi,
Assistant Administrative Services Director
EXECUTIVE SUMMARY:
The purpose of the report is to provide the City Council with an overview of the preliminary two-
year General Fund budget as well as the Five-Year Capital Improvement Program proposals.
The City Council will also review the City’s 10-year Financial Forecast. Staff is seeking the City
Council’s direction in preparing the budget.
FINANCIAL IMPACT:
The financial impact will be determined following the direction provided by the City Council on
the preparation of the FY 2016-17 and FY 2017-18 Budget and Financial Plan. If there are any
additional initiatives that the City Council wishes to have considered, those will be included in
the budget proposal which will receive final consideration at the Budget Hearing currently
scheduled for May 17, 2016.
RECOMMENDATION:
Staff recommends that the City Council receive the report and provide Staff with direction in
preparing the final FY 2016-17 and FY 2017-18 Budget and Financial Plan.
DESCRIPTION:
As in prior years, this Staff Report will focus primarily on the General Fund and on the proposed
capital projects for the coming five years. No significant budgetary changes are proposed in
other funds, and all fund balances are stable. Impact Fees Funds, which fluctuate with
development activity, are used to fund capital projects which are listed in this report. Also
included is the updated 10-Year General Fund Forecast, which provides the context for the two-
year budget proposals.
Securing Dublin’s Future
At the Strategic Planning meeting of March 7, 2015, the City Council received a report on the
projected an operating deficit in the General Fund by FY
City’s 10-Year Forecast, which
2020-21.
In response, the City Council identified long-term fiscal sustainability as a City’s key
strategic initiative and directed Staff to ensure that fiscal sustainability becomes a major factor in
ITEM NO. 8.1
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future decisions, including the FY 2015-16 budget and beyond. Staff presented an initial list of
specific focus areas within this initiative, and began work on many of them during the current
fiscal year. Below is the list of action items discussed at that meeting, with the current status.
Item Status
November 2015: the City Council approved a
consulting services agreement for development
Develop a preventative maintenance plan
of cost of ownership analysis; the draft report is
being reviewed by Staff.
June 2015: a General Fund reserve was set
aside for the Shannon Center parking lot
resurfacing project; March 2016: the City Council
Reinvest in existing facilities/infrastructure approved the final project budget. Staff is also
looking at reinvesting in the Dublin Sports
Grounds, and at a future meeting will propose a
budget amendment for that purpose.
Evaluate cost recovery and pricing policy A comprehensive User Fee Study will be initiated
for services / maintenance in September 2016.
Develop performance measures / metrics
to understand the return on investment of Staff is currently evaluating two services that
all City services, and to use that data provide data measurement and reporting tools.
more effectively to inform policy decisions
March 2016: the City Council approved the
Plan for future expansion of public safety
creation of the Public Safety Complex project to
services
provide expansion space for Police Services.
June 2015: the Information Technology (IT) Fund
Reevaluate the use of Internal Service
was created and funded with $2 million for IT
Funds (ISF) and fund balance policies to
Master Plan initiatives; other ISF's were
adequately provide for City asset
eliminated and/or consolidated to better plan for
replacement
future use.
June 2015: the City Council approved a budget
with changes to the City's personnel system,
moving to the PERS minimum retiree health
Assess unfunded liabilities related to payment for employees hired after 1/1/16; the
retirement benefits budget also included an additional lump sum
payment against pension and retiree health; this
amount is increased in the FY 2016-17 and FY
2017-18 budget proposal.
In early 2014, Staff engaged a consultant to
assist with gathering and reporting on community
feedback related to City priorities; since fall, Staff
Discuss strategies for new or increased
has surveyed the community, and has been
revenue streams
engaged in discussions with various community
groups, as well as the City/School Liaison
Committee members, about this topic.
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Budget and Forecast Summary
The 10-Year General Fund Forecast serves as the foundation of the Preliminary FY 2016-17
and FY 2017-18 Budget and Financial Plan (Proposed Budget), in terms of guiding the City’s
use of resources now to prepare for the future. Staff has been particularly focused on monitoring
development revenues and expenditures, and preparing the City for how those will impact the
General Fund over time.
