HomeMy WebLinkAboutStaff Report 120-10TO: HONORABLE CITY COUNCIL
FROM: CITY MANAGER DEPARTMENT: ADMINISTRATIVE
SERVICES
DATE: JANUARY 25, 2010 CMR: 120:10
REPORT TYPE: Consent
SUBJECT: Finance Committee Recommendation to Adopt an Ordinance Authorizing the
Closing of the Budget for the 2009 Fiscal Year; Approval of 2009
Comprehensive Annual Financial Report (CAFR) and Approval of a Budget
Amendment Ordinance (BAO) to Reinstate a $809,000 Transfer from the
General Fund Budget Stabilization Reserve (BSR) to the Technology Fund in
Fiscal Year 2010
RECOMMENDATION
The Finance Committee and Staff recommend that Council adopt the attached Ordinance
authorizing closing of the Budget for the Fiscal Year ending June 30, 2009. In addition, the
Finance Committee recommended approval of the City's 2009 Comprehensive Annual Financial
Report (CAFR) (Attachment 13 to CMR 460:09; electronic copy available at
www.cityofpaloalto.org/depts/asd/financial reporting.asp and hard copies are available at the
Administrative Services Office upon request) and a Budget Amendment Ordinance (BAO) for
Fiscal Year 2010 to reinstate a $809,000 transfer from the General Fund Budget Stabilization
Reserve to the Technology Fund (attachment B to CMR 479:09). The BAO was presented to the
City Council on December 14, 2009 (CMR:479:09), but was deferred to a "date uncertain".
Subsequently, the Finance Committee, on December 15, 2009 recommended approval of the BAO
with the CAFR.
BACKGROUND
As customary, the City Council is required to close out its financials each fiscal year. At its
December 15, 2009 meeting, the Finance Committee unanimously approved the closing of the
2009 fiscal year. The General Fund ended the fiscal year with a balance of $809,000 after not
CMR 120:10 Page 1 of 2
making the $4.8 million transfer for its share of allocated costs to the Technology Fund. The
Finance Committee voted unanimously that the balance of $809,000 in the General Fund be
transferred to the Technology Fund to make up part of the original $4.8 million transfer that was
delayed. The full amount of the $4.8 million IT transfer that was delayed will be repaid over four
years starting in Fiscal Year 2010. The payback amount for Fiscal Year 2010 is $1.2 million
$809,000 of which is covered by the attached BAO and the remaining $391,000 will be included
in the midyear budget for Fiscal Year 2010 on March 2. Please refer to the background section of
the attached CMR 479:09 for additional details.
PREPARED BY:
TRUDY EIKENBERRY
Accounting Manager, Administrative Services
DAVID MBERG
Assistant Director, Administrative S rvices
DEPARTMENT HEAD APPROVAL:
OPE' .Z
Director, Administrative Services
CITY MANAGER APPROVAL:
ATTACHMENTS
Attachment A: CMR 460:09
Attachment B: CMR 479:09
Attachment C: Minutes from the Finance Committee Meeting of December 15, 2009
CMR 120:10 Page 2 of 2
ATTACHMENT A City of Palo Alto
City Manager's Report
TO: HONORABLE CITY COUNCIL
ATTENTION: FINANCE COMMITTEE
FROM: CITY MANAGER DEPARTMENT: ADMINISTRATIVE
SERVICES
DATE: DECEMBER 15, 2009 CMR: 460:09
REPORT TYPE: ACTION
SUBJECT: Recommendation Regarding Adoption of Ordinance Authorizing
Closing of the Budget for the Fiscal Year Ending June 30, 2009,
Including Reappropriation Requests, Closing Completed Capital
Improvement Projects, Authorizing Transfers to Reserves and
Approval of Comprehensive Annual Financial Report (CAFR)
RECOMMENDATION
Staff recommends that the Finance Committee review, provide input, and forward the attached
ordinance (Attachment A) and associated exhibits to the City Council for its approval to: close
the Fiscal Year (FY) 2009 Budget; authorize re -appropriation of FY 2009 funds into the FY
2010 Budget (Exhibits A & B); close completed capital improvement projects (Exhibit C); and
transfer remaining balances to the appropriate reserves (Exhibits D & E for General Fund and
Exhibits F & G for Enterprise Funds). In addition, staff recommends the Finance Committee
review and forward to the City Council for its approval the City's Comprehensive Annual
Financial Report (CAFR) (Attachment B).
BACKGROUND
The attachments to this report provide the necessary documents for closing the FY 2009 Budget
and reauthorizing FY 2009 funds for the current FY 2010. In addition, they provide detailed
information on the City's financial activities for FY 2009. This CMR highlights key fiscal issues
affecting the City of Palo Alto. The Management Discussion and Analysis (MD&A) chapter of
the CAFR (Attachment B) also provides a discussion and analysis of the City's current fiscal
health and includes financial statements, and performance information that is compared to the
prior year, and capital asset and debt administration data.
CMR:460:09 Page i of 4
DISCUSSION
Economy
The weak economy has had a significant impact on key General Fund revenue sources. Key
revenues have declined since FY 2008. Rising unemployment, tight credit markets and loss of
consumer confidence have affected revenue streams and present significant financial challenges
for the City. Due to worsening fiscal conditions, preliminary FY 2009 financials were discussed
with Council on December 1, 2009. As discussed in those reports, these challenges are structural
and must be addressed. Staff continues to work with City Council to address these challenges.
Results by Fund
General Fund
For FY 2009, the General Fund had a year-end shortfall of $4.8 million. This shortfall was
primarily due to our failure to achieve $4.8 million of targeted savings in salaries and benefits
during the second half of the year (of the $8 million plan), because of a staff error in accurately
tracking those targeted savings. That said, the error masked the fact that the City could not have
achieved those savings and would have had to make future cuts or budget reductions. In order to
balance the budget this FY, staff postponed a budgeted $4.8 million transfer to the Technology
Fund. This one-time deferral was the General Fund share of technology cost allocations and it
will be addressed in a four year funding plan. The final FY 2009 result for the General Fund is a
net gain of $809,000 compared to. a net gain of $3.0 million the prior year. The $2,2 million
decrease was primarily due to revenue decreases in sales tax of $2.5 million, and documentary
transfer tax of $2.2 million. The year-to-year difference would have been greater without the
deferral of the GF technology transfer. The net gain of $809,000 reflects yearend accounting
transactions and increases the Budget Stabilization Reserve. At the direction of the Finance
Committee and pending full Council approval, staff will return to Council on December 14,
2009, with a Budget Amendment Ordinance (13A0) to transfer $809,000 to the Technology Fund
from the General Fund Budget Stabilization Reserve in FY 2010
At fiscal yearend, the fund balance for the General Fund totaled $43.2 million. This was
comprised of reserves for:
Encumbrances, notes, prepaid expenses, unrealized gain and inventory
$12.6 million
Budget Stabilization Reserve
$24.7 million
Equity Transfer Stabilization Reserve
$3.6 million
Reappropriation Reserve
$2.3 million
Details of the GF are presented in Exhibit E and discussed in the MD&A pp, 14-16.
Capital Projects Fund
For FY 2009, the Capital Projects Fund reported $24.0 million in expenditures and other uses, an
increase of $2.3 million from prior year. This level of expenditures is consistent with the City's
effort to rehabilitate and maintain its existing infrastructure. The Capital Projects Fund balance
totaled $36.0 million, a decrease of $2.3 million. As of June 30, 2009, the Infrastructure
Reserve (IR) balance was $7.0 million, a decrease of $10.9 million from prior year, due to funds
being committed to Council -adopted projects. The Encumbrance Reserve is $11.2 million, $6.9
CMR:460:09
Page 2 of 4
million higher than the prior year. Reappropriation Reserve balance increased by $1.7 million
from prior year for a total of $17.7 million. A number of completed and closed projects with
remaining balances at the end of FY 2009 totaling $211,000 will be returned to the Infrastructure
Reserve. This provided an additional source of revenues to the IR. (MD&A p. 16).
Overall, the following summarizes changes to the City's General and Capital Fund reserves:
• The General Fund Budget Stabilization Reserve (BSR) is 17.4 percent of budgeted
expenditures and operating transfers for FY 2010. This percentage is within the Council
approved guidelines of 15 to 20 percent and shows a closing balance of $24.7 million, a
decrease of $1.4 million from the prior year.
• Budget transactions included in the attached ordinance decreased General Fund reserves
by $34,000 (Exhibit A).
• The Infrastructure Reserve has a final balance of $7.0 million at the end of FY 2009.
Enterprise Funds
The Rate Stabilization Reserves (RSRs) for the combined Enterprise Funds decreased by a net
$28.5 million. Major changes include a $7.7 million decrease in the Water Fund. Primarily due
to increased reappropriation reserves of $9.4 million for the Emergency Water Supply Project
(CIP WS -08002), and a $7.6 million decrease in the Electric Fund, was primarily due to an $8.7
million increase for utility purchases and a $2.5 million increase in surplus energy costs. Cost
increases resulted from the need to purchase high -cost power due to unfavorable weather
conditions (that is, less hydropower available). Wastewater Treatment Fund had a decrease of
$8.3 million for an ending balance of negative $15.6 million compared to a negative $7.3 million
in prior year. The negative balance is due to an increase in reappropriation reserve of $11.6
million for the Disinfection Facility Improvement Program (CIP WQ-06014). The Refuse Fund
had a decrease of $6.7 million for a negative ending balance of $2.9 million. The Refuse Fund's
updated forecasted closure costs for the landfill resulted in $3.1 million of additional costs. The
Refuse Fund also had increased encumbrance and reappropriation reserves of $1.1 million for the
Relocation of Landfill Facilities Project (CIP RF-07001). The Storm Drain Fund had an increase
of $286,000 but still has a negative ending balance of $1.1 million. The reserve was negatively
impacted by a $510,000 operating reappropriation for customer rebates for innovative storm
drain improvement projects. The Storm Drain capital project spending is decreasing; therefore,
the additional increase in income due to the rate increase passed in April 2005 should return the
reserve to a positive balance by the end of FY 2010. Exhibit G provides the balance changes for
all reserve categories for the Enterprise Funds (MD&A p.17-18). At the end of FY 2009, a
number of Enterprise Fund CIP projects were completed and closed (Exhibit C). The remaining
balances of these projects reverted to their respective reserves.
RESOURCE IMPACT
Adoption of the attached budget -closing ordinance (Attachment A) allows for the re -
appropriation and carryover of funding from the FY 2009 budget so that specific operating
programs and capital projects can be completed in the current fiscal year (Exhibit B). In addition,
by closing completed capital improvement projects, balances (Exhibit C) are returned to the
original funding source for future appropriation. Exhibits D and F summarize financial results for
CMR:460;09 Page 3 of 4
original funding source for future appropriation. Exhibits D and F summarize financial results for
the General Fund and Enterprise Funds, respectively, by providing an analysis of the
performance of these funds in comparison to the budget as adopted and adjusted by Council.
Exhibit E reflects the changes to and status of major reserves.
POLICY IMPLICATIONS
This recommendation is consistent with existing City policies.
ENVIRONMENTAL REVIEW
The action recommended is not a project for the purposes of the California Environmental
Quality Act.
PREPARED BY:
A
TRUD EIKENBERRY
Accounting Manager, Administrative Services
Assistant Director, Administrative Services
DEPARTMENT HEAD APPROVAL:
CITY MANAGER APPROVAL:
or, Administrative Services
S KEENE
Manager
ATTACHMENTS
Attachment A: Budget Closing Ordinance
Exhibit A — Detailed Changes to the Adjusted Budget
Exhibit B — Fiscal Year 2009 Re -Appropriation Requests
Exhibit C — Capital Improvement Projects Completed in FY 2009 and Closed
in Fiscal Year 2010.
Exhibit D — General Fund Summary
Exhibit E — General Fund Reserve Summary
Exhibit F — Enterprise Summaries
Exhibit G — Enterprise Reserve Summary
Attachment B: CAFR
CMR:460:09 Page 4 of 4
ATTACHMENT A
ORDINANCE NO.
ORDINANCE OF THE COUNCIL OF THE CITY OF PALO ALTO
AUTHORIZING CLOSING OF THE BUDGET FOR THE
FISCAL YEAR ENDING JUNE 30, 2009
The Council of the City of Palo Alto does ordain as
follows:
SECTION 1. The Council of the City of Palo Alto finds
and determines as follows:
A. Pursuant to the provisions of Section 12 of Article
III of the Charter of the City of Palo Alto and .as set
forth in Section 2.28.070 of the Palo Alto Municipal Code,
the Council on June 9, 2008 did adopt a budget for fiscal
year 2009; and
B. Fiscal year 2009 has ended and the financial
results, although subject to post -audit adjustment, •are now
available and are herewith reported in summarized financial
Exhibits "A", "B", "C", "D", "E", "F", and "G" prepared by
the Director, Administrative Services, which are attached
hereto, and by reference made a part hereof.
SECTION 2. Pursuant to Section 2.28.080 of the Palo
Alto Municipal Code, the City Manager during fiscal year
2009 did amend the budgetary accounts of the City of Palo
Alto to reflect:
A. Additional appropriations authorized by ordinance
of the City Council.
B. Amendments to employee compensation plans adopted
by the City Council.
C. Transfers of appropriations from the contingent
account as authorized by the City Manager.
D. Redistribution of appropriations between
divisions, cost centers, and objects within various
departments as authorized by the City Manager,
E. Fiscal Year 2009 appropriations which on July 1,
2008 were encumbered by properly executed, but uncompleted,
purchase orders or contracts.
