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HomeMy WebLinkAbout1997-10-07 City Council (7)City of Palo Alto City Manager’s Report TO:HONORABLE CITY COUNCIL ATTENTION: FINANCE COMMITTEE FROM:CITY MANAGER DEPARTMENT: ADMINISTRATIVE SERVICES AGENDA DATE: OCTOBER 7, 1997 CMR:413:97 SUBJECT:PROPOSED GUIDELINES FOR PREPARATION OF THE 1998- 99 OPERATING AND CAPITAL BUDGET RECOMMENDATION Staffrecommends that the Finance Committee review staffs recommendations for the 1998- 99 budget guidelines and forward them with any changes to the City Council for approval. POLICY IMPLICATIONS The budget guidelines are used by staff to construct the proposed budget. Contained in the recommended guidelines are a number of policy directions. One of the significant policy changes proposed is that the next operating and General Fund capital budget be a one-year instead of the traditional two-year budget document. EXECUTIVE SUMMARY The proposed 1998-99 budget will be prepared in accordance with the guidelines below, which include a proposal that the operating budget and the General Fund capital budget be a one-year budget instead of the traditional two-year budget normally prepared at this time. There are several reasons for recommending a one-year budget. First, the Council is currently reviewing the Comprehensive Plan and it is not anticipated that it will be adopted in sufficient time for inclusion, in this budget. Since the Comprehensive Plan guides the City’s physical development for the next century, it is important that its programs be integrated into the budget. In addition, as staff has worked to prepare a comprehensive infrastructure management plan, it has become apparent that it is unrealistic to complete the development of a prioritization methodology and to finalize the prioritization in sufficient CMR:413:97 Page 1 of 5 time to incorporate it into the next budget. Moreover, staff believes that taking a year to address the serious backlog of General Fund capital improvement projects that have already have been approved is prudent before beginning to implement a major infrastructure program. New project requests would be considered only if they are required for health and safety reasons, are legally required, or respond to Council direction. A one-year operating and General Fund capital budget will also allow sufficient time to examine staffing or other resource needs related to the infrastructure management plan. Finally, many of the impacts on the Electric Fund of operating in a deregulated environment are unclear at this time. There may be some significant changes which will need to be undertaken after some experience with deregulation and open access. For all these reasons, staff is recommending deviating from the traditional two-year budget and preparing a one-year operating and General Fund capital budget for 1998-99. Staff has prepared a preliminary 1998-99 General Fund Summary (Attachment A) using the most recent revenue information. The revenues reflected in the attachment have been adjusted based on preliminary receipts for 1996-97 and projected trends for 1997-98 and 1998-99. Based on revenue and expenditure projections, the General Fund Should be in a surplus situation for 1998-99. The surplus would be handled in accordance with the Council- approved General Fund reserve policy, which includes the funding of an Infrastructure Reserve. Overall Guidelines The operating budget will be a one-year budget as an interim step to allow: the Comprehensive Plan to be approved by Council; focus on the current backlog of General Fund capital projects; and experience to be gained regarding operating the Electric Fundin a deregulated environment. Because the Comprehensive Plan is not yet approved by the City Council, the 1998- 99 operating budget will not include the implementation of the Plan. The implementation of the Comprehensive Plan will be included in the 1999-2001 budget. The 1998-99 operating budget will include the Council priorities for 1998-99, which are traffic management and safety, implementation of the Comprehensive Plan and the In .frastructure Plan. As revenues permit, salaries and benefits will be established for the 1998-99 budget, with the goal of keeping the City a competitive employer with surrounding jurisdictions. CMR:413:97 Page 2 of 5 .General Fund Guidelines. Human Service contract funding will be increased by the amount of the Bay Area Consumer Price Index (CPI). All other non-salary expenditure increases will be carefully scrutinized for merit within the constraints of sufficient overall revenues. Proposed additions to the 1998-99 budget must result from health and safety issues, legal and regulatory mandates, and responses to Council direction. Changes to the General Fund budget required due to the passage of Proposition 218, the Jarvis Initiative, will be recommended with the 1998-99 budget. The 1998-99 budget will include the implementation of recommendations from the organizational evaluation of the Planning Division as such recommendations are available. The proposed budget will include an expansion of the Palo Alto Unified School District (PAUSD) Fields program as appropriate, depending on the status of the PAUSD Building For Excellence Program and the availability of matching funds from PAUSD. The 1998-99 budget will incorporate Council direction regarding new or expanding levels of service, which may include services related to downtown safety, the Family Resource Center, the Emergency Master Plan, and the Library Master Plan. As information is available from the Palo Alto Medical Foundation/South of Forest (PAMF/SOFA) coordinated area plan, recommendations for both operating and capital budget programs will be included in the proposed budget. The Historical Regulations Program and the Public Safety Building project are on timelines that may be outside of the budget process. However, depending on the timing of Council review, some or phases may be incorporated into the 1998-99 Budget. Enterprise Fund Guideline~s The proposed operating budget for the Enterprise Funds will include recommendations regarding any chahges in rate structures or programs in the affected funds caused by the passage of Proposition 