The Proposed Budget is balanced in both years, with a General Fund operating surplus of $7.0
million in the first year, and $5.9 million in the second year. Property Tax, Sales Tax, and
Development Revenue continue to be show growth in both years, but contract services costs,
for both public safety and maintenance, have increased significantly. The full impact of the
operation of the Emerald Glen Recreation and Aquatics Complex (EGRAC) is being shown in
the second year. City staff is also preparing for the impact of the preventative maintenance
study, which is currently underway.
The 10-Year Forecast still shows a General Fund deficit by FY 2020-21 ($0.9 million), with a
projected deficit of $7.4 million by FY 2024-25. It should be noted that, while conservative
assumptions have been used in the City’s major revenue categories, a recession scenario is not
included and could result in a further estimated hit of $4.8 million in one fiscal year (using the
same impacts as the recession of 2009), absent any corrective action.
The Proposed Budget and 10-Year Forecast is included as Attachment 1. The following is a
high-level summary of operating revenue assumptions and expenditure proposals in the
General Fund over the 10-year period.
Revenue Assumptions
Property Tax (46% of total budget)
The City has benefited from the continued rise in home prices in the Bay Area, as Dublin saw
double-digit median home price increases in each of the past three years. The increased home
values have also led to the City being able to recapture a majority of the Proposition 8 value that
lowered assessed values during the recession. Total Property Tax has increased an average of
11.8% per year since FY 2013-14.
Proposed Budget
Property tax revenue (including property tax sharing with the County) is projected to grow
$2.3 million (6.9%) in FY 2016-17 and $1.8 million (5.1%) in FY 2017-18.
CPI adjustment: 1.525% increase (out of a maximum of 2%) on all existing non-Prop 8
homes.
Transfer of ownerships: actual value increase is $451 million in FY 2016-17; 2.4% increase
applied to FY 2017-18.
Prop 8 recapture: growth based on projected growth in median sale price, for single
family residential homes.
New development: Includes activity in existing (vested) projects in the two-year budget
period.
10-Year Forecast
CPI adjustment: 1.5% through FY 2020-21; 1% annually thereafter.
Transfer of ownerships: growth based on historical averages, with no large land transfers
factored in.
Prop 8 recapture: minimal increase due to large Prop 8 recapture already occurring
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New development: Includes activity in existing (vested) projects in the 10-year period
Sales Tax (27% of total budget)
The City has benefitted from high performance of new businesses coming to Dublin, coupled
with the improving economy, leading to an average annual increase in sales tax of $1.55 million
(10.0%) over the past five years. While it is anticipated that new businesses will continue to
come to the City, some of the large-scale increases seen over the past five years are not
expected to continue as they were due to large commercial projects being brought on-line. The
high performance of new businesses has been partially offset with the continued decrease in
gas prices.
Proposed Budget
Sales Tax is projected to increase by approximately 5.7% in FY 2016-17, without
factoring in the on-time triple flip payment the City expects in FY 2015-16, and not taking
into account sales tax reimbursements. This is due primarily to higher than anticipated
sales in new businesses. Growth in FY 2017-18 is projected at 3.7%.
After factoring in sales tax reimbursement arrangements, actual revenue is projected to
grow $1.1 million (5.6%) in FY 2016-17 and $445,000 (2.2%) in FY 2017-18.
Approximately 30% of Sales Tax revenues come from one Business Group (Auto &
Transportation).
Online retail sales continue to outpace brick and mortar stores; the City does receive
Sales Tax Revenue for goods ordered by Dublin residents.
10-Year Forecast
Growth factor: 2.5% in FY 2018-19; 2.0% annually thereafter.
All sharing agreements have been factored in with the last agreement projected to finish
in FY 2022-23.