Page 1 of 6
ATTACHMENT A
SECTION 3. The Council hereby approves adjustments
to the fiscal year 2009 budget for Fund Balancing Entries
as shown on attached Exhibit "A".
SECTION 4. The Council hereby re -appropriates
fiscal year 2009 appropriations in certain departments and
categories, as shown on the attached Exhibit "B", which
were not encumbered by purchase order or contract, at year
end into the fiscal year 2010 budget.
SECTION 5. The fiscal year 2009 encumbered
balances for the departments and categories shown on
Exhibit "D" shall be carried forward and re -appropriated to
those same departments and categories in the fiscal year
2009 budget.
SECTION 6. The City Manager is authorized and
directed:
A. To close the fiscal year 2009 budget accounts in
all funds and departments and, as required by the Charter
of the City of Palo Alto, to make such interdepartmental
transfers in the 2009 budget as adopted or amended by
ordinance of the Council; and
B. To close various completed Capital Improvement
Projects (CIP) as shown in Exhibit "C" and move all
completed CIP to their respective reserve funds indicated
in Exhibit "G"; and
C. To establish reserves as shown in Exhibits
and "G" for all Funds as necessary to provide for:
(1) A reserve for encumbrances and re -
appropriations in the various funds, the
purpose of which is to carry forward into
the fiscal year 2010 budget and continue, in
effect, the unexpended balance of
appropriations for fiscal year 2009
departmental expenditures as shown in
Exhibits "E" and "F"; and
(2) Reserves for Advances to
Stores Inventory, and other
accordance with ordinance
guidelines as shown in Exhibit
Other Funds,
reserves in
and policy
"E"; .and
Page 2 of 6
ATTACHMENT A
(3) A reserve for general contingencies of such
amount that the City Council has approved;
and
(4) Reserves for utilities plant replacement,
rate stabilization, and other reserves in
accordance with Charter and policy
guidelines as shown Exhibit "G".
D. To fund the Budget Stabilization Reserve in
accordance with the General Fund Reserves Policy adopted by
the City Council.
SECTION 7. The Emergency Preparedness Fund is hereby
decreased by Sixteen Thousand Five Hundred Twenty Nine
Dollars ($16,529) as described in Exhibit "A". This
transaction will change the Emergency Preparedness Fund
Balance to $6,000.
SECTION 8. The Public Services Donation Fund is
hereby decreased by Ten Thousand Nine Hundred Eight Dollars
($10,908) as described in Exhibit "A". This transaction
will change the Public Services Donation Fund Balance to
$777,000.
SECTION 9. The Child Care Fund is hereby decreased
by Six Thousand Two Hundred Eighty Dollars ($6,280) as
described in Exhibit "A". This transaction will change the
Child Care Fund Balance to $335,000.
SECTION 10. The Community Development Block Grant
Fund is hereby increased by Twenty Nine Thousand Eight
Hundred Dollars ($29,800) as described in Exhibit "A" This
transaction will change the Community Development Block
Grant Balance to $3,355,000.
SECTION 11. The Housing In -Lieu Fees Fund is hereby
decreased by One Hundred Thousand Dollars ($100,000) as
described in Exhibit "A". This transaction will change the
Housing In -Lieu Fees Fund Balance to $4,564,000.
SECTION 12. The Local Law Enforcement Block Grant
Fund -is hereby decreased by Twenty Thousand Four Hundred
Two Dollars ($20,402) as described in Exhibit "A", This
transaction will change the Local Law Enforcement Block
Grant Fund Balance to $1,000,
Page 3 of 6
ATTACHMENT A
SECTION 13. The Recovery Act JAG Fund is hereby
decreased by Four Thousand Eight Hundred Twenty Dollars
($4,820) as described in Exhibit "A". This transaction will
change the Recovery Act JAG Fund Balance to $24,000.
SECTION 14. The Electric Supply Rate Stabilization
Reserve is hereby increased by the sum of One Million Eight
Hundred Six Thousand Three. Hundred Ninety Two Dollars
($1,806,392), as described in Exhibit "A". This transaction
will change the balance in the Electric Supply Rate
Stabilization Reserve to $41,442,000.
SECTION 15. The Electric .Distribution Rate
Stabilization Reserve is hereby decreased by the sum of One
Million Seven Hundred Nineteen Thousand Sixe Hundred Twenty
Two Dollars ($1,719,622) as described in Exhibit "A". This
transaction will change the Electric Distribution Rate
Stabilization Reserve to $6,341,000.
SECTION 16. The Electric Fiber Optics Sub -fund Rate
Stabilization Reserve is hereby increased by the sum of
Four Thousand One Hundred Thirty One Dollars ($4,131) as
described in Exhibit "A". This transaction will change the
Electric Fiber Optics Sub -fund Rate Stabilization Reserve
to $6,436,000.
SECTION 17. The Gas Supply Rate Stabilization
Reserve is hereby increased by the sum of One Thousand Nine
Hundred Forty Seven Dollars ($1,947) as described in
Exhibit "A". This transaction will change the Gas Supply
Rate Stabilization Reserve to $8,733,000.
SECTION 18. The Gas Distribution Rate Stabilization
Reserve is hereby increased by the sum of Thirty Seven
Thousand One Hundred Thirty Three Dollars ($37,133) as
described in Exhibit "A". This transaction will change the
Gas Distribution Rate Stabilization Reserve to $4,449,000.
SECTION 19. The Wastewater Collection Rate
Stabilization Reserve is .hereby increased by Fifty Four
Thousand Four Hundred Eighty Dollars ($54,480) as described
in Exhibit "A". This transaction will change the
Wastewater Collection Rate Stabilization Reserve to
$6,001,000.
SECTION 20. The Water Rate Stabilization Reserve is
Page 4 of 6
ATTACHMENT A
hereby increased by the sum of Thirty Eight Thousand One
Hundred Thirty Two Dollars ($38,132) as described in
Exhibit "A". This transaction will change the Water Rate
Stabilization Reserve to $5,400,000.
SECTION 21. The Wastewater Treatment Stabilization
Reserve is hereby increased by the sum of Six Hundred
Eighteen Thousand Eight Hundred Ninety Eight Dollars
($618,898) as described in Exhibit "A". This transaction
will change the Storm Drainage Rate Stabilization Reserve
to ($15,602,000).
SECTION 22. The Printing and Mailing Fund is hereby
decreased by One Hundred Three Thousand Three Hundred
Twenty Seven Dollars ($103,327) as described in Exhibit
"A". This transaction will change the Printing and Mailing
Fund Balance to $84,000.
SECTION 23. The Technology Fund is hereby decreased
by Six Hundred Fifty .One Thousand Seven Hundred Three
Dollars ($651,703) as described in Exhibit "A". This
transaction will change the Technology Fund Balance to
$8,366,000.
SECTION 24. Upon completion of the independent audit,
detailed financial statements reflecting the changes made
by the Sections 7 through 23 of this ordinance shall be
published as part of the annual financial report of the
City as required by Article III, Section 16, of the Charter
of the City of Palo Alto and in accordance with generally
accepted accounting principles.
SECTION 25. As specified in Section 2.28.080(a) of
the Palo Alto Municipal Code, a two-thirds vote of the City
Council is required to adopt this ordinance.
SECTION 26. The Council of the City of Palo Alto
hereby finds that the enactment of this ordinance is not a
project under the California Environmental Quality Act and,
therefore, no environmental impact assessment is necessary.
SECTION 27. As provided in Section 2.04.330 of the
Palo Alto Municipal Code, this ordinance shall become
effective upon adoption.
INTRODUCED AND PASSED:
Page 5 of 6
ATTACHMENT A
AYES:
NOES:
ABSTENTIONS:
ABSENT:
ATTEST:
City Clerk Mayor
APPROVED AS TO FORM: APPROVED:
City Attorney City Manager
Director of Administrative
Services
Page 6 of 6
Exhibit A
CITY OF PALO ALTO
FISCAL YEAR ENDING JUNE 30, 2009 BUDGET SUMMARY
DETAIL CHANGES TO THE ADJUSTED BUDGET
Fund
Cost
Center
Comm.
Item
FY 2009
Year End Ad'
Description
GENERAL FUND
Use Changes
Net Changes To (From) Reserves
17300000 32060 5,911 Transfer to fund training and safety
17300000 33450 10,618 Transfer to fund emergency meals
70191001 various 4,744 Transfer to fund special events
70191003 32070 6,164 Transfer to fund housekeeping
19300000 31070 3,490 Transfer to fund program and project contract services
19300000 39040 2,790 Transfer to fund print and mailing services
33,717
(33,717)
Fund Balancing Entries 17300000 38500 (16,529) Decrease Changes In Other Fund Balance
19100000 38500 (10,908) Decrease Changes in Other Fund Balance
19300000 38500 (6,280) Decrease Changes in Other Fund Balance
SPECIAL REVENUE FUNDS
Community Development Block Grant
60232002 30010 15,938 Transfer to fund regular salaries
Use Changes 15,938
23200000 38500 45,738 To correct posting of FY 2009 carryforward
Corrections 45,738
Net Changes To (From) Reserves 29,800
Fund Balancing Entries 23200000 38500 29,800 Increase Changes in Other Fund Balance
Housing In -Lieu Fees
60233002 35010 100,000 Transfer to budget for HTSCC grant funds
Use Changes 100,000
Net Changes To (From) Reserves (100,000)
Fund Balancing Entries 23300000 36500 (100,000) Decrease Changes in Other Fund Balance
Local Lavin Enforcement Block Grant
70249001 31220 20,402 Transfer to fund instruction and training
Use Changes 20,402
Net Changes To (From) Reserves (20,402)
Fund Balancing Entries 70249001 38500 (20,402) Decrease Changes in Other Fund Balance
Recovery Act JAG
70251001 31220 4,820 Transfer to fund instruction and training
Use Changes 4,820
Net Changes To (From) Reserves (4,820)
Fund Balancing Entries 70251001 38500 (4,820) Decrease Changes in Other Fund Balance
ENTERPRISE FUNDS
Electric Fund
20000021 39100 (80,378) To correct Utilities Administration charges
20000031 39100 (6,392) To correct Utilities Administration charges
Page 1 of 3
Exhibit A
CITY OF PALO ALTO
FISCAL YEAR ENDING JUNE 30, 2009 BUDGET SUMMARY
DETAIL CHANGES TO THE ADJUSTED BUDGET
Fund
Use Changes
Cost
Center
Comm.
Item
FY 2009
Year End Adj
(86,770)
Description
Net Changes To (From) Reserves 86,770
Fund Balancing Entries 20000020 38040 80,378 Decrease in Distribution RSR- Electric
20000030 38170 6,392 Increase in Supply RSR- Electric
Fiber Optics Fund
20000081 39100 (4,131) To correct Utilities Administration charges
Use Changes (4,131)
Net Changes To (From) Reserves 4,131
Fund Balancing Entries 20000080 38040 4,131 Increase Rate Stabilization Reserve
Gas Fund
20000041 39100 (37,133) To correct Utilities Administration charges
20000051 39100 (1,947) To correct Utilities Administration charges
Use Changes (39,080)
Net Changes To (From) Reserves 39,080
Fund Balancing Entries 20000040 38040 37,133 Increase in Distribution RSR- Gas
20000050 38170 1,947 Increase in Supply RSR- Gas
Water Fund
20000061 39100 (38,132) To correct Utilities Administration charges
Use Changes (38,132)
Net Changes To (From) Reserves 38,132
Fund Balancing Entries 20000060 38040 38,132 Increase Rate Stabilization Reserve
Wastewater CollectionFund
20021202 38790 (33,797) To close CIP Project WC -01005 (Sewer Rehabilitation and Augmentation
Proejct #14)
20000071 39100 (20,683) To correct Utilities Administration charges
Use Changes (54,480)
Net Changes To (From) Reserves 54,480
Fund Balancing Entries 20000070 38040 54,480 Increase Rate Stabilization Reserve
Utilities Administration Fund
20000002 19100 (188,796) To correct Utilities Administration charges
Source Changes (188,796)
Wastewater Treatment Fund
50060201 38790 (600,000) To close CIP Project WQ-06013 (Sludge Ash Processing and Beneficial
use) and return balance to reserve
50060201 38790 (16,898) To close CIP Project WQ-97070 (Wastewater Solids Disposal) and return
balance to reserve
Use Changes (616,898)
Net Changes To (From) Reserves
616,898
Page 2 of 3
Exhibit A
CITY OF PALO ALTO
FISCAL YEAR ENDING JUNE 30, 2009 BUDGET SUMMARY
DETAIL CHANGES TO THE ADJUSTED BUDGET
Fund
Fund Balancing Entries
INTERNAL SERVICE FUND
Printing & Mailing Fund
Cost
Center
Comm.