218. CMR:413:97 Page 3 of 5 Rate adjustments for the Refuse, Water, Storm Drainage and Wastewater Collection Funds may be proposed, taking into account the restrictions imposed by Proposition 218. The proposed budget will include funding for a consultant study of the Utilities Enterprise Methodology (UEM) used to calculate the equity transfers from the Electric, Water and Gas Funds to the General Fund. The study will evaluate the UEM, as well as consider alternative ratemaking methodologies and make recommendations accordingly. Depending on negotiations with the City of Los Altos, the proposed budget may include funding for acquisition of the remaining portion of the former Los Altos Treatment Plant site that will be converted to a collection and staging yard for the Refuse Fund. If negotiations for revision and renewal of the PASCO contract for refuse collection are completed, the 1998-99 budget will include the outcome of those negotiations. The remaining operational recommendations from the Utilities Department organizational review will be implemented as part of the 1998-99 budget. The proposed budget will begin to implement the mandates of AB 1890. As part of AB 1890, funds for "public benefits" programs will be included to promote energy efficiency, energy conservation and new investment in renewable energy resources and technologies. Cat~ital Irnprovement Progam The 1998-99 Capital Improvement Program (CIP) for General Fund departments will focus on reducing the backlog of currently funded CIP projects by strictly limiting new projects. New project requests would be considered only if they are required for health and safety reasons, are legally required, or respond to Council direction. Certain ongoing projects, such as streets resurfacing, sidewalk repairs, and funding for playgrounds, irrigation, and amenity improvements in the parks are proposed to continue to receive funds. Provided there are sufficient revenues, the 1998-99 budget will maintain the $4 to $5 million General Fund CIP, as has been true for the last several years. Staff anticipates that ongoing projects and new projects which are required for health and safety reasons, or are legally required, will use some portion of these funds. It is likely that CMR:413:97 Page 4 of 5 the rest of the funding will be targeted to high priority Council-directed capital projects. The CIP will continue to utilize the Town Design Consultant to incorporate aesthetic and design improvements in projects. Emphasis will be placed on mitigating the physical impact of a project, and providing estimates of the cost of aesthetic improvements. The budget will include a recommendation for a CIP to upgrade the incinerators at the Regional Water Quality Control Plant and associated debt funding required to finance the project. The Utility Funds will not be subject to the same General Fund CIP recommended ~guidelines. The 1998-2003 Utility Funds CIP will be prepared as a traditional five- year CIP. FISCAL IMPACT The fiscal impact of the guidelines is unknown at this time. ENVIRONMENTAL IMPACT There is no Environmental Assessment required to adopt the guidelines. ATTACHMENTS Attachment A: Attachment B: 1998-99 Projection General Fund Summary 1998-99 General Fund Summary Assumptions PREPARED BY: Virginia Harrington, Budget Manager DEPARTMENT HEAD APPROVAL: Melissa Cavallo Acting Director CITY MANAGER APPROVAL: CC: n/a Manager CMR:413:97 Page 5 o1’ 5 Attachment A 1998-99 Projection General Fund Summary ($000’$) Adjusted Adopted Projected Change Percent 1996-97 1997-98 1998-99 Change Revenues Sales Tax Property Tax Utility Users Tax Transient Occupancy Tax Document Transfer Tax Motor Vehicle Fines and Penalties Other Taxes, Fines, Penalties Service Fees and Permits Charges to Other Funds Rental Income Other Revenues Total Revenues Plus Operating Transfers In Total Source of Funds Expenditures Administrative Departments Community Services Fire Planning Police Public Works Non-Departmental Contingency for Prop 218 Total Expenditures Operating Transfers Out Total Use of Funds Net Surplus/(Deficit) 18,600 19,995 20,107 112 0.56% 7,900 8,177 8,463 286 3.50% 5,260 5,414 5,612 198 3.66% 4,580 4,900 5,497 597 12.18% 1,850 1,905 1,962 57 2.99% 2,207 2,274 2,325 51 2.24% 1,061 1,074 1,169 95 8.85% 5,118 5,253 5,456 203 3.86% 8,224 ’8,365 8,765 400 4.78% 7,190 7,411 7,633 222 3.00% 10,308 10,594 10,806 212 2.00% 7,697 7,968 8,207 239 3.00% 74,875 78,077 80,546 2,469 3.16% 12,775 12,962 ¯ 12,962 0 0.00% $87,652 $91,039 $93,508 $2,469 2.71% 12,451 12,729 12,644 (85)-0.67% 17,047 17,466 17,466 0 0.00% 12,927 12,723 12,723 0 0.00% 4,723 4,666 4,591 (75)-1.61% 15,671 15:856 15,856 "0 0.00% 10,287 10,748 10,748 0 0.00% 4,995 8,168 9,791 ’1,623 19.87% 1,000 1,000 0 0.00% 78,101 83,356 84,319 963 1.16% 6,486 6,090 6,090 0 0.00% $84,587 $89,446 $90,909 $1,463 1.64% $3,065 $1,593 $2,599 $1,006 63.17% Attachment B 1998-99 General Fund Summary_ Assumptions Revenues Sales Taxes 3.5 percent growth rate over projected 1997-98 tax receipts. Property Taxes 3.5 percent growth rate over projected 1997-98 tax receipts. Utility Users Tax Consistent with latest projected Utility rate changes and projected sales. Telephone revenues are expected to increase by 3 percent over projected 1997-98 receipts while UUT utility receipts are anticipated to remain at the same level as projected 1997-98 receipts. Transient Occupancy Tax Transient Occupancy taxes are anticipated to grow by 3.5 percent over projected 1997-98 tax receipts. Other Taxes and Fines This category includes the documentary transfer tax, motor vehicle in-lieu tax, and City violation and fine revenue. Overall, this revenue category is anticipated to increase by 3.9 percent over 1997- 98 projections. The transfer tax is projected to increase by 3.5 percent; the motor vehicle tax by 2.2 percent; and fines and penalties by 8.9 percent. Service Fees and Permits Increase of 4.8 percent over 1997-98 projections. Charges to Other Funds 3.0 percent growth rate over the 1997-98 budget. Rental Income Increase of 2.0 percent over projected 199%98 revenues. Other Revenues 3.0 percent growth rate over the 1997-98 budget.. Operating Transfers Consistent with latest Utility financial projections.