Development Revenues (11% of total budget)
Development revenues include revenues from permits (primarily building permits), and from
planning and engineering services provided by the City that are ultimately covered by developer
deposit accounts. The updated projections include anticipated activity in existing projects and do
not presume any new development during the 10-year period. Accelerated activity in the current
year will carry forward into the Proposed Budget, resulting in an increase in revenue in for two
years, with decreases occurring in FY 2018-19 and beyond.
As the City Council is aware, development projects progress through various stages, and the
receipt of revenues and corresponding service (i.e., City cost) do not happen simultaneously.
Plan check costs are typically incurred approximately 12 months after revenue has been
received, meaning that as development decreases, the associated decrease in costs will lag. In
anticipation of this, the City has maintained a reserve in the amount of $2.7 million to cover
costs during that lag.
Two-Year Budget
Development revenues are projected to decrease $197,000 (2.2%) in FY 2016-17 from
the FY 2015-16 Amended Budget (the Amended Budget includes a $1.9 million increase
in projected development revenues approved by the City Council at the mid-year review
on March 1, 2016).
FY 2017-18 revenues are projected to decrease $874,000 (10.1%) year over year.
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10-Year Forecast
The overall long-term trend shows double-digit percent declines starting in FY 2018-19
through FY 2022-23, flattening out as build-out approaches.
FY 2016-17 development revenues are projected to be 11.3% of total revenue ($8.7
million)
In FY 2024–25 revenues are projected to be 3.1% of total revenue ($2.6 million)
Charges for Services (6% of total budget)
Charges for service include revenue primarily from Parks and Community Services programs.
Recreation program revenues are projected to increase significantly due to the inclusion of
EGRAC revenue for a partial year in FY 2016-17, and a full year in FY 2017-18, though the
associated expenditures more than offset these funds.
Two-Year Budget
Emerald Glen Recreation and Aquatics Center (EGRAC) revenues have been
incorporated into the budget for four months of FY 2016-17, and the full year in FY 2017-
18. The net General Fund contribution to EGRAC operations is budgeted at $909,147 in
the first year, as Staff will be hired and costs will be incurred before the facility opens. In
FY 2017-18, the General Fund subsidy is projected to be roughly $1.0 million, which is
what had been planned for in previous version of the forecast.
Parks and Community Services program revenue (from services provided directly to the
community) is budgeted to increase $558,000 in FY 2016-17 and $1.1 million in FY 2017-
18.
The other large funding sources in this category are Waste Management Administrative
Fees, collected from the City’s sole garbage and waste collector (Amador Valley
Industries), and Santa Rita revenue, whereby the County reimburses the City for costs
incurred when responding to non-emergency calls at the Santa Rita Jail. Total Charges
for Services are projected to increase $750,000 (18.4%) in FY 2016-17 and $911,000
million (18.9%) in FY 2017-18.
10-Year Forecast
An annual increase of 1% was applied beginning in FY 2018-19 and beyond on all
Charges for Services (including EGRAC revenue).
Expenditure Budget Proposals
Most General Fund departmental expenditure budgets are adjusted each year in a relatively
consistent manner, that is, they change with CPI adjustments, or are grown by a another
specific known factor. Examples are:
− Personnel costs: these are driven by the provision of salaries and benefits as approved by
the City Council (most recently in Spring 2015). Pension and retiree health rates are set by
CalPERS and actuaries, respectively, and are driven by actual investment performance,
investment return expectations, demographic and mortality changes, benefit provision
changes, and any additional contributions that agencies choose to make. The Proposed
Budget incorporates the City’s most recent reported rates, and includes an additional lump
sum payment towards the pension liability, as discussed below.
− Supplies and Services and Capital Outlay budgets: these remain generally static across
departments, unless there are one-time planned purchases, such as for new software, new
subscriptions or services, etc. The Proposed Budget does not contain significant changes
in this category.
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This portion of the Staff Report discusses only the more significant proposals for the upcoming
budget cycle, as shown in the summary table below. The following sections present the
proposals in detail.