Item
FY 2009
Year End Adj
Description
50060001 38040 618,898 Increase Rate Stabilization Reserve
40030202 30010 103,327 Transfer to fund regular salaries
Use Changes 103,327
Net Changes To (From) Reserves (103,327)
Fund Balancing Entries 40030001 38090 (103,327) Decrease Retained Earnings
Technology Fund
40070003 30010 59,013 Transfer to fund regular salaries
40070301 30030 8,767 Transfer to fund temporary salaries
40070302 31050 180,365 Transfer to fund contract services
various 31990 336,850 Transfer to fund other contract services
40070003 32260 233 Transfer to fund electrical
40070002 33020 1,500 Transfer to fund city membership
40070205 33040 52,703 Transfer to fund telephone and noncity utilities
40070003 33060 22 Transfer to fund travel and meetings
various 33700 12,250 Transfer to fund temporary parking permit
Use Changes 651,703
Net Changes To (From) Reserves (651,703)
Fund Balancing Entries 40070001 38300 (651,703) Decrease Reserve for Technology
Page 3 of 3
Exhibit B
FY 2009 REA
`PROPRIATION REQUESTS
MARY OF REQUESTS
Total Requests
Total Recommended
$ 2,264,907
$ 2,264,907
$ 521,095
$ 521,095
1
$ 180,365
$ 180,365
$ 1,387,380
$ 1,387,380
$ 4,353,747
$4,353,747
$
AMOUNT
INTENDED USE
COMMENTS/REASONS
FOR NOT COMPLETING IN FY 2609
STATUS
City Manager's Office
$111,500
Senior Games
Sponsorship
This reappropriation is being requested for a
sponsorship agreement for the 2009 National
Senior Games as approved by Council. When
Council approved the agreement in March
2009, there was no appropriation of funds
associated with the approval. The FY 2010
City Manager's Office budget does not have
the funds to cover these one-time expenditures.
As such, a reappropriation of savings is being
requested from the FY 2009 budget to cover
expenditures associated with the 2009 Senior
Games to be held August 1-15, 2009.
Recommended $111,500. There is
sufficient balance in the Fiscal Year
2009 budget that can be
reappropriated.
Planning Department
$32,107
Comprehensive Plan
Amendment
This reappropriation is being requested for the
Comprehensive Plan Amendment. This project
was the result of a colleague's memo to update
the Comprehensive Plan through 2020 to
identify future growth and ensure sufficient
services to serve existing and future needs and
address sustainability, The Comprehensive
Plan Amendment is a multi -year project and
this $32,107 budget balance needs to be
reappropriated into FY 2010 for the ongoing
project costs.
Recommended $32,107. There is
sufficient balance in the Fiscal Year
2009 budget that can be
reappropriated.
$17,500
Alternative Modes
Program
This reappropriation is being requested for the
City's Bicycle Transportation Plan input into
the Comprehensive Plan. Due to workload
issues, this project was not completed in FY
2009. This project will be implemented in the
Fall.
Recommended $17,500. There is
sufficient balance in the Fiscal Year
2009 budget that can be
reappropriated.
Page 1 of 5
$
AMOUNT
INTENDED USE
COMMENTS/REASONS
FOR NOT COMPLETING IN FY 2009
- STATUS _
$53,800
Study of parking
permit program for
College Terrace
This reappropriation is being requested for the
study of a residential parking permit program
in College Terrace. On October 25, 2001, as a
condition of their General Use Permit with
Santa Clara, Stanford University paid $100,000
to the City for study of a residential parking
permit program in College Terrace. Funds
were held in a deposit account until they were
ready for use. At mid -year FY 2009, the City
Council authorized moving the funds into the
Transportation Section budget and proceeding
with the study. The $53,800 remaining is
reserved specifically for that project to
implement any recommendations adopted by
the City Council. Staff will obtain Council
approval of the program in July 2009, and
implementation of the project will then begin.
Recommended $53,800. There is
sufficient balance in the Fiscal Year
2009 budget that can be
reappropriated.
_
$50,000
Speed Surveys
This reappropriation is being requested for the
completion of speed surveys to justify radar
enforcement on Palo Alto streets. The
California Traffic Control Device Committee
sets the guidelines on how to perform the
survey analysis. Staff wanted to wait for their
decision so that the testing analysis would not
be obsolete. Staff will proceed with the speed
surveys because the California Traffic Control
Device Committee did not make a decision
until this Spring.
Recommended $50,000. There is
sufficient balance in the Fiscal Year
2009 budget that can be
reappropriated,
Non -Departmental
$2,000,000
City Manager Housing
This reappropriation is being requested for the
purchase of a home for the City Manager. The
City Manager expects to complete a home
purchases in FY 2010.
Recommended $2,000,000. There is
sufficient balance in the Fiscal Year
2009 budget that can be
reappropriated.
Utilities Department- Fiber Optics Fund
$11,000
Broadband Project
This reappropriation is being requested for the
development of a broadband project to attract
federal stimulus funds. Council originally
appropriated $300,000 to support negotiations
with a consortium of films that intended to
bring fiber to the premises. The remaining
balance of $11,000 is needed in the next fiscal
year for technical assistance to pursue federal
stimulus funds.
Recommended $11,000, There is
sufficient balance in the Fiscal Year
2009 budget that can be
reappropriated.
Page 2 of 5
$
AMOUNT i
INTENDED USE
COMMENTS/REASONS
FOR NOT COMPLETING IN FY 2009
STATUS
Public Works
Department- Storm Drainage Fund
$510,095
Storm Drain Innovative
Improvements
This reappropriation is being requested for
customer rebates for innovative storm drain
projects. Annually since FY 2006, CIP SD-
06105 Storm Drain Innovative Improvements
has been funded for innovative storm drain
projects on public and private property.
Rebates are provided for projects that protect
storm water quality and reduce the quantity of
storm runoff. Funding has been more
appropriately moved from the capital budget to
the operating budget, and the remaining
balance needs to be reappropriated to provide
funding for future rebates along with those in
process.
Recommended $510,095. There is
sufficient balance in the Fiscal Year
2009 budget that can be
reappropriated.
—
Administrative Services Department- Technology Fund
$180,365
Application Software
Replacement
This reappropriation is being requested for
application software replacement. With the
increased workload during the technical
upgrade of SAP and the migration of the utility
billing system, some work needed to be
reprioritized as staff was not able to complete
all of the plans for FY 2009. Among the items
that are planned to be addressed are the
migration of GIS data from the Utilities
Engineering group to the Enterprise GIS, the
completion of the Information Technology
Strategic Plan update, upgrading of software
for the Budget Division and potentially
performing modifications to the City's web site
as identified by the Public Web Committee.
Recommended $180,365. There is
sufficient balance in the Fiscal Year
2009 budget that can be
reappropriated.
Page 3 of 5
CAPITAL IMPROVEMENT PROJECTS (CIP)
Yk
7'F"i'
_':�
SIP
M 4-' i -
AMOUNT
s,tl f I F'3• -
ANT N �?, 5 . _.>5
e, , Zf Spa S �`'?I ' ",-f
k�«t t 3
ME IS'
QR: l0 GPMP .ETiNG IN'F,Y.20R9 _.
£' ii€ ��
Y
_
: T. <� = s.. :' TA
Police Department
.
PD -07000
$400,000
Mobile
Command
Vehicle
This reappropriation is being requested
because staff has concluded that a
mobile command vehicle could be
designed to act as a back-up 911 center
during a major disaster and could be
used as a regional asset but the cost is
more than the original budget.
Additional funding of $300,000 is
anticipated with the recent approval of
$150,000 from the Homeland Security
Grant Program (HSGP) and $150,000
from Bay Area Urban Area Security
Initiative (UAS1) program.
Recommended $400,000. There is
sufficient balance in the Fiscal Year 2009
budget that can be reappropriated.
Fire Department
FD -08001
$60,000
Fire Station #6
Improvements
This reappropriation is being requested
to remodel the station kitchen and
adjoining dayroom which are well used
and show extreme wear and safety
issues.
Recommended $60,000. There is sufficien
balance in the Fiscal Year 2009 budget that
can be reappropriated.
Planning
Department
PL -07000
$60,000
Traffic Calming-
Downtown
North Traffic
Circles-
Hardscape
In 2004, the City installed traffic
calming measures in the Downtown
North. In 2005, after an evaluation of
the measures, the City Council accepted
them as a permanent installation, with
the additional direction that hardscape
be installed on the traffic circles. This
project was delayed due to staffing
vacancies' in the Planning and
Transportation Division.
Recommended $60,000. There is sufficien
balance in the Fiscal Year 2009 budget that
can be reappropriated.
Page 4 of 5
CAPITAL IMPROVEMENT PROJECTS (CIP)
sY _ p
X'rl- t{ YY�.d 1 ytT x 1
l�h __ »b• '?fit '34i yam. y E JJ --< 4
STATUS .`
C[
�F� lry1t�(.�
A Olt T
t - t a n
1 TENDS USA'
r �, (t �s F �� � � A7
�M/x rF�e sf`1yjfjN�� S. �} S;
IVI (RE V�,'�, f
,. C0 Tf FY 09
Planning Department
PL -07001
$837,380
lntermodal
Transit Station
This reappropriation is to provide funds
for the conceptual plan, final design, and
implementation of connectivity
improvements in the vicinity of the Palo
Alto lntermodal transit center. The
Metropolitan Transportation
Commission (MTC) was in the process
of developing a way finding plan for the
station area and the City did not want to
duplicate their efforts. This project will
focus on areas not covered by the MTC
plan such as lighting improvements on
the pathways to and from the station
area.
Recommended $837,380. There is
sufficient balance in the Fiscal Year 2009
budget that can be reappropriated.
Planning Department
PL -07003
$30,000
Caltrain Station
Connectivity
Improvements
Projects
This reappropriation is to provide funds
for the conceptual plan, final design, and
implementation of connectivity
improvements in the vicinity of the Palo
Alto lntermodal transit center. The
Metropolitan Transportation
Commission (MTC) was in the process
of developing a way finding plan for the
station area and the City did not want to
duplicate their efforts. This project will
focus on areas not covered by the MTC
plan such as lighting improvements on
the pathways to and from the station
area.
Recommended $30,000. There is sufficient
balance in the Fiscal Year 2009 budget that
can be reappropriated.
.
Page 5 of 5
Exhibit C
City of Palo Alto
CAPITAL IMPROVEMENT PROGRAM PROJECTS
Cotpletedand Closed in FY2009
PROJECT NUMBER
PROJECT TITLE
PROJECT
BALANCE
t eneral Fund
AC -02024 Children's Theater System 0
CA -01014 Community Services Facility Lighting Enhancements 0
FD -09002 Jaws of Life Hurst Tool Replacement 221
LB -94018 Library Automation Service 159
OS -07002 Foothills Interpretive Center & Maintenance Yard Parking Lot 0
OS -07003 Foothills Park Maintenance Building Rehabilitation 1,718
OS -99005 Cubberley Athletic Field Irrigation 0
PD -07001 SWAT Van Replacement 0
PD -99013 Police Records Management System 6,027
PE -00101 Foothills Park Vista Hill 0
PE -00105 Embarcadero Road Median Improvements 2,973
PE -01013 El Camino Median Landscape Improvements 512
PE -01021 Homer Avenue Undercrossing 0
PE -04011 Cambridge Parking Structure Improvements 0
PE -05300 Arastradero Preserve Gateway 844
PE -06004 Bowden Park Improvements 0
PE -06008 Johnson Park Improvements 0
PE -06012 Cubberley Landscaping Improvements 0
PE -07002 Hoover Park Improvements 0
PE -07003 Ramos Park Improvements 0
PE -07006 Boulware Park Improvements 0
PE -07009 Baylands Athletic Center Fencing and Dugout 36,404
PE -07011 Library Service Model Analysis 0
PE -08002 Peers Park Improvements 82
PE -89004 Yacht Harbor Improvements 10,016
PE -96008 Downtown Urban Design Improvements 0
PE -98003 Mitchell Park Facilities Improvements 75,064
PE -99006 MSC Feasibility Study (Pub Bldg -MSC Seismic Ret.) 0
PF-00020 Office Space Renovation and Construction 0
PF-01005 Lucie Stern Community Center Improvements 0
PF-04001 General Buildings Study 0
PF-06003 Cubberley Community Center Fire Alarm System 0
PF-07010 Main Library Improvements 0
PF-09001 Downtown Library Mechanical and Electrical Upgrades 0
PF-90018 Cubberley Building Code Construction 0
PG -00010 Park Facilities Improvements 0
PG -04010 Stanford / Palo Alto Playing Fields 0
PG -07000 Heritage Park Playground Public/Private Park 0
PG -08001 Golf Course Driving Range Turf and.Netting 47,165
PL -02023 South El Camino Master Schematic Design 0
PL -99023 Page Mill / Hanover Intersection Improvements 0
Total $ 181,185
" General Fund CIP Projects were identified as closed in FY 2009. The balance of these projects will be returned to
reserve in FY2010 midyear.
(Internal Service Fund
TE-88022
VR-06800
Computer Aided Mapping
MTBE Investigation at Fire Station 2
Total
0
0
$0
1
Exhibit C
City of Palo Alto
CAPITAL IMPROVEMENT PROGRAM PROJECTS
Completed and Closed In FY 2009
!PROJECT NUMBER
[Wastewater Collection Fund _ J
WC -01005**
[Wastewater Treatment Fund 1
WQ-06013**
WQ-97070**
PROJECT TITLE
•1 PROJECT
1 BALANCE
Sewer System Rehabilitation and Augmentation Project 14 33,797
$33,797
Sludge Ash Processing and Beneficial Use
Wastewater Solids Disposal Project
**Projects are closed. No expenditures were incurred in the current fiscal year.
600,000
16,698
$616,898
2
Exhibit D
GENERAL FUND SUMMARY ($0005;)
2008-09
2008-09
2008-09
2008-09
2008-09
2008-09
2008-09
Adopted
Adjusted
CAFR Basis
Allocated
Encum+
Budgetary
Variance
Budget
Budget
RevIExp
Charges
Reapprop
Rev/Exp
Adj Budget
Revenues
Property Taxes
23,510
25,098
25,445
n/a
25,445
347
Sales Taxes
22,402
20,015
20,089
n/a
20,089
74
Utility Users Tax
10,783
1 1,024
11,030
n/a
11,030
6
Transient Occupancy Tax
8,424
7,250
7,1 11
,
n/a
7,111
(139)
Other Taxes, Fines & Penalties
8,816
5,816
5,440
n/a
5,440
(376)
Charges for Services
20,849
19,938
19,769
n/a
19,768
(170)
Permits & Licenses
5,767
5, i 60
4,310
n/a
4,310
(850)
Charges to Other Funds
10,952
10,999
11,168
n/a
11,168
169
Rental Income
13,426
13,121
13,646
n/a
13,646
525
Other Revenues
3,965
4,251
6,033
11
n/a
6,044
1,793
Total Revenues -.
