HomeMy WebLinkAboutStaff Report 150-05
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TO: HONORABLE CITY COUNCIL
ATTN: FINANCE COMMITTEE
FROM: CITY MANAGER DEPARTMENT: ADMINISTRATIVE
SERVICES
DATE: FEBRUARY 15, 2005 CMR:150:05
SUBJECT: 2004-05 ADJUSTED BUDGET – SECOND QUARTER (Q2) FINANCIAL
RESULTS, MIDYEAR AMENDMENTS AND CAPITAL IMPROVEMENT
PROGRAM STATUS
RECOMMENDATION
Staff recommends that the Finance Committee recommend to the City Council adoption of the attached
Budget Amendment Ordinance (BAO) (Attachment 1), which includes:
a. Proposed midyear adjustments to the 2004-05 Budget for the General Fund, Enterprise
Funds, Special Revenue Funds, Internal Service Funds, Debt Service Fund, and
Capital Improvement Fund (Exhibit A).
b. New or amended 2004-05 Capital Improvement Program Project Descriptions
(Exhibit B).
c. Amendments to the 2004-05 Adopted Municipal Fee Schedule (Exhibit C).
d. Amendments to the 2004-05 Table of Organization (Exhibit D).
The 2004-05 midyear Capital Improvement Program Projects Status Report is attached as an
informational item (Attachment 2). A list of continuous projects follows this summary (Attachment 3).
No action is required on these two items.
Staff also recommends the Finance Committee review and comment on the preliminary financial
condition of the City as of December 31, 2004.
BACKGROUND
This report summarizes the changes to the 2004-05 Adopted Budget as part of the normal course of
business through December 2004. Where possible, adjustments are held until this midyear report is
brought to Council in an effort to streamline the BAO process year-round. This discussion is
categorized by fund with a primary focus on major changes in the General Fund. Details of these
changes, as well as all fund summaries, are included in Exhibit A. The midyear CIP project status
report (Attachment 2) provides the Finance Committee with information on the status of the City’s CIP
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projects as of December 31, 2004.
As recommended by the City Auditor, this report also provides the Finance Committee and City
Council with preliminary insight into the financial condition of the City as of December 31, 2004. It is
worth noting the second quarter totals are unaudited and are subject to change.
DISCUSSION
The following is a summary of major revenue and expenditure adjustments as detailed in Exhibit A.
General Fund
At midyear, General Fund operating revenues and expenditures are at 41 and 54 percent of budget
respectively. The difference between these numbers reflects typical timing issues with the collection
of tax revenues and contract encumbrances. As noted below, the State of California’s “triple flip”
agreement with cities in fiscal 2004-05 and 2005-06 is resulting in later-than-normal payments as a
significant portion of sales tax revenue is being paid as property tax. By year-end, total General Fund
expense will be less than total revenues.
In the first half of 2004-05, the City witnessed stabilization in the local economy and a lessening in the
rate of decline in its economically sensitive revenue sources. While this represents a positive turn for
the City, the local job picture has not improved significantly. Consequently, staff does not foresee a
major rebound in key revenue sources such as sales and transient occupancy taxes. State actions to
solve its budget problems, however, do require a considerable adjustment to Vehicle License Fee
revenue.
Sales tax revenues for 2004-05 are expected to roughly equal the $18.1 million realized in 2003-04.
This requires a downward adjustment of $0.24 million at midyear. Sales taxes in the second and third
calendar year 2004 quarters (which fall in fiscal year 2004-05) improved over prior year quarters by
3.0 percent and 4.3 percent, respectively. Due to several significant one-time receipts in the prior
year, softness in automobile sales, and rising consumer debt, sales tax revenue is projected to remain
flat in 2004-05 compared to the prior year.
Property taxes are being adjusted upward at midyear by $2.49 million to $16.09 million. As
mentioned above, the State is paying a large part of the VLF via property tax remittances. Of the $2.59
million increase, $1.71 million is due to this change. The remaining $0.88 million is due to the
increase in the property tax roll for 2004-05. The long-term lease transaction for the Stanford
Shopping Center results in additional annual property taxes for the City.
