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HomeMy WebLinkAbout1996-11-19 City CouncilCity City of Palo Alto Manager’s Report TO:HONORABLE CITY COUNCIL ATTENTION: FINANCE COMMITTEE FROM:CITY MANAGER DEPARTMENT: ADMINISTRATIVE SERVICES AGENDA DATE: NOVEMBER 19, 1996 CMR:465:96 SUBJECT:PROPOSED GUIDELINES FOR PREPARATION OF THE 1997-98 INTERIM OPERATING AND CAPITAL BUDGETS REQUEST The report proposes guidelines for preparation of the 1997-98 interim operating and capital budgets. RECOMMENDATION Staff.recommends that the Finance Committee review staff’s recommendations for the 1997- 98 budget guidelines and forward them with any changes to the City Council for approval. POLICY IMPLICATIONS Guidelines were adopted for the preparation of the 1996-98 budget to reflect the Council’s priorities. The 1997-98 budget will be a one-year, interim budget. The budget guidelines should reflect changes or adjustments in policy direction. Staff will utilize the guidelines in constructing the proposed budget. EXECUTIVE SUMMARY The proposed 1997-98 budget guidelines build on the 1996-98 guidelines adopted by Council in the fall of 1995. The 1996-98 budget was a two year budget: the second year of the budget was approved in concept and the guidelines approved for 1996-98 carry through to 1997-98. The 1996-98 guidelines are summarized below with proposed additions or changes for 1997- 98 highlighted, and proposed deletions are shown with strike outs. CMR:465:96 Page 1 of 6 Staff has prepared a preliminary 1997-98 General Fund Summary (Attachment A) using the most recent revenue information. The revenues reflected in Attachment A have been adjusted based on actual receipts for 1995-96 and projected trends for 1996-97 and 1997-98. Based on preliminary assessments of the impact of Proposition 218 on the General Fund, $1.0 million has been identified as a contingency for the impact of Proposition 218. In addition, due to recent adjustments in compensation packages for various bargaining units, salary expenditures are projected to increase slightly. Including the contingency for Proposition 218, the estimates reflected in Attachment A show that the General Fund should be in a surplus situation for the 1997-98 fiscal year, based on the spending plan that was included in the two year budget. General Guidelines Operating Budget If revenues permit, salaries and benefits will be established for the 1996-98 1997’98 budget with the goal of keeping the City a competitive employer with surrounding jurisdictions, although there would be no guarantee that salaries would keep pace with the Bay Area rate of inflation. Staff will incorporate recommendations contained in the Critique of First Mission Driven Budget (CMR:347:95). These recommendations included developing an impact measure reporting and review process and implementing a new timekeeping system. "~-".........."-°’ ...........’--°:--iD Staffwill al.,,.-o,,~.~so respond to feedback received ~om the F~ance Co~ee d~g its review of~e 1995Z96 Ye~ End Key PI~ ~d Impact Me~es Repot, to renew ~pact me~es to ensue they suppo~ ~e ~ssions wi~ w~ch ~ey ~e ~sociated. The proposed budget will include the implementation of any new COuncil policies or programs that Council has approved during 1996~97; as ~ding is available. General Fund Human Service contract funding will be increased ~°"~" ycar -c"- .......... ’-"’~ ~ 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. CMR:465:96 Page 2 of 6 ~- -’"’:-- ~’~" ~-~ ...........:" ~ ........~ ~e 1997~98 budget adopted in concept b~ ~o~cil ~cluded Task ~orce reco~endations.~d~ refined b~ed on s~s experience ~Rh ~mplemen~tion o~ the T~ee Task ~orce recommendations du6ng ] The budget will include funding for the priorities that have been established by Council, including revitalization of neighb0rhood business districtsi infrastructure (continuing from 1996=97)i ~d ~c management ~d safeW (also continuing from 1996,97). Options for long-term financing of the Cubberley Community Center will be presented with the 1996-97 1997-98 budget, addressing stagnant utility user tax revenues, increasing expenditures and a limited capital program. ~ese options will build upon input received from the Finance Committee d~ng the 1996:98 budget issues discussions. additions to the 1997,98 budget must result from he~th ~d safeW issues; legal and regulatory mandates, and responses to Co, oil direction~ Other programmatic proposals will be held for the next two year budge~ 1998~2000, Re 1997~98 budget Will incorporate Council d~eCtion; as available~ regarding the establishment of a Family Resource Center: The 1997-98 budget will reflect the results of acomprehensive review of traffic issues. infrastructure program, Any changes to the General Fund budget required dueto the passage of~oposition 218 will be recommended with the 1997~98 budget: ~e attached General F~d summary earmarks $1 ;0 million for the potentifl impact of Proposition 218. CMR:465:96 Page 3 of 6 Utili .ty Funds Rate increases will be considered based on ongoing operational and capital needs. indicated potential rate increases for Water and Refuse Rates in 1997:98. Reserve levels in the Utility Funds that exceeded the Council approved maximum level at the end of tsk04-9-5 1995,96 will be reviewed. Staff will make recommendations on potential adjustments in those funds with excess reserve balances as part of the 1996-97 1997:98 budget. Staff will incorporate the results of the Utilities Organizational Review, as appropriate, in the 1997-98 Budget. The