128,894
,122,672
112;873.
', 11,179
: nla
124;052
1,381 -
Add: Operating Transfers In
17,677
17,677
17,602
n/a
17,602
(75)
Prior Year Encum & Reapprop
4,460
4,460
n/a
4,460
-
Total Source: of Funds 146,5711
144,810
130;475
15,639
nla `'
` 146,114
I305
Expenditures
Administrative Departments
17,490
18,333
16,008
354
1,356
17,718
615
Community Services
21,600
21,918
17,450
3,705
521
21,677
241
Fire
24,260
24,212
21,904
1,493
367
23,765
447
Library
6,570
6,607
5,988
235
278
6,502
105
Planning
10,419
10,621
9,505
383
595
10,483
138
Police
29,831
29,077
26,965
1,289
209
28,464
612
Public Works
13,859
13,758
10,065
2,829
594
13,489
269
Non-Departmental/School Site
7,980
8,834
6,863
2
2,000
8,866
(32)
Total Expenditures
132,009
. - 133,36 0
'
.' 114,748
10,291
': 5;920
. - 130,964
1;396
Add: Operating Trans Out
13,300
15,817
15,814
-
15,814
3
Total .lise.of Funds
: 145,309
149,1:78
130,562
1.0,291
5,920
- 146,778
' 2,398
Net Surplus/(Deficit)
1,262
(4;369)
(86)
5,349
` (5,920)
(664).
3,703
CAFR Reconciliation:
Current year encumbrance/reappropriations
Prior year encumbrance/reappropriations
Current year stores adjustment
Prior year stores adjustment
5,920
(4,460)
(24)
37
CAFR Net Income
809
Page 1 of 1
Exhibit E
GENERAL FUND RESERVE
FISCAL YEAR
SUMMARY ($000s)
2009
PJTt #h#PE'ibA""+Sf. -Y.LM ....Y.;
Balance Net From
@ 06/30/08 Operations
b _ __ _ ,. �.� .�.,... .. ,. _ ., 3iss&E.
N
42,415 809
(3,816) 157
(648) (1,617)
(37) 13
Balance
@
06/30/09
43,224
(3,659)
(2,265)
(24)
�,ff j(' } �/ e (� ., - F y�
';4.K(111
VI 41(0.43.1,M4!
CAFR Fund Balance
Less: Encumbrances
Reappropriations
Ad ustment for Stores Operations
( l:rF 2„ 3 ,y T h
V� 9 ril 'i.--;-'4,,A,
Budgetary Fund. Balance . ' �, "-::cJ, kJ .:$
y�
� 3 1 ''' '1< fr
..37,994:. .•. F ., ,(�30).: ,
1
3' 276.
7 !� ;. .E�` �i.,j r{ 2 YJ ,y �'; -8' y, Yqj S {,b "�i.
y$ Xx A 4
����'.a���xfrt��P�? �R� Fe.1 ���¢'`i�3'��A1�3;1 4��.
Budget Stabilization Reserve
Reserve For Infrastructure Improvements
Notes Receivable Reserve
Stores Inventory Reserve
Prepaid Reserve
Unrealized Investment Gain/Loss Reserve
Reserve For Equity Transfer Stablization
Reserve For Emergencies
Adjustment for Stores Operations
26,102 (1,355)
0 0
2,255 (727)
2,999 174
2,032 (257)
1,035 1,406
3,528 108
0 0
(37) 13
24,747
0
1,528
3,173
1,775
2,441
3,636
0
(24)
Budgeta'ry.Fund Balance '
37,91 °'° (638)
37,276
Adjustment for Stores Inventory Encumbrance
Adjustment for Stores Operations
0
(24)
Total A)justm'ents ',--,e, .
, r }
. � _ .. . x'(24)
'=
Page 1 of 1
Exhibit F
WATER FUND ($000)
REVENUE
Water sales
Other revenues
Bond Proceeds
Reappropriations ! Enc
TOTAL REVENUE"_
EXPENSES
Purchases
Other Expenses
TOTAL OPERATING EXPENSES
Capital Expenses
Principal Payments
TOTAL EXF?EiJSES
FY 2008
ActuallEnc
Reapprop
25,975
3,301
3,666
J2,42
8,363
12,175
20,538
TOt.(FROM),RgpERVES
14,988
340
(2;924)
FY 2009
Adjusted
Budget
26,519
1,991
35,000
11,673
FY 2009
ActuallEnc
Reapprop
$ Variance
Favorable
(Unfavor.)
26,686 167
2,788 797
(35,000)
11,673
75,183 ::41,147 (34,036)
8,859 8,413
15,446 14,579
24,305 22,992
26,104 26,110
351
060%
-2'4;423'
351
446
867
1,313
(6)
FY 2009
Actual!Enc
Reapprop
$ Varlance
Favorable
(Unfavor.)
ELECTRIC FUND
REVENUE
Electric retail sales
Electric wholesale sales
Other revenues
Bond Proceeds
Reappropriations ! Enc
TOTALREVEN[3E
EXPENSES
Purchases
NCPA & TANC Debt Svc
Other Expenses
TOTAL OPERATING EXPENSES
Capital Expenses
Principal Payments
TOTAL' EXPl=N5EE . . . , �<
FY 2008
ActuallEnc
Reapprop
90,833
25,173
1,350
8,922
.1 26,275
71,065
8,554
40,725
120,344
15,768
100
136�i 12
(8,$34)
FY 2009
Adjusted
Budget
103,402
23,031
7,551
133,984
87,318
8,892
45,352
105,483
24,452
7,551
137,486
82,348
8,086
43,453
141,562 133,887
14,974
100
156,6$6: `
(22,552) (13,244)
2,081
1,421
3,502
4,970
806
1,899
7,675
16,743 (1,769)
100
1515;730 6;9OB
9 408'
Page 1 of 4
Exhibit F
FIBER OPTICS FUND
FY 2008
ActualfEnc
Reapprop
REVENUE
Revenues
Reappropriations 1 Enc
Tot.AC EyENUE
EXPENSES
Operating Expenses
TOTAL. OPERATING EXPENSES
Capital Expenses
TOTAL EXPENSES
YOORI M) tESERVEB`,' •
FY 2009 FY 2009 $ Variance
Adjusted ActuallEnc Favorable
Budget Reapprop (Unfavor.)
3,186 3,796
182 182
610
3,366 3 7$ 610
1,554 1,710 (156)
1,554 1,710 (156)
482 691 (209)
2,036 2,401 (365)
7,332 ` 1;577 245:
Prior to Fiscal Year 2009 the Fiber Optics Fund was reported in the Electric Fund.
GAS FUND
REVENUE
Gas retail sales
Gas wholesale sales
Other revenues
Reappropriations / Enc
FY 2008
ActuallEnc
Reapprop
48,100
2,261
7,515
TOTAL REVENUE 57,878'.
EXPENSES
Purchases 27,220
Other Expenses 12,564
TOTAL OPERATING EXPENSES 39,784
Capital Expenses 13,632
Principal Payments 415
TOTAL EXPENSES 53;831
TOI(L ROM),REStRVEs;: 4,045
FY 2009 FY 2009 $ Variance
Adjusted Actual/Enc Favorable
Budget Reapprop jUnfavor.)
50,489 47,425 (3,064)
1,376 2,062 686
8,287 8,287
0,'153,
•57,7:74
28,011 25,091 2,920
15,334 13,580 1,754
43,345
38,671 4,674
15,856 17,953
429 429
58;630' . ,.57,053
(2,097)
2,577
522 '721' s79
Page 2 of 4
Exhibit F
WASTEWATER COLLECTION FUND
REVENUE
Revenues
Reappropriations / Enc 5,966
TOTAL REVENUE 22,593
EXPENSES
FY 2008
Actual/Enc
Reapprop
16,627
Sewer Treatment Exp.
Operating Expenses
7,056
4,814
TOTAL OPERATING EXPENSES 11,870
Capital Expenses 10,229
Principal Payments
TOTAL EXPENSES
,TO/(FROM)'-RESERVES;.
55
22,154..
439:.
FY 2009 FY 2009 $ Variance
AdJusted ActuaIEnc Favorable
Budget Reapprop JUnfavor.)
15,326 15,468 142
6,845 6,845 -
22,171 22313 142.
7,539 6,131 1,408
5,397 4,785 612
12,936 10,916 2,020
10,413 11,246 (833)
58 58
23;407 22;230 1;187
(1;236)"
93 1s329'
WASTEWATER TREATMENT FUND
FY 2008
Actual/Enc
Reapprop
REVENUE
Operating Revenues 23,905
Restricted Bond Proceeds 9
Loan Proceeds 4,879
Reappropriations 1 Enc 23,804
Bonded Reappro/Encum 17
�TOTA� REI/ETJUE.'
EXPENSES
Operating Expenses
TOTAL OPERATING EXPENSES
Capital Expenses
Principal Payments
TOTAL EXPENSES
'7O!(FkOAll) RESERVES
"52,614,
16,696
16,696
30,252
355
47,303
5,311
FY 2009 FY 2009 $ Variance
AdJusted Actual/Enc Favorable
Budget Reapprop (Unravor.)
21,250
23,814 2,564
20,000 2,210 (17,790)
15,733 15,733 -
17 17 -
57,404 r`'. 41;774 '(16'226)
18,863 15,570 3,293
18,863 15,570 3,293
37,173 34,577 2,596
367 367
5fi�403 54;.514 '' S,t38 ,-
597 (8;744} i9,-337)
Page 3 of 4
Exhibit F
REFUSE FUND
REVENUE
Revenues
Reappropriations / Enc 884
FY 2008
ActuallEnc
Reapprop
29,850
TOTAL: RtV1NUE
EXPENSES
30,734
Payments to PASCO 9,276
Other Expenses 20,994
TOTAL OPERATING EXPENSES 30,270
Capital Expenses
TOTAL' EXPENSE);
TO1(FROM) R ES,RV4s
1,000
31,270`i:
($30)
FY 2009 FY 2009 $ Variance
Adjusted Actual/Ens Favorable
Budget Reapprop (Unfavor.)
32,835 30,022 (2,813)
1,874 1,874
34,709: 31"896 (2,813)
9,527 9,504 23
23,432 26,334 (2,902)
32,959 35,838 (2,879)
3,890 2,720 1,170
61849 X38;558 (1,709)
(2140. (0 662) .; "(4,522).
STORM DRAINAGE FUND
REVENUE
Revenues
Reappropriations !Eno
FY 2008
Actual/Enc
Reapprop
FY 2009 FY 2009 $ Variance
Adjusted Actual!Enc Favorable
Budget Reapprop (Unfavor.)
5,346
2,295
TOTAL REVENUE 7;641.
EXPENSES
Operating Expenses
TOTAL OPERATING EXPENSES
Capital Expenses
Principal Payments
TOT,4L EXPENSES
2,379
2,379
8,472
360
11,211
TO!(FROM) RESERVES: (3,570)
5,685 5,824 139
4,683 4,683 -
10,368. .10,507 139'
3,132 2,418 714
3,132 2,418 714
6,865 7,418 (553)
385 385
:10,882' 10, 21" 161'
(14);' " 286 100.
Page 4 014
Exhibit G
RESERVE SUMMARY ($000)
FISCAL YEAR 2009
Water
Electric
Fiber Optics
Gas
WWC
WWT
Refuse
Storm
Total
Beginning Reserves
$14,706
$131,712
$5,859
$13,461
$6,908
($4,702)
$4,468
($1,384)
$171,028
To (From) Reserves
(8,306) (13,244) 1,577
721
93
(8,740)
(6,662)
286
(34,275)
En atvesd)6.411as
:0i40':':,:::0:01.44.§:.:,-!' 7,436 .:14 82'►1
.
