HomeMy WebLinkAboutStaff Report 9817
City of Palo Alto (ID # 9817)
Finance Committee Staff Report
Report Type: Action Items Meeting Date: 11/28/2018
City of Palo Alto Page 1
Summary Title: Review & Approve $4 Million in General Fund Budget
Amendments & Amend the Table of Organization
Title: Review Recommended $4 Million in General Fund Savings and Approve
Corresponding Budget Amendments in Various Funds and the Table of
Organization
From: City Manager
Lead Department: Administrative Services
RECOMMENDATION
Staff recommends that the Finance Committee recommend that the City Council:
1) Amend the Fiscal Year 2019 Budget Appropriation for various funds as identified in
Attachment A; and
2) Amend the Fiscal Year 2019 Table of Organization for the General Fund to:
a. Eliminate 1.0 Performance Auditor I in the Office of the City Auditor;
b. Reduce 1.4 Building Serviceperson-Lead and reduce 0.75 Building Serviceperson
positions; and
3) Amend the Fiscal Year Table of Organization for Other Fund increasing by 1.4 Building
Serviceperson-Lead and reduce 0.75 Building Serviceperson.
EXECUTIVE SUMMARY
This action would complete the “immediate action” plan outlined by staff and approved by the
City Council in October 2018. If approved, these adjustments identify $4 million in excess
revenues and additional expense savings in the General Fund as directed by the City Council as
part of the FY 2019 Adopted Budget.
BACKGROUND
As part of the FY 2019 Adopted Budget, the City Council directed staff to find $4 .0 million in
structural fixes in the General Fund and return to the Finance Committee and City Council after
the 2018 summer break. In September 2018 and October 2018, the Finance Committee and
the City Council approved two strategies to address this task as presented by staff, an
“immediate action” and a “strategic action” workplans. The workplans as presented in
September and October are discussed briefly below.
City of Palo Alto Page 2
Immediate Action: This approach would allow for potential resolution of this $4 million referral
by December 2018, with final budget adjustments completed during the FY 2019 Mid-Year
Budget review, considered by the Council in early February. Returning to the Finance
Committee in November/December, staff would bring forward recommended reductions based
on a review of basic criteria with a focus on the General Fund. As directed by the Council, both
one-time and ongoing solutions are viable for this workplan with a strong recommendation to
stay away from using reserves.
Strategic Action: This workplan would require an initially intensive citywide program review
effort anticipated to last anticipated to last approximately six-months, with budgetary actions
occurring no earlier than the FY 2020 budget process. Staff would begin a citywide review of all
programs and services currently provided by the City of Palo Alto resulting in a “services
portfolio.” Services are defined as discrete programs to identifiable users and vary in size across
the organization.
Previous staff reports transmitted regarding this referral can be found below:
- Finance Committee September 18, 2018: CMR #9553
- City Council, October 29, 2018: CMR #9740
DISCUSSION
Staff has identified “Immediate Action” General Fund budget adjustments and the impacts of
them to attain $4.0 million in excess revenues or additional expense savings beyond those
presumed in the FY 2019 Adopted Budget. These adjustments would allow for an additional
principal contribution of $4.0 million from the General Fund to the 115 Pension Trust Fund in FY
2019. Staff’s intent would be to contribute commensurate amounts from other funds,
including Internal Service Funds and Enterprise Funds, to match this level as part of the annual
budget development.
As we proceed in parallel with steps toward more comprehensive strategic recommendatio ns,
these immediate actions reflect near-term revenue and expense changes to hit the $4 million
target. A summary of recommended adjustments are as follows; additional details with the
specific appropriation changes can be found in Attachment A, Exhibit 1.
City of Palo Alto Page 3
Proposed Change $’s in
‘000s
Ongoing?
Excess Tax Revenue FY 2019:
Collections are anticipated to exceed budgeted estimates, primarily
Property Tax.