Transient Occupancy Taxes (TOT) appear to be firming in 2004-05 with occupancy and room rates
slowly rising. Although July through September results were flat, October and November 2004
occupancy and room rates were 4 percent higher than the prior year. Staff is cautiously optimistic that
this trend will continue and has accordingly adjusted TOT revenue upward by $0.20 mi llion.
Other Taxes and Fines
· Documentary transfer tax revenues are being raised by $0.28 million at midyear. Transfer
taxes were exceptionally strong in 2003-04 as a result of the Stanford Shopping Center
transaction. With a steady residential market and a potentially improving commercial market,
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staff expects slightly higher 2004-05 revenues than originally budgeted.
· Motor Vehicle License Fee (VLF) revenue is being reduced by $3.3 million as a
consequence of State actions to solve its deficit. As described in the Long Range Financial
Plan (p. 10), the City is losing $1.5 million in annual VLF revenue in 2004-05 and in 2005-06;
full payment will resume in fiscal 2006-07. Starting in 2004-05, most of the remaining VLF
revenue will be paid via property tax remittances. A small part of the VLF will continue to be
paid directly by the State, estimated at $0.3 million for 2004-05.
· Parking citation revenues are bring reduced by $0.1 million (6 percent) due to the opening of
the new public garages and the extension of free parking time limits from 2 to 3 hours.
Charges for services revenues are being reduced by $0.2 million (1 percent). Major components of
this reduction include a $0.4 million (31 percent) reduction in Development Center plan check fees
resulting from a slowdown in development-related activities; a $0.1 million (7 percent) reduction in
paramedic revenues due to delayed implementation of the Basic Life Support (BLS) program and a
revised Medicare reimbursement projection; offset by a $0.3 million increase in 2003-04 yearend
Stanford University billings for fire services.
Permits and licenses revenues are being reduced by $0.3 million (11 percent) due to a reduction in
Planning and Community Environment’s building permit fee revenue. Changes in Development Center
activities have prompted a recommendation for a comprehensive cost recovery analysis as part of the
2005-07 budget process.
Department expenditures are being reduced by a net $0.7 million (1 percent) as a means of
balancing the midyear revenue reductions and $0.25 million in additional expenditure appropriations
mainly from grant-funded spending. Specifically, $1.0 million in salary and benefit savings is being
removed from 8 department budgets related to 37 current vacant positions. Li brary Department grants
include the State of California’s Library Fund allocation ($23,929) and a California State Library
grant purchase of Chinese language books ($10,000). Police Department grants include a COPS grant
for a bar coding system, purchase and upgrade of various public safety equipment ($100,000); an
Office of Traffic Safety (OTS) grant for a seatbelt compliance campaign ($25,000); an OTS grant for
police sobriety checkpoints ($11,245); and a Department of Alcoholic Beverage Control (ABC) grant
for decoy operations ($10,433).
General Fund Overtime Analysis:
Overtime expense reached 79 percent of budget as of December 31, 2004. Specifically the Fire and
Police Departments are exceeding anticipated spending levels in this area for the following reasons:
· Fire Department (111 percent of budget): The two primary factors contributing to this
situation are disability leave and vacancies. There are eight personnel on disability leave and
the general length of time for disability has increased (four on long-term leave). There are 6
vacancies but the new recruits from the April academy will not be on active duty until next
fiscal year. There will be offset savings in the regular salary budget to fund this additional
expense.
· Police Department (66 percent of budget): The main factors contributing to higher overtime
spending include absences due to disability leave, staff vacancies, and newly hired officers
assigned to the academy and patrol program. These absences create additional overtime
expense due to mandated minimum staffing levels in Patrol. Overtime reimbursements of
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approximately $85,000 are expected from activities related to Stanford University football
games, sobriety checkpoints duties, seat belt enforcement and ABC decoy operations. Offset
savings in regular salaries will fund this additional expense.