Significant Budget Proposals, General Fund
$ Change from Prior YearAnnual Cost
FY 16-17FY 17-18by FY 2018-19Assumptions for Forecast
grows with salary and benefit
provisions per the most recent
New Positions 243,082 14,479 257,561 employee agreement
Unfunded Liability Payment 250,000 25,000 275,000 grows 5.0% per year
Contract Services - Police 1,777,701 987,958 2,765,659grows 5.5% per year
Contract Services - Fire 1,003,979 34,187 1,038,166grows 4.0% per year
Contract Services - MCE 614,355 534,265 1,148,620grows 4.0% per year
grows with salary and benefits
EGRAC* 359,147 674,659 1,033,806costs and contract
estimated $1.0 million annually by
FY 18-19 (study
Preventative Maintenance 300,000 450,000 750,000 currently underway)
Total$4,548,264$2,720,548$7,268,812
Personnel
New Positions
The Proposed Budget includes the addition of the following City Staff, beginning in FY 2016-
17 (cost shown is first year salary and benefits):
1.0 Recreation Coordinator for EGRAC: $143,545.
1.0 Office Assistant I (Two-Year Limited Term) in the Records Division of the City Clerk’s
Office: $99,537.
Seasonal and Temporary salaries increase roughly $747,000 in FY 2017-18 for the full
year of EGRAC operations.
Contribution to Unfunded Pension Liability
Staff proposes to increase the annual lump sum payment from $250,000 to $500,000 per
year (grown by 5%), beginning in FY 2016-17. According to the most recent reports, the
City’s unfunded pension liability is $8.8 million (in addition to an unfunded retiree health
liability of $4.5 million), and while the City has $10.8 million in reserves for these
obligations, Staff will evaluate whether to enter into an alternate amortization schedule, or
to make annual lump sum contribution as the budget allows, to pay off the liability sooner
and save the City money over the long term.
Contracted Services
The City contracts for Public Safety (Police and Fire), Maintenance, development and other
miscellaneous services. In FY 2016-17 and FY 2017-18, total proposed contracted services
make up 62% of the overall General Fund expenditure budget. Public Safety contract costs
make up 41% of the total operating budget.
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Police Services
Significant increases are proposed for the Police Services contract with Alameda County
Sheriff’s Office (ACSO), as shown in the table below.
Police Services Contract Changes
Contract $,IncreaseIncreaseContract $, Increase Increase
FY All Funds$%General Fund Only$%
15-1615,524,19215,424,192
16-1717,301,8941,777,70211.5%17,201,902 1,777,71011.5%
17-1818,289,855987,9615.7%18,189,860 987,9585.7%
The following are highlights of the proposal:
The FY 2016-17 proposal includes 4% COLA for sworn and non-sworn, and 4% COLA
contingency
The FY 2017-18 proposal includes 4% COLA for sworn and 3.25% for non-sworn, and
4% COLA contingency
Beginning in FY 2016-17, the proposal includes one additional Deputy, at a total cost of
$225,000. This position was made available due to the deletion of two existing City
positions.
Salaries and Benefit increases for the current contracted 56 FTE total $1.2 million;
Salaries increased $354,000 (5.2%) and Benefits increased $861,000 (16.2%).
The significant increase in the City’s payment of benefits is due to more retirements, and
the County lowering its contribution to ACSO’s retirement costs by 2%.
Benefits as Percent of Salaries
% of
FY
Salaries
2012-1373%
2013-1479%
2014-1580%
2015-1680%
2016-1790%
The 10-Year Forecast assumes an annual increase to Police Services costs of 5.5%.