7,`00
, (.f ,44�)
(2,194)
(1,098)•
136,753'°
Adj Budgeted Reserves
14,400
126,467
5,127
13,022
6,738
(1,147)
3,676
(1,377)
166,906
% of Budgeted Reserves
44%
94%
145%
109%
104%
1172%
-60%
80%
82%
RESERVE DETAIL
FISCAL YEAR 2009
Water
Electric
Fiber Optics
Gas
WWC
WWT
Refuse
Storm
Total
Rate Stabilization
General RSR
$5,400
$6,436
$6,001
($15,602)
($2,844)
($1,098)
($1,707)
Supply RSR
41,442
8,733
50,175
Distribution RSR
6,341
4,449
10,790
Total RSR
5,400
47,783
6,436
13,182
6,001
(15,602)
(2,844)
(1,098)
59,258
Emergency Plant Replace
1,000
1,000
1,000
1,000
1,000
2,160
7,160
Calaveras
64,535
64,535
Underground Loan
717
717
Conservation Loan
1
-
Water Resources Board
650
650
Shasta rewind Loan
-
Central Valley Project
153
153
Public Benefit Program
4,280
4,280
Ending:(teserves • ,6,4UQ
,118,46&
7,430
i4,1$2"
7,041
(1.3,442)
.(x,194}
(1,098)
136,75 :
RATE STABILIZATION RESERVE
FISCAL YEAR 2009
Water
Electric
Fiber Optic'
Gas
WWC
WWT
Refuse
Storm
Total
Beginning RSR
$13,111
$55,418
$5,859
$12,133
$6,027
($7,285)
$3,832
($1,384)
$87,711
To(from) RSR
(7,711)
(7,635)
577
1,049
(26)
(8,317)
(6,676)
286
(28,453)
EndingRSR 5,440.
47,783
6;436
13,1$2`
�
6,io0�1
...
(15,64)2)"
,.
(2,844)
(1;098)
,.
.59,258
RSR Minimum
5,321
47,834
536
13,839
2,737
3,236
2,757
N/A
76,260
RSR Maximum
13,303
99,292
1,341
31,111
6,844
6,472
5,515
N/A
163,878
RSR % of Maximum
41%
48%
480%
42%
88%
-241%
-52%
N/A
36%
Page 1 of 1
ATTACHMENT B
City of Palo Alto
City Manager's Report
TO: HONORABLE CITY COUNCIL
FROM: CITY MANAGER DEPARTMENT: ADMINISTRATIVE
SERVICES
DATE: DECEMBER 14, 2009 CMR: 479:09
SUBJECT: Approval of the Finance Committee Recommendation to Approve a
Budget Amendment Ordinance (BAO) to Transfer $809,000 from the
General Fund Budget Stabilization Reserve (BSR) to the Technology
Fund in Fiscal Year 2010
RECOMMENDATION
Staff recommends that the City Council:
1. Approve the attached BAO to transfer from the General Fund Budget BSR to the
Technology Fund in the amount of $809,000, which represents the General Fund's Fiscal
Year 2009 year end surplus.
2. Allow for the BSR to temporarily drop below the Council approved minimum 15 percent
of General Fund expenditures.
BACKGROUND
On December 1, 2009, staff presented the Finance Committee with a preview of the 2009 Fiscal
Year-end financial results for the General Fund (GF). The FY 2009 General Fund Budget
included a mid -year budget savings and reduction plan of $8 million. The December 1 Finance
Committee Report focused on our failure to achieve $4.8 million of targeted savings in salary
and benefits during the second half of the year (of the $8 million plan) because of a staff error in
accurately tracking those targeted savings. That said, the error masked the fact that the City
could not have achieved those savings and would have had to make future cuts or budget
reductions. The error was not discovered until after the close of the fiscal year and as staff began
work on the year end closing in preparation for the audit. The effect of this error was a year end
shortfall of $4.8 million in the General Fund.
Since the City is required to have both a balanced General Fund budget and balanced budget by
department at year end, staff recommended deferring the 2009 General Fund transfer to the
Technology Fund, which also was $4.8 million. This action resulted in a balanced budget at
year-end closing. By the time of the final closing, the net shortfall was reduced to $4.0 million
due to final year-end audit adjustments that came after the deferral of transfers from the
CMR:479:09 Page 1 of 4
Technology Fund. Consequently, a positive $809,000 balance was left in the General Fund
(Attachment A: CMR:434:09). As a solution to cover the shortfall and balance the Fiscal Year
FY 2009 budget, staff proposed the postponement of a budgeted $4.8 million GF cost allocation
transfer to the Technology Fund (TF). These adjustments are currently reflected in the FY 2009
Comprehensive Annual Financial Report (CAFR).
DISCUSSION
At the December 1, 2009 Finance Committee meeting ASD staff presented a recommendation
for the year-end closing to resolve the savings shortfall that led to the $4,8 million deficit. The
recommendation was to forgo a $4.8 million cost allocation transfer from the General Fund to
the Technology Fund for fiscal year 2009. The transfer was not made in order to cover the
unrealized salary and benefit savings and to ensure that any final audit adjusting entries could be
made. An alternative could have been to draw down the General Fund's Budget Stabilization
Reserve (BSR) by $4.8 million. The primary reason for staff's recommendation to forgo the cost
allocation transfer from the General Fund is to maintain a healthy BSR. It will also help with
reserve levels that will factor into the upcoming issuance of debt for the Library Bonds. By
making the adjustment to the budget, rather than drawing on reserves, staff was able to maintain
a healthy reserve level in the BSR. This demonstrates to the rating agencies that we are able to
maintain strong reserves in the face of continuing fiscal uncertainty now and in the future. The
importance of this is to reaffirm the City's AAA rating, resulting in a better interest rate and
savings in rate costs.
The Finance Committee expressed disappointment that staff did not inform them earlier in the
process, or before the finalization of the external CAFR audit, to allow for discretion in the
decision to draw down the BSR or forgo the Technology Fund transfer. In addition, the Finance
Committee expressed a desire to return the General Fund's FY 2009 surplus of $809,000 to the
Technology Fund, adjusting the ending reserve balance to $860,000 instead of the $51,000 that
would have remained.
Fiscal Year 2010 Budget (Current Year)
The BAO action recommended by the Finance Committee amends the current FY 2010 budget.
At the December 1 Finance Committee meeting ASD, staff recommended to replenish the $4.8
million over a four year period in increments of $1.2 million beginning this year, FY 2010. The
Finance Committee made a motion to approve staff's recommendation to close out the 2009
Fiscal Year by eliminating the transfer to the Technology Fund and to recommend to the full
Council a Budget Amendment Ordinance in the FY 2010 Budget to fund the Technology Fund
with the $809,000 excess from FY 2009, plus any amount necessary to fund all of the technology
expenditures planned for FY 2010. This motion was passed unanimously by the Finance
Committee.
Funding for the planned and budgeted Technology Fund CIP projects will not be disrupted since
the General Fund is making its full budgeted contribution of $5.1 million in FY 2010 (current
year) and therefore addresses the Finance Committee's concern to maintain the 2010 capital
projects at the adopted level. Technically the $809,000 million transfer from the General Fund is
not needed to ensure adequate funding in 2010. However, it can be used to replenish the
Technology Fund reserve. The Council may want to consider adding funding of $416,000
CMR:479:09 Page 2 of 4
million with the midyear budget to reach the amount of $1.2 million to be consistent with the
four-year plan to replenish the Technology Fund.
The $809,000 million draw from the BSR will drop the balance to $21.2 million or 14.9 percent
of the 2010 adopted budget expenditure budget. The Council BSR policy calls for a minimum of
15 percent, so staff requests Council approval to temporarily reduce the BSR below the Council
approved policy. The FY 2009 fiscal closing BAO will be presented to the City Council in
January 2010 and will increase the BSR by $2.6 million, resulting in a 16.7 percent reserve level
and well within the Council approved guidelines of a minimum of 15 percent and maximum of
20 percent.
The projects listed below are from the Technology Fund's FY 2010 Capital Improvement Plan
(CIP). This can be found in the Capital Improvement Fund Financial Summary of the FY 2010
Adopted Capital Budget. Staff will discuss and seek approval from the Finance Committee and
the Council for any adjustments to project funding or to schedule it in the future. The $5.1
million the General Fund will transfer to the Technology Fund covers operating costs plus capital
costs. The budgeted CIP for 2010 is as follows:
Project No.
PRJ TE-02015
PRJ TE-05000
PRJ TE-07000
PRJ TE-08002
PRJ TE-10000
PRJ TE-10001
Description
Citywide GIS Data
Radio Infrastructure
Enterprise Application Infr Upgrade
Electronic Patient Care Report
Collections Software
Utilities Billing Improvement
Total FY2010 Adopted
Other Revenue Sources
Tech Fund Contribution
FY2010
Adopted Budget
258,632
200,000
135,000
20,000
79,800
250,000
943,432
(588,616)
354,816
During the December 1, 2009 Finance Committee meeting, the ASD director mentioned that
several projects were being delayed as a result of the foregoing of the transfer to the Technology
Fund. The projects mentioned included the Library RFID and Radio Infrastructure. As a
clarification, none of the 2010 Technology projects were requested to be deferred. Those
projects mentioned were for future years.
RESOURCE IMPACT
Approval of the attached Budget Amendment. Ordinance will transfer $809,000 from the General
Fund Budget Stabilization Reserve to the Internal Service Fund -Technology Fund Reserve. As a
result of this change, the Budget Stabilization Reserve will be reduced from $22 million to $21.2
million.
ENVIRONMENTAL REVIEW
This is not a project for the purposes of the California Environmental Quality Act.
CMR:479:09 Page 3 of 4
PREPARED BY:
CITY MANAGER APPROVAL:
ATTACHMENTS
LALO PE
Director
JA S EENE
Cit, . nager
trative Services
Attachment A: CMR:434:09 Fiscal Year 2009 General Fund Discussion and Fiscal Year 2010
Financial Results as of November 20, 2009
Attachment B: Budget Amendment Ordinance
CMR:477:09 Page 4 of 4
ATTACHMENT A
TO: HONORABLE CITY COUNCIL
ATTENTION: FINANCE COMMITTEE
FROM: CITY MANAGER DEPARTMENT: ADMINISTRATIVE
SERVICES
DATE: DECEMBER 1, 2009 CMR: 434:09
SUBJECT: Fiscal Year 2009 General Fund Discussion and Fiscal Year 2010
Financial Results as of November 20, 2009
RECOMMENDATION
Staff recommends:
1. That the Finance Committee review and provide input on the General Fund financial
resulfs for FY 2009 and preliminary results for FY 2010, including staff's proposed
financial plans for each of the two fiscal years.
2. After Finance Committee review, direct staff to present this report to the full Council in
January 2010.
BACKGROUND
Staff is providing the 2009 fiscal year-end financial results for the General Fund (GF) earlier
than usual due to the severe downturn in the economy and the impacts it has caused to the City's
financial position. Because of a higher than anticipated budget gap in Fiscal Year (FY) 2009,
staff is presenting year-end results in this report and will provide the final audited financial
statements to the Finance Committee December 15.
Looking at the current fiscal year, the continuing economic downturn requires revisiting revenue
and expense performance and potential options to close a higher than expected year-end budget
gap. In the FY 2010 budget process, a $10 million General Fund deficit was identified. This gap
was closed with a three pronged approach that relied on one-time reductions, program cuts, and
reductions in employee benefits and salaries. The latter was achieved through reductions in
benefits to SEIU and management employees and a postponement of a police union salary
increase. Unfortunately, these reductions of approximately $10 million have proven insufficient
to stem the tide of declining revenues and the City is facing an additional $5.4 million deficit.
This deficit could continue to grow if revenues do not remain stable in the second half of this
fiscal year.
CMR:434:09 Page 1 of 13
The City of Palo Alto is not alone in facing this disturbing situation. The cities of San Francisco
and Oakland have already pared their budget several times and are likely to face additional future
drops in property taxes. Jurisdictions up and down the Peninsula are facing fluid, if disruptive
revenue environments in which multiple budget adjustments are needed. Moreover, the size and
nature of the revenue shortfalls, such as shifts in consumer spending patterns, likely require long-
term structural expense changes. An updated Long Range Financial Forecast (Attachment A) is
provided to show the projected deficits the City faces in FY 2010 and beyond.
DISCUSSION
Fiscal Year 2009 General Fund Results
The drop in key revenue sources in FY 2009 required midyear budget adjustments to GF
revenues and expenditures. Early in the year, staff estimated the FY 2009 budget deficit to be $8
million and a plan was implemented to close this gap. The adjustments made to revenues at
midyear were close to projections. Unfortunately, however, the adjusted expense budget
underestimated expenditures at year end and resulted in a GF deficit of $4.8 million (in addition
to the $8 million projection). This additional shortfall was mentioned briefly during the October
5, 2009 Council meeting, but since staff did not have the specific data reviewed by the outside
auditor at that time, it has not been discussed in detail until this report. The components of the
shortfall are outlined in the following table and explained below.
Table 1
FY 2009 General Fund Deficit Summary
Salaries
($2,100,000)
Overtime
Police
Fire
($ 650,000)
(.$ 250,000)
Benefits
($1,800,000)
Total
($4,800,000)
Salaries
The salary line item was over budget due to a miscalculation in the amount of expected salary
savings. The adopted operating budget includes an annual factor for salary savings. These
savings result from 1) an expected vacancy rate or the number of positions that are not filled at
any given time throughout the fiscal year; and 2) a salary expense "cushion" resulting from
salaries being budgeted at the top step compared to actual salaries that are, for many employees
lower (e.g., new hires). During the midyear budget process, staff included a second round of
salary savings that did not materialize. The miscalculation was not recognized in time to make
additional expense adjustments. Staff has implemented monthly variance reports, as well as other
controls, to avoid such occurrences in the future.
CMR:434:09 Page 2 or 13
Overtime
Overtime costs in the Police and Fire departments exceed the budget every year due to vacancies,
disabilities, minimum staffing requirements, and staffing of Station 8 for fire protection in the
summer and emergencies. In a typical year, these overages are covered by salary savings
citywide or in the public safety departments. With the salary savings factor overestimated,
however, the savings were not there to absorb the overtime excess. Therefore, the $900,000 in
excess overtime for these two departments contributed to the FY 2009 deficit. It should be noted
that Stanford University reimburses 30.3 percent of all operating expenditures including
overtime and the State of California provided reimbursements for Fire Strike Team activities.