With these two departments removed from the analysis, General Fund overtime expense is at 45
percent of budget at midyear.
Enterprise Funds
Major operating fund issues are discussed below. Please refer to the detail fund summaries in Exhibit
A for more information on these midyear changes and to the CIP section for a discussion of the
changes in Enterprise CIP project funding.
· Electric Fund (Net reserve reduction of $0.5 million) An additional $475,000 in legal expenses is
required due to ongoing litigation with Enron and PG&E. An additional $23,000 in contract
services for line clearing is needed to encumber the full contract bid amount with Davey Tree.
The remaining expenditure increase includes $50,000 for contract services with Canopy to
administer the Right Tree in the Right Place Program, the cost of which the Utilities Department
has agreed to cover in fiscal 2004-05.
· Gas Fund (Net reserve reduction of $0.2 million) An increase of $60,000 in legal fees is due to
additional legal assistance needed in the Gas Accord III settlement. An increase of $53,000 in
contract services is required to assist in regulatory matters. The remaining expenditure increase
includes $53,876 for contract services with PG&E for mandated training.
(as of 12/31/04)
Adopted
Budget
Midyear
Budget
Midyear
Changes Actual
% of
Midyear
Budget
City Attorney - - - - 0%
City Auditor - - - - 0%
City Clerk 13 13 - - 0%
City Council - - - - 0%
City Manager 4 4 - - 0%
Administrative Services 52 52 - 7 13%
Community Services 199 199 - 110 55%
Fire 983 983 - 1,087 111%
Human Resources 2 2 - 1 50%
Library 59 59 - 24 41%
Planning and Community Environment 66 66 - 29 44%
Police 974 974 - 638 66%
Public Works 100 100 - 52 52%
Total Overtime 2,452 2,452 - 1,948 79%
Total Overtime Excluding Public Safety 495 495 - 223 45%
CITY OF PALO ALTO
2004-05 MIDYEAR FINANCIAL REPORT
GENERAL FUND OVERTIME
(in thousands of dollars)
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Capital Improvement Program
Adjustments to the City’s 2004-05 Capital Plan are noted in Exhibit A, with specific project
adjustments described in Exhibit B. All of the CIP changes fall into three basic categories: transfer of
project management due to CIP streamlining process, projects requiring additional appropriations, and
other adjustments such as reducing project appropriations.
· Civic Center Infrastructure Project – CIP PF-01002 – Additional funding needed for
construction/design phase (Capital Fund, $630,000 Infrastructure Reserve funding).
· Photovoltaic Design and Installation – CIP PE-05001 – Increase funding by $406,600 and
decrease funding by the same amount to Animal Shelter – CIP PE-04014; funding is
transferred due to elimination of CIP PE-04014 Animal Shelter as a candidate project for grant
funding (No additional funding required).
· Main Library Space Reconfiguration – CIP PE-05002 (New project) Funding for space
reconfiguration to provide space for youth services collection and program area. (Reduce
funding for Library Automation CIP LB-94018 $140,000; reduce Library Department
operating budget $36,392; Capital Fund $176,000 Infrastructure Reserve funding.) See
informational report in this packet for fuller description.
· University Parking Structure – CIP PE-95030 – Project already completed. $8,421,237
reduction in project appropriation, as well as a transfer of unused funding to Debt Service
Fund ($3,434,695) and to University Avenue Parking Structure Fund ($425,000).
· Downtown Urban Design Improvements – CIP PE-96008 – Relocation of one Decaux
toilet from Lytton Plaza to the Caltrain Transit Center (Capital Project Fund: $40,000
Infrastructure Reserve Funding).
· Sidewalk Repairs – CIP PO-89003 – Reduce funding by $500,000 to align budget with
project annual expense. No significant change in project scope (Reduce transfer from General
Fund $500,000).