proposed budget will include a recommendation for reserving additional Electric Fund monies beyond what has currently been allocated to the Calaveras Reserve, to support projected stranded costs of purchasing power in anticipation of increased competition in the electric industry. Recommendations from the study of the competitiveness of the Water Utility, including the use of possible debt financing for the capital improvement program, will be included inthe 1997-98 budget. Any changes to the Refuse and Storm Drainage rate structure and operating budgets due to the of Proposition 218, the Jarvis Initiative, will be recommended with the 1997-98 budget, Capital Improvement Program Provided there are sufficient revenues, the 1996-97 1997-98 budget will at least maintain the $4.0 million General Fund Capital Improvement Program (CIP) ($1.0 million in streets and sidewalks projects and $3.0 million in other General Fund projects). The CIP will continue to utilize the Town Architect concept 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. CMR:465:96 Page 4 of 6 The General Fund CIP will continue to provide augmented funding ($300,000 to $400,000 per year) for parks, focusing on playground, irrigation and park amenity improvements. The General Fund CIP will be analyzed to ensure that the work program it represents, along with the backlog of already approved capital projects, can be accomplished within a reasonable time frame after the appropriation for the project is approved by Council. o~,~,, ,,,,, ,,,~.,.,,~,~,,,~. L.,..,. ,~ "~s ,~,,~,~,,~,~, that the The Bu odule is the first module of the comprehensive infrastructure report; and will be presented to the Finance Committee in T..I.. 1 nn~o~,: ..,~.,, November 1996. After Council review, it will be incorporated as appropriate in the 1997-98 CIP during the Interim Budget process. Recommendations and prioritization of projects from the following four modules of the comprehensive infrastructure review will not be incorporated until the 1998-2000 budget. Funding for the implementation of the capital improvements to specific Palo Alto Unified School District (PAUSD) fields, through the joint sharing agreement with PAUSD, will be included in the Interim Budget. Once the Comprehensive Plan is approved by the Council, an implementation plan, which includes short-term and long-term financing, will be incorporated, as appropriate, into the 1997-98 Budget. 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 1997-98 General Fund Summary and Assumptions CMR:465:96 Page 5 of 6 PREPARED BY: Virginia Harrington, Budget Manager DEPARTMENT HEAD APPROVAL: CITY MANAGER APPROVAL: CC: n/a Deputy City Manager, e Fleming Manager CMR:465:96 Page 6 of 6 Attachment A Preliminary 1997-98 General Fund Summary ~ v e_n Sales Taxes Property Taxes Utility Users Tax 1996-97 1997-98 Projected Changes Adopted Budget 1997-98 Budget Adopted in Budget Concept % Change Transient Occupancy Tax Other taxes, fines & penalties Service fees and permits Charges to Other Funds Rental Income Other Revenues Total Revenues 17,169 17,5 t 2 19,887 2,375 13.6% 7,772 7,928 8,195 267 3.4% 5,167 5,187 5,177 (10)-0.2% 3,930 3,930 4,900 970 24.7% 4,741 4,814 5,297 483 10.0% 8,639 8,735 8,735 0 0.0% 7,190 7,331 7,331 0 0.0% 9,890 9,923 9,923 0 0.0% 7,349 7,340 7,340 0 0.0% 71,847 72,700 76,785 4,085 5.6% Plus Operating Transfers In 12,775 13,327 13,327 0 0.0% Total Source of Funds $84,622 $86,027 $90,112 $4,085 4.7% Expenditures Administrative Departments 11,945 12,038 12,038 0 0.0% Community Services 16,300 16,580 16,580 0 0.0% Fire 12,569 12,821 12,821 0 0.0% Planning 4,142 4,101 4,101 0 0.0% Police 15,161 15,215 15,215 0 0.0% Public Works 10,010 10,207 10,207 0 0.0% Non-Departmental 7,711 8,336 9,291 955 11.5% Contingency For Proposition 218 1,000 1,000 100.0% Total Expenditures 77,838 79,298 81,253 1,955 2.5% Operating Transfers Out 5,696 4,829 6,000 1,171 24.2% Total Use of Funds $83,534 $84,127 $87,253 $3,126 3.7% N’~t Surplus/(Deficit)$1,088 $1,900’~2,859 $959 50.5 % Preliminary 1997-98 General Fund Summar_v.,Assumptions Revenues Sales Taxes 4.5 percent growth rate over projected 1996-97 actual tax receipts. Property Taxes 3.0 percent growth rate over projected 1996-97 actual tax receipts. Utility Users Tax Consistent with latest projected Utility rate changes and projected sales. Telephone revenues projected to remain relatively flat compared to projected 1996-97 receipts. Transient Occupancy Tax 7.0 percent growth rate over projected 1996-97 actual tax receipts. Other Taxes and Fines This category includes the documentary transfer tax, motor vehicle in-lieu tax, and City violation and fine revenue: 3.0 percent growth rate over projected 1996-97 revenue. Service Fees and Permits t. 1 percent growth rate over the 1996-97 budget. Charges to Other Funds 2.0 percent growth rate over the 1996-97 budget. Other Revenues No growth compared to 1996-97 budget. Operating Transfers Consistent with latest Utility financial projections. Expenditures Non-Departmental Slight increase in salaries due to the impact of union negotiations since the 1996-98 Budget was adopted by Council. In addition, an increase is projected for the General Fund’s contribution towards a proposed computer replacement fund. Contingency for Impact of Proposition 218 Projected possible impact of Proposition 218 on the General Fund. Operating Transfers Out Increase reflects traditional level of CIP spending instead of the interim CIP level that was originally included in the 1997-98 budget.