The $900,000 is not offset by these reimbursements. The City will receive these reimbursements
in FY 2011.
Benefits
The City has a General Benefit Fund (GBF) from which it pays its benefit expenses such as
medical and workers compensation costs. This fund, like other Internal Service Funds (e.g.,
Technology, Vehicle), typically carries a positive balance in the form of retained earnings which
covers operations and project or capital needs. In the past, the balance in retained earnings in the
General Benefits Fund helped cushion against year-end benefit expense adjustments.
Specifically, workers compensation and general liability costs, which reflect yearend actuarial
adjustments (based on incurred but not reported expenditures) can fluctuate considerably but are
not known until year end as they are based on the volume and severity of claims. In most years,
the GBF and the Fund's retained earnings are sufficient to cover unexpected liabilities as well as
any overages in other benefit categories such as medical premium expenses.
Anticipating that retained earnings in the GBF were sufficient to cover benefit expenses in FY
2009, General Fund benefit expenses were held constant from FY 2008 to FY 2009. This
practice has been implemented in past budget years in an effort to keep a reasonable balance
between retained earnings balances in the GBF and what expenses are budgeted in and allocated
to GF departments each year. Disappointingly, benefit expenses at the end of FY 2009 came in
$1.8 million over budget due to higher than anticipated claims.
Establishing an annual budget depends on a number of variables that can be difficult to predict
and are subject to change. In high performing years, the City has enjoyed considerable cushion
in its budget that has allowed midyear adjustments with negligible impact on the bottom line. In
times of sustained economic downturn, cushions such as higher than anticipated revenues, are no
longer present. Margins that are extremely tight due to falling revenues, low Internal Service
Fund reserve balances, and prior expense reductions have become tighter and more difficult to
maintain. Of the $4.8 million FY 2009 deficit shown in Table 1, only the $2.1 million in
underestimated salary expenses could have been foreseen at midyear (midyear report was
presented to the Finance Committee on March 10) and later. The remaining expenditures, on the
other hand, are finalized at year-end and thus sufficient data is not available for earlier
adjustments.
CMR:434:09 Page 3 of 13
Budget Balancing Plan for Fiscal Year 2009
In order to solve the $4.8 million deficit for FY 2009, staff proposes postponing a budgeted $4.8
million transfer to the Technology Fund. This will have the effect of lowering GF expense and
eliminating the General Fund deficit. This one-time deferral will reduce the Technology Fund's
retained earnings to $51,000 net of encumbrances and re -appropriations. The $4.8 million
transfer will result in planned technology projects such as radio infrastructure improvements and
library RFID implementation being delayed. In addition, technology infrastructure replacement
schedules will need to be revisited and adjusted accordingly. As a consequence of this action,
the Technology Fund is at an exceptionally low balance and will need to be replenished via
future transfers from the GF so as to not severely impact technology operations. Currently,
repayment over a four year period is being contemplated. The only other immediately available
option to solve the deficit would be to draw down the General Fund Budget Stabilization
Reserve, but since the City is experiencing extremely volatile economic conditions which have
implications for FY 2010 a reserve drawdown in FY 2009 is not recommended.
Fiscal Year 2010 Financial Results To Date
On September 8 and October 5 (CMR: 394:09 and CMR 358:09 in Attachment B), staff
informed Council of potential further deterioration in General Fund revenues and the possible
need for budget adjustments in excess of the $10 million in reductions already incorporated in
the Adopted FY 2010 Budget. Due to the extended recession, City revenues will fall
significantly below budget in FY 2010. Since FY 2008, sales, transient occupancy,
documentary, and interest income have fallen by a combined $8.2 million. In addition, permit,
golf course fee, and traffic fine revenue also have dropped by $1.1 million since FY 2008 due to
the economic environment. Cumulatively, this represents a $9.3 million downward, swing in GF
resources over two years and it has caused an additional budget deficit for FY 2010 which is
estimated now at $5.4 million. Attachment C shows the performance of revenues through
November 20, 2009 relative to the budget. Due to the timing of payments (e.g., sales and
property taxes) and seasonal factors, these results must be viewed cautiously.
Revenue Performance in FY 2010
Sales Tax
Sales Tax revenue is the General Fund's third highest revenue equaling 14 percent of its
resources. In recent years sales tax has become a highly volatile and fragile source of City
income. Whereas FY 2008 actual revenues were $22.6 million; it now appears the City will
realize $17.7 million in FY 2010. This represents a $5 million or 22 percent decline in a very
short period of time. To place it in perspective, this $5 million drop equals 77% of the FY 2010
Library budget.
The projected $17.7 million in ,sales tax revenue is $2.0 million below the FY 2010 Adopted
Budget. The primary cause for the decline is economic and the secondary cause is a dramatic
decrease in the amount remitted by the State in its semi-annual "triple flip" payments for FY
2010. With the exception of one economic segment (electronic equipment), all sales tax
segments — autos, department stores, miscellaneous retail, furniture/appliance had dreadful
results in the second quarter. In fact, all of these areas had the lowest "benchmark year"
performance in this quarter compared to 8 prior "benchmark year" quarters (a benchmark year is
the current quarter reporting period plus the prior 3 quarters). New auto sales fell to $1.1 million
CMR:434:09 Page 4 oft 3
compared to $1.8 million in the second quarter of 2007. For the same periods, department store
sales have fallen from $2.7 million to $2.2 million, while miscellaneous retail sales dropped from
$1.9 million to $1.5 million. Even the normally resilient restaurant sector has turned downward.
The City's outside sales tax consultant believes that sales taxes may fall as much as 15 percent in
the upcoming third quarter compared to the prior third quarter. This would be consistent with
the prior 2 quarters and would not bode well for the critical fourth quarter holiday sales season.
Furthermore, on October 14, the State notified jurisdictions of lower "triple flip" payments.
Whereas the State advanced the City $5.7 million in FY 2009, in FY 2010 its payment dropped
to $4.3 million, a 24.6 percent reduction. While there is a solid rationale for reducing the City's
"triple flip" payment given the economy and statewide sales tax receipts dropping by 20.8% in
the second quarter, the State seems to have underestimated what the City will realize in sales
taxes at year end by around $0.4 million. The State eventually will reconcile its payments to
actual results for FY 2010, but not until the following fiscal year.
In contrast, the State's "triple flip" payment to the City for FY 2009 was higher than justified by
actual results. Since the State reconciles its payments to actual results in the following fiscal
year, consequently the "true up" for FY 2009 will result in a $0.8 million reduction in payment
for FY 2010. By adopting the "triple flip" payment system to solve its budget dilemmas, the
State has further complicated sales tax projections.
Transient Occupancy Tax (TOT)
City TOT revenues have been soft. Revenues from January through June 2009 were 29 percent
below those of the prior year. In July 2009, revenues were below July 2008 by 21.3 percent.
The Senior Games did have a salutary impact in that August revenues were only 8.7 percent
below the previous August; but September's results resumed this sector's weak trend line being
21 percent below September 2008. Based on performance to date, a downward adjustment of
around $0.2 million will be recommended at midyear.
Investment Income
With the Federal Open Market Committee (FOMC) keeping interest rates low for a longer than
expected period, the City's interest income has declined. Although short-term interest rates on
Treasury instruments are close to zero percent, the City is earning nearly 4 percent on its
portfolio. This rate of return is a consequence of earlier, long-term investments that have not yet
matured. This rate will decrease and staff believes a downward adjustment in income of $0.2
million is necessary.
Property and Documentary Transfer Taxes
Property taxes are tracking close to budget and are expected to be on target at year end. Despite
a weak housing market, property values in Palo Alto have remained relatively stable. There are
indications from the County, however, that a large number of commercial properties throughout
the County are filing for reassessments which will lower future property tax receipts. No hard
numbers are available at this time, but an impact on this revenue category can be expected in the
next few years.
Although the transfer tax has fallen from $5.4 million in FY 2008 to $3.1 million in FY 2009,
receipts from July through October are only slightly lower compared to the same period of the
CMR:434:09 Page 5 of 13
prior year. This may indicate that the bottom of this revenue source has been reached and will
hold steady until year end. At this time, the budget of $2.8 million in FY 2010 for the transfer
tax appears realistic and will likely be increased to $2.9 million at midyear.
Utility Users Tax
Results to date indicate the telephone tax will exceed estimates, while utility related revenues
will be lower than anticipated. The net result is that this revenue source will likely be adjusted
upward at midyear by around $0.2 million.
Parking Violation Revenue
The City has collected $0.4 million or 20 percent of the $2.0 million budgeted in Parking
Violations to date. The number of first quarter citations issued is 29 percent lower than previous
first quarter results, while, due to a decline in downtown occupancy and the slowdown of retail
spending, the number of vehicles monitored has decreased 16 percent. Based on the 16 percent
checked for compliance, year end Parking Violation revenue is projected to be $1.5 million, or
$0.5 million short of budget. Staff will be reevaluating the cost recovery levels of the program
and make recommendations to balance revenues and expenses.
Permits
Permit processing has declined approximately 14 percent or $0.6 million. Although the
valuation of projects submitted for permit issuance is higher than the prior year, stricter lending
qualifications and conservative spending practices have lengthened the time applicants require to
finalize their projects. While some permit fees are collected at the beginning, most are
recognized when the permit is finally issued. Projects that do not go to completion do not pay
the costs of processing their permits part way. This collection system should be reevaluated to
ensure that the program is covering its costs throughout the permit process.
Plan Checking Fees
Fees for the processing of applications have declined approximately 14 percent due to the
recession. This line item is expected to be decreased at midyear by $0.3 million.
Golf Course Revenue
The economic environment has affected the number of golf rounds played in Palo Alto and
throughout the industry. The projection for FY 2010 of 76,000 rounds at the course is being
revised downward to 72,000 rounds, thus reducing revenues by an estimated $0.2 million. CSD
is examining ways to keep the golf course competitive with other nearby municipal golf courses.
It will be important to develop a long-term plan for the golf course (which is in need of
additional maintenance and upgrades) given the significant drop in rounds and as the associated
costs of running and maintaining the course continue to increase. It is important to note that the
Golf Course suffered a $0.3 million loss in FY 2009. Staff will return during the fiscal year with
further recommendations on how to address the golf course deficits and a long-term plan.
Class Registration Fees
The Community Services Department (CSD) experienced a 6 percent decline in program and
camp registrations this summer, demonstrating that the recession has had an impact on class and
program activity. CSD fee revenue will be adjusted downward at midyear by approximately
CMR:434:09 Page 6 of 13
$0.4 million. The department is working with class producers to look at new programs and
revamp old ones by using evaluation information from participants. CSD will look at new
methods of marketing (including banners through the city, school flyers and e-mail blasts from
Friends groups).
Cost recovery levels will need to be reviewed and difficult policy decisions made regarding
programs that may not be recovering their costs or are being duplicated by surrounding
competition. The City is likely at a point where it will no longer be able to sustain the number of
Comrnunity Services programs offered, and a prioritization of programs will be needed with
input from all stakeholders.
Other Revenues
This revenue source includes facility rentals, special events fees, and other miscellaneous
revenues. It will be decreased by approximately $0.3 million, due to an economy related
decrease in demand for these services.
Attachment D shows, in considerable detail,. GF revisions to revenue projections for FY 2010
and FY 2011 based on the discussion above.
Expense Performance in FY 2010
With the exception of overtime, regular salary expenses are in line with their budgeted levels.
This is supported by the discussion below on the salary savings expected in FY 2010 due to
vacancies. These savings represent one of the proposed steps for solving the expected year-end
deficit.
Overtime Expenditures Compared to Adjusted Budget
General Fund Overtime Analysis:
The following chart shows total overtime expenditures reaching 73 percent of the adjusted
budget on a citywide basis while straight line usage would indicate 39 percent usage through
November 20. The table below shows that Fire, Police, and Public Works Departments are the
principal departments exceeding their budget.
CMR:434:09 Page 7 of 13
Table 2: FY 2010 General Fund Overtime As of November 20
CITY OF PALO ALTO
FISCAL YEAR 2010 MIDYEAR FINANCIAL REPORT
AS OF NOVEMBER 20, 2009
GENERAL FUND OVERTIME
(In thousands of dollars)
(as of 11- 0.2008)
Categories
I Adopted 1 Adjusted % of
` Budget Budget Actual Adj Budget
City Attorney
City Auditor
City Clerk
City Council
City Manager 3 3
27%
Administrative Services 45 45 12
Community Services 105 105 42 40%
Library 58 58 22 38%
Fife 1,018 1,018 1,041 102%
Human Resources 4 4
Planning and Community Environment 67 67 18 27%
Police 1,000 1,000 568 57%
Public Works 113 113 75 66%
2,420 2,420 1 1,7781 73%
7
Total Overtime
7
• The Fire Department has used 102 percent of its annual overtime budget through
November 20, 2009. This is due to Station 118 staffing ($0.2 million) and Medic -1
staffing ($0,1 million), with the remaining amount of $0.7 million resulting from backfill
for minimum staffing requirements due to sick leave, vacations, and workers'
compensation light duty assignments.