· Utilities CIS Study – CIP EL-05002 – (New Project) Study on CIS system integration with
SAP (Electric Fund: $82,000; Transfer project funding from SAP Continuous Improvement
Project CIP -TE-05001 in Technology Fund; no funding from stabilization reserve).
· Wastewater Solids Disposal Project – CIP WQ-97070 – Additional funding needed to
upgrade and rehabilitate two multiple hearth incinerators (Wastewater Treatment Fund:
$72,000 reserve funding).
· Mail Processing System – CIP AS-05000 – (New Project) Funding for purchase of mailing
machine in accordance with United States Postal Service standard (Printing and Mailing
Fund: $33,000).
· Children’s Library Improvement – CIP PE-04010 – Change in project description. Addition
of 610 square feet (south addition) is planned in partnership with the Palo Alto Library
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Foundation (PALF) and Friends of Palo Alto Library (FOPAL). The south wing will have
office and storage space for Children’s Library staff.
Other Funds
Special Revenue Funds: Two changes are proposed for the City’s Special Revenue Funds: a transfer
from the Parking District Funds to cover the cost of erecting signage for the new downtown parking
garages ($13,000); a correcting entry reversing a transfer from the Community Development Block
Grant (CDBG) Fund to the Capital Fund that is not needed ($628,440).
Business Improvement District (BID): Appropriation of funds to allow the processing of authorized
expenditures from collected fees on BID-related activities through June 30, 2005 (Business
Improvement District Fund, $68,857).
Amendments to the 2004-05 Adopted Municipal Fee Schedule
Staff is proposing to amend the 2004-05 Municipal Fee Schedule (Exhibit C) to include four new fees
and fourteen existing fee adjustments. Future year annual revenue increases are expected to be
$189,500 due to these changes.
The new fees are concentrated in the Fire D epartment’s paramedic services and include: ALS II which
is the highest level of paramedic service; BLS Transport – Single which is for inter-facility transport;
BLS-1 for Special Event Stand By, and ECG 12 Lead which is a new, more advanced defibrillator.
The fee adjustments are in the Administrative Services Department (adjust the Returned Check Fee),
Community Services Department (Mitchell Park Community Center hourly room rentals: Teen Center,
Main Hall, and Mitchell Park Community Center Patio), Fire Department (increasing the fees for ALS,
BLS, BLS Scheduled Transport, 911 ALS Transport Mileage, Inter-facility BLS Transport Mileage,
Night, Oxygen), and the Library Department (eliminating the Replace Lost Library Card fee, increasing
the Test Monitoring Fee).
Table of Organization Changes
The proposed adjustments to the Table of Organization (Exhibit D) include three new items and one
correction to a previously submitted item.
· Administration Services Department: Reclassification of 1.0 Full Time Equivalent (FTE)
Financial Analyst to Senior Financial Analyst in the Real Estate Division due to restructuring
of duties related to the acquisition and disposition of property rights. The division eliminated
a vacant Senior Financial Analyst position in fiscal 2003-04, and now must upgrade the
Financial Analyst position to a Senior Analyst position to match job duties. The $9,430 in
additional annual expense is funded with cost reductions elsewhere within the division.
· Community Services Department: Correction of an error in the department restructuring
presentation (CMR:427:04 of October 25, 2004) requires the elimination of both a 0.5 FTE
Facilities Assistant and 0.5 FTE Program Assistant to add 1.0 FTE Office Specialist as
described in the staff report. Costs associated with this change have been included in Budget
Amendment Ordinance No. 4850.
· Library Department: Reinstatement of Saturday hours at the Downtown library branch
requires the addition of a 0.5 FTE Library Assistant, funded by a one -time $35,000 transfer
from the City Manager Contingency fund. This expense will be incorporated into the
department’s 2005-06 budget proposal as an ongoing expense. Additionally, a new 1.0 FTE
Library Assistant will be created by eliminating a vacant 0.5 FTE Senior Librarian and
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reallocating $19,212 from temporary to regular salaries. This position will be assigned to the
Mitchell Park Library to better support the high level of circulation at that branch.