Fire Services
Fire Services Contract Changes
Contract $,
General Fund Operating Contract $,
Contract $,IncreaseIncreaseOnly Cost General Total Increase
FY All Funds$%(Operating)IncreaseEquip Fund OnlyIncrease%
15-16 11,768,731 11,425,166 19,244 11,444,410
16-17 12,792,959 1,024,228 8.7% 12,039,262 614,096 409,127 12,448,389 1,003,979 8.8%
17-18 12,766,223 (26,736)-0.2% 12,420,769 381,507 61,807 12,482,576 34,187 0.3%
The following are highlights of the proposal:
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FY 2016-17 proposal assumes 4.33% COLA effective 1/1/2016 and 3% COLA effective
1/1/2017
FY 2017-18 proposal assumes 3% COLA effective 1/1/2017 and 2.5% COLA effective
1/1/2018
FY 2016-17 proposal includes $409,127 for equipment replacements (self-contained
breathing apparatus); an additional $200,000 will be needed in future years for radio
replacements. Staff will propose to designate $600,000 in June 2016 for the replacement
costs.
The following patrol vehicles are due for replacement, and sufficient funds are available
in the City’s Internal Service Funds to cover the costs:
− FY 16-17: Patrol Vehicle at Station 16 ($250,000)
− FY 17-18: Patrol Vehicle at Station 18 ($250,000) and Engine at Station 18
($700,000)
The 10-Year Forecast assumes an annual increase to Fire Services costs of 4.0%.
Maintenance Services
The City’s maintenance services provider, MCE, has provided a cost and services proposal
for the two-year budget period, which incorporates new parks and facilities, and includes
increased service levels of maintenance citywide. The result is an increase of $614,355 in
FY 2016-17 and $534,265 in FY 2017-18, in the General Fund only.
MCE Services Contract Changes
Contract $,IncreaseIncreaseContract $, Increase Increase
All Funds$%General Fund Only$%
FY
14-154,296,6183,607,853
15-164,354,2093,680,892
16-174,963,622609,41314.00%4,295,247614,35516.70%
17-185,516,932553,31011.10%4,829,512534,26512.40%
The following are the highlights of the proposal:
Streets and Parks– due to the maturing of landscaping, and service level cuts in FY
2008-09, additional maintenance and/or replacement will be required for trees, shrubs,
bedding and plant pruning, leaf cleanup, rodent control, litter pickup, restroom
maintenance, tournament support, field renovation. ($121,294 / year in Streets, and
$148,755 / year in Parks).
Facilities – due to the aging of facilities (Civic Center, Library, and Senior Center),
additional maintenance will be required beyond general repairs, including HVAC systems,
main doors, and main lighting. ($40,027 / year).
New Inventory –
1) EGRAC grounds: $36,000 / year;
2) EGRAC building and amphitheater: $42,697 / year (only four months of costs
were included in the FY 2016-17 proposal);
3) Jordan Ranch Park: $52,453 / year, beginning in FY 2017-18;
4) Fallon Sports Park Phase II: $175,291 / year; beginning in FY 2017-18;
5) Sub-Area 3 at IronGate: $85,059 / year, beginning in FY 2017-18;
6) New subdivisions accepted by the City for landscaping, drainage inlets, and
road maintenance: $67,530 in FY 2016-17 and $85,394 in FY 2017-18.
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The two-year budget proposal also includes a lump sum budget for additional work
beyond what is included in the contract scope. This has been historically budgeted for but
not called out in the contract. Staff has asked MCE to include this in the total contract
amount, at a not-to-exceed amount of $300,000, which is the average cost of additional
work over the past several years.
Emerald Glen Aquatics Complex (EGRAC)
While the specific budget for the operation of this new facility falls in the expenditure
categories already discussed (contracted services and staffing), it is important to discuss the
bottom line budget impact separately.
In prior budget reviews, Staff reported to the City Council that the annual General Fund
subsidy to EGRAC operations was estimated at $800,000 to $1.0 million per year. Staff has
now put together a comprehensive budget for this facility, including staffing, maintenance,
and equipment costs, and an estimate of attendance and fees. The cost in the first full year
of operations (FY 2017-18) is estimated to require a General Fund subsidy of $1,033,806.
The City will also incur costs for four months of operation in FY 2016-17, and has already
included several of the additional full-time positions in the FY 2015-16 budget.