• The Police Department's has used 57 percent of its annual overtime budget. The
customary work of busy shifts, case writing, investigations, and court appearances on off
days as well as an increase in the 9-1-1 dispatch center as more senior Police Dispatchers
train newer employees are the cause of Police exceeding budget to date. Traffic control
services at Stanford football games and other events are partially offset by
reimbursements from the university and organizations.
• The Public Works department has used 66 percent of its overtime budget. The
department has had limited staffing in custodial and maintenance areas and has used
overtime to maintain minimum service levels. The department is currently using limited
hourly personnel to assist with custodial and maintenance services. Overtime costs are
expected to rise further as the temporary salary budget is exhausted. This department's
OT budget is small in comparison to the Fire and Police departments.
CMR:434:09 Page 8 of 13
For historical and more detailed information on public safety overtime costs see Attachment E.
Budget Balancing Plan for Fiscal Year 2010
Although department expense budgets, as a whole, are within their expected target range, the
dramatic fall in revenues requires immediate action to achieve a balanced budget. The following
table shows the revenue adjustments discussed above and the actions recommended to close the
expected $5.4 million gap. These actions are explained below.
Table 3: FY 2010 Proposed Budget Balancing Plan
Revenue Impacts
-000s-
Sales Taxes
-2,005
Parking Violations
-460
Fees/Permits
-1,551
Return on Investments
-238
Other Revenue
-186
Increases in Specific Revenues
144
Total Revenue Impacts
-4,296
Expense Impact
-1,131
Total GF Impact
-5,427
Expense Offsets — Proposed
Salary savings - hiring freeze
1,500
Public Safety Building
2,700
Budget Stabilization Reserve
1,279
Repayment of the IT Loan
-1,225
Non -Salary Savings
1,000
$3 Million Solution Salary and Benefit
Gap to Offset
173
Total Proposed Offsets
5,427
Net Change .
0
Salary Savings
Staff is now monitoring salary savings due to vacant positions on a monthly basis. The General
Fund's has 622.51 Full -Time Equivalents (FTE) of which there are currently 45 vacant FTE.
Should the City maintain this vacancy rate, an estimated $4.1 million in savings can be realized
by year end. Of the 45 FTE, however, 10 positions are considered critical for public health and
safety and operations will be filled. This will reduce the vacancy savings by approximately $1.0
million. In addition and because of overtime costs annually exceeding budget, anticipated salary
CMR:434:09 Page 9 of 13
savings must be further reduced by $1.6 million. The net anticipated vacancy or salary savings
at year end is anticipated to equal $1.5 million at year end. Attachment F shows these savings by
department.
Public Safety Building
It is proposed that the remaining encumbrance for the public safety building capital project be
reduced by $2.7 million. These funds were designated for completing design work and since this
project has been postponed and there is no land currently identified for the building, it is
recommended they be returned to the original source of funding the General Fund's Budget
Stabilization Reserve. This project will then retain $0.3 million to allow for evaluation of
alternative facilities.
Budget Stabilization Reserve
The extraordinary economic conditions, precipitous fall in revenues, and time required for
implementing further expense reductions, cause staff to reluctantly recommend a one-time draw
on the General Fund Budget Stabilization Reserve (BSR) of $1.3 million. With the City's
participation in the California Securitization Program (CMR 413:09), the $2.5 million property
tax "loan" by the State (cited in CMR: 394:09) that would have required a draw on the Budget
Stabilization Reserve has been neutralized. The City will now receive bond proceeds through
the Program at thetime property taxes are deducted from the State, thereby keeping the GF
whole.
The one-time $1.3 million drawdown will reduce the BSR to $24.6 million or 17.4 percent of
budgeted expenditures. City policy requires that the BSR remain at a minimum of 15% of
expenditures. If the reserve falls below this level the policy will need to be amended or an
exception will need to be approved by the Council. Having a healthy level of reserves is critical
for emergencies or severe economic dislocations such as the one we are enduring. Therefore, it
is appropriate to use it in FY 2010. In future years, however, additional expenditure reductions
or revenue enhancements will be required to avoid drawing down the BSR below required
minimum levels (see Attachment A - the Long Range Financial Forecast).
Additional FY 2010 Budget Reductions and Expenses
To minimize the draw on the BSR, staff will attempt this fiscal year to find $1.2 million in non -
salary and other savings. Contracts, travel and training, and materials and services will be
scrutinized to achieve this before year end. Staff had hoped to find such savings in FY 2009 (to
offset the $1.131 million expense impact cited in Table 3 above), but was unable to identify
them. Without these reductions, an additional draw on the BSR may be needed. This will be a
challenging but necessary exercise to close the anticipated gap.
Because of the $4.8 million drawdown on the Technology Fund in FY 2009, it is important to
replenish the Technology Fund. To do so requires a $1.2 million annual payback over four
years. This payment is reflected in the Table 3 above.
FY 2010 and Future Fiscal Year Challenges
Although staff believes that if all of the above budget solutions are implemented and revenues do
not further decline, a balanced budget would result at year end, the tenuousness of the economy
and uncontrollable expenses such as general liability losses and workers compensation could
CMR:434:09 Page 10 of 13
further adversely impact the budget. The City has already made repeated and painful expense
reductions to balance its budget beginning with the dot.com bust and earlier and there are only
more painful reductions left. Meanwhile, the City faces sizeable, new expense challenges.
The Long Range Financial Forecast (LRFF) presented to Council on October 5, 2009 (CMR:
394:09) has been updated based on recent revenue and expense data. The Net Operating Surplus
(Deficit) line in the forecast for FY 2010 shows a deficit of $5.4 million in FY 2010. Below this
line are the recommended solutions (discussed above) to solve the projected deficit. Even with
the solutions proposed for FY 2010, the General Fund still shows continuing Net Operating
Deficits in Fiscal Years 2011 through 2020.
Compounding these deficits are additional costs and liabilities the City will face in the near
future. These "below the line" liabilities and costs cause the City's deficit to equal $5.6 million
in FY 2011 and to grow considerably until 2020. These include:
1) Ca1PERS will increase retirement contributions from participating jurisdictions starting in
FY 2012 due to significant losses in its investment portfolio. The City of Palo Alto
estimated increases will rise from an additional $1.0 million in FY 2012 to $5.4 million
inFY2015.
2) The annual contribution towards the citywide employee retiree medical liability will rise
by $1.4 million per year with the General Fund's share at $0.7 million
3) The new library and community center expansions and rehabilitations require
approximately $1.0 million in incremental annual operating expenses beginning in FY
2013.
4) The current rate of funding from the General Fund and Infrastructure Reserve, which is
around $9 million per year, is about $6 million less than what is required to fund the $302
million infrastructure backlog or liability. Moreover, the Infrastructure Reserve balance
currently stands at $6.4 million and is expected to decline to $2.7 million in FY 2011.
New revenues or a reallocation of expenses are necessary to fund needed infrastructure
work.
Offsetting these deficits, but not included in the LRFF, are the savings from certain benefit
changes implemented for SEIU and management employees. These include a second tier
retirement plan (2 percent at 60) for new employees and an employee contribution to medical
expenses that is to take effect in FY 2011. Similarly, the City will need to seek salary and
benefit savings from Fire and Police whose costs represent 39 percent of the GF's budget.
It should be noted that the Ca1PERS Board recently adopted a plan to share excess reserves in the
preferred provider organization health plan with local agencies by providing a two month
"premium holiday." This results in a savings to the General Benefit Fund of approximately $0.7
million citywide in FY 2010. Given the minimal balance in the GBF, staff proposes that these
savings be used to bolster the Fund's balance in preparation for any year end unanticipated
liability expenses.
CMR:434:09 Page 1 1 of 13
The recommendations to balance the FY 2010 budget primarily consist of one-time adjustments
(e.g. draw on reserves, vacancy savings) to get us through the current fiscal year. During this
time, the Council, community, and staff will need to address the long-term deficits the City
faces. In addition to further contributions by employees, expense reductions will be necessary
and must involve prioritizing City programs. Also, additional revenues must be explored.
During the FY 2010 budgeting process, the Finance Committee discussed what has come to be
known as "Tier Two" reductions (Attachment G). These reductions were placed in abeyance
until such time as a clearer revenue picture emerged in FY 2010 and need now to be revisited. In
addition, and because of the magnitude of the City's financial challenges, a list of near, medium,
and long-term alternatives are presented to foster further discussion of how to balance the
General Fund's budget (Attachment H). It is important to note that many of these options have
significant policy ramifications and/or legal or other obstacles. They are being introduced at this
time, however, as examples of issues to discuss and with the expectation that they will generate
other related solutions. The Executive Leadership Team (ELT) has scheduled a retreat to take a
comprehensive look at these initial recommendations and it is expected that this list will undergo
further refinement before it is presented to the full Council.
ELT will examine the best practices identified in a recent League of California Cities publication
("Municipal Fiscal -Health Contingency Planning," Western City, pp. 18-23) to plan for the
difficult cost reduction process ahead and for proposals to Council. General strategies
recommended include, for example:
o Proposing reductions that reflect the fewest service impacts to the community
o Describe service impacts and make process transparent to all involved parties
o Crafting operating expenditure reductions that are real and feasible
o Reductions must be ongoing and net of any related revenues, fees or grants
o Maintain essential facilities, infrastructure and equipment at reasonable levels
Once ELT develops a process and identifies possible reductions, staff will propose these to
Council.
Conclusion
Critical revenues sources have declined by a total of $9.3 million since FY 2008. The recovery
in these revenues is expected to take multiple years, and it is entirely possible that some revenue
sources never regain the levels reached in peak years. Beginning in FY 2010 the City has taken
proactive measures to begin paring back its expenses. By establishing a two-tier retirement
structure and requiring employees to contribute to medical expenses (still to be negotiated with
Fire and Police unions), the City has taken a major step toward addressing its unsustainable
expense structure. But there is considerable work ahead. Even with the current year deficit
closed, expenses will outpace revenues in each future year. The City must decide how to cut
those expenses back -- which programs and services are lowest priority. This is likely a multi-
year process.
CMR:434:09 Page 12 of 13
RESOURCE IMPACT
The discussion in this report and the financial results depicted in the LRFF indicate impacts to
the City's General Fund.
ENVIRONMENTAL REVIEW
This is not a project for the purposes of the California Environmental Quality Act.
PREPARED BY:
DEPARTMENT HEAD APPROVAL:
CITY MANAGER APPROVAL:
JOE S CI ,
Deput}Jirector of Administrative Services.
DAVID RAMBERG
Assistant Director of Administrative Services
1
LALO PEREZ
Director of Administrative Services
JAMES KEENE
City Manager
ATTACHMENTS
Attachment A: Long Range Financial Forecast
Attachment B: CMR:394:09 Fiscal Year 2010 Budget Update
CMR:358:09 Review of Preliminary FY 2009 Revenue Analysis
Attachment C: Fiscal Year 2010 General Fund Financial Report as of November 20
Attachment D: General Fund Revenue Changes for FY 2010 and 2011
Attachment E: Police and Fire Departments Public Safety Overtime Analysis for Fiscal Years
2005 through 2009, with Fiscal Year 2010 Data through November 20, 2009
Attachment F: FY 2010 Salary Savings by Department
Attachment G: Tier 2 Reductions
Attachment H: Budget Reduction Options
CMR:434:09 Page 13 of 13
Attachment A
LONG RANGE FINANCIAL FORECAST MODEL 2009 ($000)
FY 2009 FY 2010 FY 2010 FY 2041 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016
FY 2017
FY 2018
FY 2019
FY 2020
Adopted Projected
Actual Budget Budget
Revenues
Sales Taxes $ 20,069 $ 19,650 $ 17,645 $ 17,982 $ 18,430 $ 18,983 $ 19,647 $ 20,434 $ 21,200
$ 21,941
$ 22,599
$ 23,051
$ 23,588
Property Taxes 25,445 25,752 25,778 26,379 27,325 28,379 29,689 31,136 32,735
34,337
35,936
36,804
37,879
Utility User Tax 11,030 11,250 11,417 12,513 13,156 13,676 13,973 14,703 15,486
16,328
17,200
18,071
18,966
Transient Occupancy Tax 7,111 7,000 6,850 6,987 7,140 7,344 7,656 8.019 8,420
8,799
9,085
9,344
9,631
Other Taxes, Fines & Penalties 5,440 5,633 5,274 5,390 5,510 5,656 5,828 6,016 6,187
6,338
6,418
6,484
6,592
Subtotal: Taxes 69,115 69,285 66,964 69,251 71,561 74,038 76,793 80,308 84,028
87,743
91,238
93,754
96,656
Service Fees & Permits 16,210 17,437 15,814 16,576 17,800 18,133 18,661 19,397 20,162
20,958
21,784
22,719
23,690
Joint Service Agreements 7,796 7.857 7,857 8,166 8,529 8,940 9,356 9,818 10,306
10,820
11,360
11,932
12,533
(Stanford University)
Interest Earnings 2,008 1,900 1,662 1,646 1,676 1,724 1,785 1,852 1,923
2,002
2,053
2,095
2,163
Other revenues 17,246 15,352 15,235 15,484 15,764 13,977 14,330 14,695 15,070
15,456
15,854
16,26.4
46,666
Reimbursements horn Other Funds 11,483 10.643 10,644 10,799 11,078 11,392 11,785 12,260 12,755
13,274
13,815
14,382
14,930
Total Revenues 123,858 122,474 118,176 121,922 126,408 128,204 132,710 138,330 144,244
150,253
156,104
161,146
166,658
Transfers from Other Funds 17,614 19,664 19,664 18,709 19,192 19,735 20,417 21,239 22,097
22,995
23,933
24,915
25,865
TOTAL SOURCE OF FUNDS 141,472 142,138 137,840 140,631 145,600 147,939 153,127 159,569 166,341
173,248
180,037
186,061
192,523
Expenditures
Base Salaries 62,104 ,63,512 63,512 64,007 66,074 67,309 69,271 72,002 74,841
77,792
80,860
84,049
87,365
Salary & Benefit Reductions to be Negotiated rx (3,000)
PAPOA Salary Increase Deferral I' (794)
,
Negotiated Savings from SEIU (1,222) (1,222) (1,246) (1,271) (1,310) (1,362) (1,416)
(1,473)
(1,532)
{1,593)
(1,657)
Negotiated Savings from Mgml./Prof. {806) (806) {822) (839) (864) {898) (934)
{972)
(1,010)
(1,051)
(1,093)
Benefits 29,477 32,205 32,205 32,935 34,713 36,772 38,715 40,769 42,943
45,243
47,666
50,245
52,963
Subtotal: Salaries and Benefits 91,581 92,717 92,895 94,914 98,718 101,971 105,813 110,511 115,433
120,590
125,986
131,650
137,578
Contract Services 10,100 9,076 10,076 9,804 9,951 10,120 10,373 10,684 11,005
11,335
11,675
12,025
12,386
Supplies & Materials 3,023 3,547 ' 3,547 3,480 3,532 3,592 3,682 3,793 3,906
4,023
4,144
4,269
4,397
General Expense 9,008 10,193 10,193 9,870 10,121 10,385 10,881 11,002 11,330
11,670
12,020
12,381
12,665
Rents, Leases, & Equipment 1,014 1,212 1,212 1,213 1,231 1,252 1,283 1,322 1.362
1,402
1,445
1,488
1,532
Allocated Expenses 10,287 14,316 14,316 14,613 14,832 15,084 15,462 15,925 16,403
16,895
17,402
17,924
18,462
Total Expenditures 125,013 131,061 132,239 133,894 138,386 142,405 147,294 153,237 159,440
165,917
172,672
179,737
187,020
Transfers to Other Funds.