$2,000 No
Additional Expense Savings:
The City is currently experiencing 8 to 10 percent vacancy lev els. In
addition, it is anticipated three contingent accounts will remain
unspent, the Innovation, Human Resources, and HSRAP contingent
accounts.
1,155 No
Cubberley Operations & Maintenance:
Shift funding for CSD Cubberley operations and maintenance st affing
into the Cubberley Fund (472).
325 Yes
Eliminate One Staff Position in the Auditor’s Office:
Eliminate 1.0 vacant Performance Auditor I position.
135 Yes
Reduce Council Contingent Funds:
Reduce the City Council contingency account of $225,000 per year to
$125,000 per year beginning in FY 2019.
100 Yes
TOTAL $4,000
These recommended adjustments provide both incremental steps to addressing the structural
costs associated with more conservative pension calculation assumptions as well as ensure the
City can carefully consider the impacts of those structural reductions on a more long -term
basis.
RESOURCE IMPACT
This report fulfills the Council direction included as part of the FY 2019 Adopted Budget to
identify $4 million for contribution to the City’s 115 Pension Trust Fund. Through a
combination of recognizing additional one-time revenues, one-time expense savings, and
structural expense reductions, $4.0 million in additional General Fund resources are available.
These additional resources will offset the $4.0 million reduction included in the non -
departmental budget as part of the FY 2019 Adopted Operating Budget.
ENVIRONMENTAL REVIEW
This report is not a project for the purposes of the California Environmental Quality Act.
Environmental review is not required.
Attachments:
• Attachment A: FY 2019 Budget Amendments in Various Funds
Department Adjustment Adjustment
GENERAL FUND (102)
Administrative
Services
Property Tax Revenue
This action increases the estimate for Property Tax receipts by $900,000, from $49.9 million to
$50.5 million. This increase recognizes an unusually high payment of excess Educational
Revenue Augmentation Fund (ERAF) which are estimated to be nearly double previous year
collections totaling over $2 million in FY 2019. This is anticipated to be a one-time adjustment.
900,000$ -$
Administrative
Services
Sales Tax Revenue
This action increases the estimate for Sales Tax receipts by $500,000, from $31.2 million to
$31.7 million. Increased business to business activities, specifically in leased revenue, have
seen significant growth in the near term. This revised estimate captures this growth; however,
additional monitoring is necessary to determine if this is a new trend or a one-time event.
500,000$ -$
Administrative
Services
Documentary Transfer Tax Revenue
This action increases the estimate for Documentary Transfer Tax receipts by $600,000, from
$7.4 million to $8.0 million. The FY 2019 Budget assumed collections in this category would
remain flat from prior year levels. However, due to property values and transactions, receipts
are tracking to end the year above budgeted estimates. This is anticipated to be a one-time
adjustment as growth for future years was already assumed as part of previous Long Range
Financial Forecasts.
600,000$ -$
Administrative
Services
Departmental Savings (vacancy savings)
This action reduces appropriated funds by $300,000 from $8.0 million to $7.7 million in the
Administrative Services Department to recognize one-time salary and benefits savings.
Additional vacancy savings is the result of three senior management positions recently vacated
including the Chief Financial Officer, Chief Procurement Officer, and Real Estate Manager.
Although it is anticipated these positions will be filled, sufficient savings is anticipated to
accrue until that time. As a result, staff remains focused on core business functions.
-$ (300,000)$
City Auditor's
Office
Reduce One Staff Position in the Auditor's Office
This action eliminates 1.0 vacant Performance Auditor I position in the Office of the City
Auditor. Each Auditor position has a goal of producing two performance audits annually; the
elimination of this position would reduce the capacity for the number of audits that can be
performed in a given year. During the development of the FY 2019 budget, no significant
reductions were approved in the Auditor's Office, which had a full team of staffing, compared
to the reductions felt by other departments and appointees.