· Police Department: Addition of 1.0 FTE Communication Technician—this position was
eliminated in the 2004-05 budget, however it was reinstated as a result of Summer 2004
contract negotiations with the Service Employees International Union. The department is
funding this position with other vacancy savings in the current year, but the $118,400 in salary
and benefit expense will be incorporated into the department’s 2005-06 budget proposal as an
ongoing expense.
2004-05 Midyear Capital Improvement Program Projects Status Report:
This report provides the Finance Committee with information on the status of the City's Capital
Improvement Program (CIP) projects as of December 31, 2004. In the attached matrix (Attachment 2),
all City departments have submitted information on their projects and commented on any issues that
might cause a change in the scope or timing of the projects. Information in this report is intended to
keep Council abreast of progress on all CIP projects that were open at the beginning of the 2004-05
fiscal year and on those projects, which were added or completed during the current year.
The attached matrix categorizes CIP projects into minor projects (projects which can be completed
within a one -year period) and multi -year projects (projects which have multi -year budgets and/or
complex implementation schedules with identifiable phases). The projects status portion of the matrix
identifies the phase the project was in as of December 31, 2004. Information on phases is intended to
give Council a perspective on how much progress was made on a project. Three d istinct phases are
utilized, as follows:
Phase: Activities:
Pre-Design · Preparation of a feasibility study
· Development of a master plan
· Definition of a project scope
· Preparation of an Environmental Impact Report
Design · Hiring a design consultant
· Completion of project design
· Soliciting bids or proposals
Construction · Acquisition of major equipment
· Installation
· Implementation of a project
The comment section of the matrix provides Council with information clarifying the status of certain
projects.
In the attached matrix, projects are listed by department for the General Fund and by fund for the
Enterprise and Internal Service Funds. The matrix also includes information on the total budget from
inception for each project, the available budget as of the beginning of the fiscal year, the fiscal year
expenditures through December 2004, including commitments (encumbrances), and the remaining
balance in the project budget as of midyear.
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The matrix does not include "continuous" projects. These projects, such as water meter replacement,
have no definitive beginning or end dates and receive ongoing funding to reflect the continuing
replacement cycles or commitments. During the first half of 2004-05, progress was made on all of the
"continuous" projects (Attachment 3).
RESOURCE IMPACT
Adoption of the attached ordinance will allow for adjustments to the fiscal year 2004-05 budget, along
with amendments to the Table of Organization, the Municipal Fee Schedule and five General Fund CIP
projects. With the approval of this ordinance, the projected ending balanc e of the General Fund BSR
is $21.2 million, a decrease of $0.7 million (17.6 percent of General Fund expense). The Capital Fund
Infrastructure Reserve is projected to end with a balance of $30.1 million, a reduction of $0.6 million.
The projected ending Rate Stabilization Reserve total for all Enterprise funds is decreasing by $0.8
million mainly due to increases in legal and capital expense.
POLICY IMPLICATIONS
These recommendations are consistent with existing City policies.
ENVIRONMENTAL ASSESSMENT
This is not a project for purposes of the California Environmental Quality Act (CEQA).
ATTACHMENTS
Attachment 1: Budget Amendment Ordinance with the following exhibits:
Exhibit A Fund Summaries and detail changes to the General Fund, Enterprise Funds,
Special Revenue Funds, Internal Service Funds, Debt Service Fund and
Capital Improvement Funds
Exhibit B CIP Project Descriptions
Exhibit C Amendments to the 2004-05 Adopted Municipal Fee Schedule
Exhibit D Amendments to the 2004-05 Table of Organization
Attachment 2: 2004-05 Midyear Capital Improvement Projects Status
Attachment 3: List of Continuous Capital Projects
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PREPARED BY:
CHARLES PERL
Budget Manager
DEPARTMENT HEAD APPROVAL:
CARL YEATS
Director, Administrative Services
CITY MANAGER APPROVAL:
EMILY HARRISON
Assistant City Manager