As a final note, the Dublin Swim Center is still fully budgeted for in this proposal to be
operational for both FY 2016-17 and FY 2017-18.
Preventative Maintenance
As part of the action items presented at the City Council’s Strategic Planning meeting last
March, Staff discussed the need for a citywide preventative maintenance plan, which is a
plan to invest and re-invest in existing City assets in an effort to prolong the useful life and
avoid large one-time repairs, but also to continue to provide to the community facilities and
infrastructure of the highest quality.
Accordingly, Staff has engaged the services of a consultant to provide a full report of the
total cost of ownership (Phase 1), and plan to maintain (Phase 2), City assets over the long
term. Phase 1 of the study is currently in draft form and being reviewed by Staff. It is not
known at this time the full impact of the report, but this kind of reinvestment will likely require
significant funding from the General Fund. Staff has estimated these costs at $300,000 in FY
2016-17, ramping up to $1.0 million per year by FY 2018-19, and those costs are included in
the Budget Proposal and the 10-Year Forecast.
Results
As mentioned above, the General Fund operating budget is balanced in FY 2016-17 and FY
2017-18. The 10-Year Forecast, however, continues to show a projected operating deficit in FY
2020-21, as illustrated in the table below.
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Ten Year Forecast ($ in thousands)
It is important to note that this is the first year in which the long-term outlook did not change from
the prior year. With that in mind, Staff is continuing to work on the action items that support the
City Council’s priority of fiscal sustainability, and will report back to the City Council as relevant
information becomes available.
Capital Improvement Projects
The Five-Year Capital Improvement Program proposed project list and funding sources list are
included as Attachments 2 and 3. Staff has also included a separate accounting (Attachment 4)
of the proposed projects that are funded by the General Fund, Dublin Crossings Fund, and
Public Facility Fees Funds.
The proposed General Fund contribution is relatively low as compared to prior years, with
funding allocated for Citywide Bicycle and Pedestrian Improvements (five years), the Storm
Drain Condition Assessment (FY 2016-17), Heritage Park Cemetery Improvements (FY 2017-
18), and a small portion to the Fallon Sports Park (FY 2016-17). Projects using the Dublin
Crossings Fund include the Police Services Building (funded by the $15 million Community
Benefit Payment as approved by the City Council at the meeting of March 1, 2016), and the
Dublin Crossings Community Park (five years). Projects with a proposed use of Public Facility
Fees Funds include Dublin Crossing Community Park (FY 2016-17 – FY 2020-21), EGRAC (FY
2016-17), Fallon Sports Park (FY 2016-17), Sean Diamond Park (FY 2017-18) and Moller
Ranch Neighborhood Square (FY 2020-21).
General Fund Reserves
Total reserves are projected at $100.9 million at the end of FY 2016-17, an increase of $6.5
million over FY 2015-16. The unassigned/available cash flow reserve is projected at $31.5
million, before any designation by the City Council to specific Committed reserves, and before
Staff completes the necessary accounting adjustments to reserves at the end of the current
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fiscal year. The City Council will have the opportunity to make reserve designations during the
City Council meeting of June 17, 2016.
Next Steps
Staff is seeking City Council the following direction on the Proposed FY 2016-17 and FY 2017-
18 Budget and Financial Plan:
1) Are there any items the City Council would like Staff to change, remove, or add to the
budget proposal? If there are any requests, Staff would analyze those and bring them
back for the City Council’s consideration at the May 17, 2016 Budget Hearing.
2) Is there any other information the City Council desires to see during the Budget Hearing
on May 17, 2016?
NOTICING REQUIREMENTS/PUBLIC OUTREACH:
None.
ATTACHMENTS:
1. General Fund Summary, FY 2016-17 and FY 2017-18 Budget, and
10-Year Forecast
2. 2016-2021 Capital Improvement Program, Project List
3. 2016-2021 Capital Improvement Program Funding Sources
4. Capital Improvement Projects Funded by General Fund, Dublin
Crossing Fund, and Public Facilities Fees Funds
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