-$ (135,000)$
City Clerk's Office Departmental Savings (vacancy savings)
This action reduces appropriated funds by $50,000 from $1.3 million to $1.2 million in the
Office of the City Clerk to recognize one-time salary and benefits savings. Currently the office
has a vacant part-time staff position that provides administrative support and coverage for the
Office. It is anticipated this position will continue to be recruited for; sufficient savings is
anticipated to accrue until the position is filled. As a result, staff ensure the continuation of
required business processes through additional coverage from management staffing.
-$ (50,000)$
CITY OF PALO ALTO
RECOMMENDED AMENDMENTS TO THE CITY MANAGER'S FY 2019 BUDGET
Revenues Expenses
ATTACHMENT A
Department Adjustment Adjustment
GENERAL FUND (102)
CITY OF PALO ALTO
RECOMMENDED AMENDMENTS TO THE CITY MANAGER'S FY 2019 BUDGET
Revenues Expenses
ATTACHMENT A
Community
Services
Reallocation of Cubberley Operations & Maintenance
This action reallocates funding for CSD Cubberley operations and maintenance staffing into the
Cubberley Fund (472). Staffing includes part-time custodial assistants (2.08 FTE) and full-time
building servicepersons (2.15 FTE). This is in addition to the Department of Public Works
staffing and resources shifted previously. In total, $700,000 of the $1.9 million annual
contributions will be dedicated to O&M and funding of $1.2 million would be available
annually for significant capital improvements. A corresponding change to the full-time Table of
Organization is included in the recommendation.
-$ (325,000)$
Human Resources Departmental Savings (vacancy savings)
This action reduces appropriated funds by $50,000 to $3.5 million in the Human Resources
Department to recognize one-time salary and benefits savings. The vacancy savings is the
result of a vacant Senior Human Resource Administrator position in the Employee Relations &
Training team. Although it is anticipated this position will eventually be filled and reassigned
to support organizational Recruitment demands, sufficient savings is anticipated to accrue
until that time. As a result, staff remains focused on keeping up with critical timelines and
deliverables and has augmented gaps in staffing with some contractual assistance to keep up
with business needs.
-$ (50,000)$
Library Departmental Savings (vacancy savings)
This action reduces appropriated funds by $200,000 from $9.7 million to $9.5 million in the
Library Department to recognize one-time salary and benefit savings. Additional vacancy
savings are the result of vacant positions such as a Senior Librarian and the current shared
executive management between the Community Services Department and the Library
Department. It is anticipated that vacant positions will continue to be recruited for and that
the shared executive management where the savings is being realized in the Library
Department in whole will accrue sufficient savings until the positions are filled. As a result,
staff ensure the continuation of Library services and hours however, additional desk time for
libraries may be necessary. In addition, both CSD and Library are operating with a reduced
executive management team resulting in diminished capacity for strategic initiatives and
oversight.
-$ (200,000)$
Non-
Departmental
Contingent Account Savings
This action eliminates funding of $140,000 on a one-time basis with the elimination of the
HSRAP contingent account ($50,000), the Human Resources contingent account ($50,000), and
the Innovation contingent account ($40,000).
-$ (140,000)$
Non-
Departmental
Reduce City Council Contingent Account
This action reduces the City Council contingent account by $100,000 beginning in FY 2019
(from $225,000 to $125,000). Historically the City Council contingent account ends each year
with expense savings. This action would limit the discretionary special projects and financial
support in those years when there are extraordinary events. In FY 2019, approximately
$30,000 has been expended to date.
-$ (100,000)$
Department Adjustment Adjustment
GENERAL FUND (102)
CITY OF PALO ALTO
RECOMMENDED AMENDMENTS TO THE CITY MANAGER'S FY 2019 BUDGET
Revenues Expenses
ATTACHMENT A
Planning &
Community
Environment
Departmental Savings (vacancy savings)
This action reduces appropriated funds by $500,000 from $8.9 million to $8.3 million in the
Planning & Community Environment Department to recognize one-time salary and benefits
savings. Critical vacancies in the department are resulting in increased application processing
time, diminished time for department strategic work planning, increased potential for
administrative mistakes, staff burnout leading to increased vacancies, and possible delays in
responses to governing bodies. This is being managed through spikes in management overtime
however, this results in reductions in quality control as remaining staff are striving to meet
deadlines. It is expected that these positions will be filled, however, sufficient vacancy savings
is anticipated to accrue until they are filled.
-$ (500,000)$
Public Works Departmental Savings (vacancy savings)
This action reduces appropriated funds by $200,000 from $18.5 million to $18.3 million in the
Public Works Department in salaries and benefits funding. Additional vacancy savings is the
result of four vacant positions, which include a Heavy Equipment Operator, Facilities staff, and
the Director of Public Works. Although it is anticipated these positions will be filled, sufficient
savings is anticipated to accrue until that time. In the interim period, staff has not been able
to keep up with work orders and regular maintenance. Similarly, daily tasks have had to be
reprioritized and/or deprioritized to accommodate the highest need requests. The interim
Director of Public Works has focused on core business functions at the expense of strategic
initiatives.
-$ (200,000)$
Non-
Departmental
Transfer to General Benefit Fund (115 Pension Trust contribution)
This action appropriates a $4.0 million transfer from the General Fund to the General Benefits
Fund for a contribution to the City's Section 115 Pension Trust Fund in alignment with the
Council direction provided as part of the FY 2019 budget adoption. A corresponding revenue
and expense adjustment in the General Benefits Fund will offset this action.
-$ 4,000,000$
Non-
Departmental
Reversal of FY 2019 General Fund Structural Reduction
This action reverses the adjustment approved in the FY 2019 Adopted Budget consistent with
the Finance Committee Recommendation on May 23, 2018 which reduced budgeted expenses
in the General Fund by $4.0 million. The specific impacts of this reduction were to be identified
and articulated to the Finance Committee during the remainder of the 2018 calendar year.
Included in this report are the specific $4 million in transactions including the implications of
them.
-$ 4,000,000$
Non-
Departmental
Budget Stabilization Reserve
This action decreases the fund balance to offset adjustments recommended in this report.
-$ (4,000,000)$
GENERAL FUND (102) SUBTOTAL 2,000,000$ 2,000,000$
Department Adjustment Adjustment
GENERAL BENEFIT FUND (687)
Non-
Departmental
Transfer from General Benefit Fund/115 Pension Trust contribution
This action recognizes $4.0 million transfer from the General Fund and appropriates a $4.0
million expense for a contribution to the City's Section 115 Pension Trust Fund. This action is
in alignment with the Council direction provided as part of the FY 2019 budget adoption.
4,000,000$ 4,000,000$
GENERAL BENEFIT FUND (687) SUBTOTAL 4,000,000$ 4,000,000$
CUBBERLEY INFRASTRUCTURE FUND (472)
Non-
Departmental
Reallocation of Cubberley Operations & Maintenance
This action reallocates funding for CSD Cubberley operations and maintenance staffing from
the General Fund to the Cubberley Fund (472). Staffing includes part-time custodial assistants
(2.08 FTE) and full-time building servicepersons (2.15 FTE). This is in addition to the
Department of Public Works staffing and resources shifted previously. In total, $700,000 of the
$1.9 million annual contributions will be dedicated to O&M and funding of $1.2 million would
be available annually for significant capital improvements. A corresponding change to the full-
time Table of Organization is also recommended.
-$ 325,000$
Non-
Departmental
Ending Fund Balance Adjustment
This action decreases the fund balance to offset adjustments recommended in this report.
-$ (325,000)$
CUBBERLEY INFRASTRUCTURE FUND (472) SUBTOTAL -$ -$
ATTACHMENT A
CITY OF PALO ALTO
RECOMMENDED AMENDMENTS TO THE CITY MANAGER'S FY 2019 BUDGET
Revenues Expenses