GE transfer tor lntrastructure GIP 10,397 6.180 6,180 8,501 8,844 9,211 9,604 10,024 10,474
10,955
11,470
12,021
12,610
L F transfer for other capital pf0jBOIS 4,251 3,720 3,720 1,747 1,636 1,685 1,735 1,786 1,838
1,892
1,947
2,003
2,063
Debt Service 1,082 1,086 1,086 1,080 929 752 749 754 751
753
752
754
234
Other 84 42 42 42 44 45 47 49 51
51
51
51
51
TOTAL USE OF FUNDS 140,827 142,089 143,267 145,263 149,839 154,098 159,429 165,850 172,554
179,568
186,892
194,568
201,979
Net Operating Surplusl(Deficit) 645 49 (5,427) (4,632) (4,239) (6,159) (6,302) (6,281) (6,213)
(6,320)
(6,855)
(8,505)
(9,456)
Other /divide
Additional Retirement Contribution Increase fI {1,031) (2,774) (4,963) (5,389) (5,756)
(6,140)
(6,542)
(6,963)
(6,963)
Retiree Metrical Cost Increase (735) (735) (735) (735) (735) (735)
. (735)
(735)
(735)
(735)
LibraryOperalingCostlncrease (250) (1,000) (1,000) (1,000) (1,000)
{1,000)
(1,000)
(1,000)
(1,000)
-Infrastructure Contribution Increase (1,000) (2,000) (2,000) (2,000) (2,000)
(2,000)
(2,000)
(2,000)
(2,000)
Technology Fund Repayment {1,225) (1,225) (1,225) (1,225)
Public Safety Bldg. Budget Savings 2,700
Non -salary Reductions to be Determined 1,000
Salary & Benefit Reductions to be Negotiated 173 967 986 1,006 1,036 1,078 1,121
1,166
1,212
1,261
1,311
Vacant Positions Salary Savings 1,500
Drawdown on Budget Stabilization Reserve 1,279
Subtotal • Other Activities - • 5,427 (093) (3,255) (6,728) (7,662) (8,046) (8,370)
(8,709)
(9,065)
(9,437)
(9,387)
GRAND NET SURPLUS (DEFICIT) $ 645 $ 49 S 0 $ (5,625) $ (7,493) $ (12,887) $ (13,964) $ (14,327) $ (14,583)
$ (15,029)
$ (15,919)
$ (17,942)
$ (18,642)
(1) In FY 2010, $2.8 million In budgeted salary savings realized, an additional $185 thousand In savings still needs to be achieved
(2) Police union (PAPOA) deferred their FY 2010 negotiated salary Increase of $0.8 million to FY 2011
(3) Based on current 2.7% Q 55 formula
Note: Assumption of no salary increase for SEIU and MgmifPro1. in FY 2010 and FY 2011 and no salary increase for Firefighters (IAFF) in FY 2011
,
LRFP 2089.xls Exhibits 1-3 with rR
5/2009 8:21 A
LI i T .jr rmi.-V ML 1 V LVI NI 11MIVL7G P t1YMiIY41ML. rLM1V
Attachment A
General Fund ($000)
PERCENTAGE CHANGES IN FORECAST FOR REVENUES AND EXPENSES
FY 2009 FY 2010 AB FY 2010 PB FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020
%
% Change % Change % Change Change Change Change Change Change Change Change Change Change % Change
Revenues
Safes Taxes
(11.20%) (2.19%) (12.17%) 1,91% 2.49% 3.00% 3.50% 4.01% 3.75% 3.50% 3.00% 2.00% 2.33%
Property Taxes 10.23% 1.21% 1.31% 2.33% 3.59% 3.86% 4.62% 4.87% 5.14% 4.89% 4.66% 2.42% 2.92%
Utility User Tax 7.24% 1.99% 3.51% 9.60% 5.14% 3.95% 2.17% 5.22% 5.33% 5.44% 5.34% 5.06% 4.95%
Transient Occupancy Tax (10.85%) (1.56%) (3.67%) 2.00% 2.19% 2.86% 4.25% 4.74% 5.00% 4.50% 3.25% 2.85% 3.07%
CANT Taxes, Fines & Penalties (30.88%) 3.55% (3.051) 2.20% 2.23% 2.65% 3.04% 3.23% 2.84% 2.44% 1.26% 1.03% t67%
Subtotal: Taxes (3.79%) 0.251 (3.11%) 3,42% 3.34% 3.46% 3.72% 4.58% 4.63% 4.42% 3.98% 2.76% 3.10%
Service Fees & Permits (5.431) 7.57% (2.44%) 4.82% 7.38% 1.87% 2.91% 3.94% 3.94% 3.95% 3.94% 4.29% 4.27%
Joint Service Agreements 12.40% 0.78% 0.781 3.93% 4.45% 4.82% 4.65% 4,94% 4.97% 4.99% 4.99% 5.04% 5.04%
(Stanford University)
Interest Earnings (10.041) (5.38%) (17.23%) (0.96%) 1.82% 2.86% 154% 3.751 3.83% 4.111 2.55% 2.05% 3.25%
Other revenues (4.36%) (10.98%) (11.66%) 1.63% 1.81% (11.34%) 2.53% 2.55% 2.55% 2.561 2.58% 2.59% 2.59%
Reimbursements from Other Funds 1,32% (7.321) (7.31%) 1.461 2.58% 2.83% 3.45% 4.03% 4.04% 4.07% 4.06% 4.16°/ 3.81%
Total Revenues (2.86%) (1.121) (4.59%) 3.17% 3.68% 1.42% 3.51% 4.23% 4.28% 4.17% 3.891 3.23% 3.42%
Transfers from Other Funds 2.24% 11.64% 11.64% (4.86%) 2.58% 2.83% 3.46% 4.03% 4.04% 4.06% 4,08% 4.101 3.81%
TOTAL SOURCE OF FUNDS (2.26%) 0,47% (2.57%) 2.02% 3.53% 1.61% 3.51% 4.21% 4.24% 4.15% 3.92% 3.35% 3.47%
Expenditures
Base Salaries 2.771 2,27% 0.99% 2.06% 3.23% 1.87% 2.91% 3.94% 3.94% 3.94% 3.94% 3.94% 3.95%
Salary & Benefit Reductions to Negotiated (1) N1A N/A
PAPOA Salary Increase Deferral 2) N/A
Negotiated Savings from SE1U N/A
Negotiated Savings from Mgml./Prof. N/A
Benefits (4.54%) 9.25% 9.25% 2.27% 5.40% 5.931 5.28% 5.31% 533% 5.36% 5.36% 5.41% 5.41%
Subtotal: Salaries and Benefits 0.30% 1.24% 1.43% 2.17% 4.01% 3.29% 3.77% 4.441 4.45% 4.47% 4.47% 4.50% 4.50%
Contract Services 7.37% (10.14%) (0.24%) (2.70%) 1.50% 1.70% 2.50% 3.00% 3.00% 300% 300% 3.00% 3.001
Supplies & Materials (0.10%) 17.33% 17.33% (1.891) 1.50% 1.70% 2.50% 3.00% 3.00% 3.001 3.00% 3.00% 3.00%
General Expense (1.83%) 13.15% 13.15% (3.17%) 2.55% 2.61% 2.85% 3.00% 2.99% 3.00% 3.001 3.00% 2.30%
Rents, Leases, & Equipment (10.58%) 19.53% 19.49% 0.12% 1.50% 1.70% 2.50% 3.00% 3.00% 3.00% 3.00% 3.00% 3:00°%
Allocated Expenses (30.391) 39.17% 39.17% 2.07% 1.50% 1.70% 2.50% 3.001 3.00% 3.00% 3.00% 3.00% 3.00%
Total Expenditures (43.21%) 4.84% 5.78% 1.25% 3.36°% 2.90% 3.43% 4.03% 4,05% 4.06% 4.07% 4.09°% 4.05%
Transfers to Other Funds
LiF transfer for Infrastructure UIP 46.73% (40.56%) (40.56%) 37.55% 4.04% 4.15% 4.26% 4.38% 4.48% 4.60% 4.70% 4.801 4.90%
projects (9.961) (12.49°%) (12.49%) (53.04%) (6.35%) 3.00% 2.97% 2.94% 2.91% 2.94% 2.91% 2.88% 3.00%
Debt Service (0.011) 0.38% 0.36% (0.54%) (13.991) (19.07%) (0.40%) 0.68% (0.31%) 0.151 (0.10m) 0.31% (69.04%)
Other 115.38% (50.00%) (50.00%) 0.00% ,4.001 4.001 4.00% 4.00% 4.00% 0.00% 0.00% 0.00% 0.00%
TOTAL USE OF FUNDS (39.58%) 0.90% 1.73% 1.391 3.15% 2.84% 3.46% 4.03% 4.04% 4.06% 4.08% 4.11% 3.81%
LRFP 2009.x15 Exhibits 1-3 vi,lh IR
11/25/2009 10:16 AM
Attachment A
General Fund ($000)
GENERAL FUND RESERVE SUMMARY ($000)
Adopted Protected
FY 2009 FY 2010 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020
Budget Stabilization Reserve
Beginning Balance $ 26,102 $ 24,637 $ 24,637 $ 24,637 $ 19,012 $ 11,519 $ (1,369) $ (15,333) $ (29,660) $ (44,243) $ (59,272) $ (75,192) $ (93,134)
To!(From)Reserves 645 49 0 (5,625) (7,493) (12,887) (13,964) (14,327) (14,583) (15,029) (15,919) (17,942) (18,842)
CAFR adjustments 1,581 0 0 0 0 0 0 0 0 0 0 0 0
One-time Only Increases/(Decreases) (3,691) 0 0 0 0 0 0 0 0 0 0 0 0
Ending Balance
% of Total Expenditures
$ 24,637 $ 24,686 $ 24,637 $ 19,012 $ 11,519 $ (1,369) $ (15,333) $ (29,680) $ (44,243) $ (59,272) $ (75,192) $ (93,134) $(111,976)
17.5% 17.4% 17.2% 13.1% 7.7% (0.9%) (9.6%) (17.9%) (25.6%) (33.0%) (40.2%) (47.9%) (55.4%)
LRFP 2009.KIs Exhibits 1-3 with IR 11/25/21109 10:16 AM
ATTACHMENT B
TO: CITY COUNCIL
FROM: CITY MANAGER DEPARTMENT: ADMINISTRATIVE
SERVICES
DATE: OCTOBER 5, 2009 CMR: 394:09
SUBJECT: Fiscal Year 2010 Budget Update
RECOMMENDATION
Staff recommends that Council review and provide input on the FY 2010 Quarter Update and
structural budget issues identified in this City Manager Report (CMR).
BACKGROUND
As a consequence of the "Great Recession" and the decline in economically sensitive revenues
such as sales and transient occupancy taxes (TOT), budget deficits were identified for FY 2009
and FY 2010. In the FY 2010 Operating Budget process, the City identified a General Fund $10
million budget gap. This projected deficit would have risen to $12 million had the City
incorporated a pay raise for management and SEIU employees. Hence, the budget proposal
assumed zero increases for these groups. To solve the $10 million deficit, the City implemented
$3.7 million in savings from department and service reductions (this included the elimination of
20.3 Full Time Equivalents based on vacancies and retirements); a $1.4 million .revenue
enhancement; $2.2 million in temporary reductions in transfers to the Capital Improvement and
Retiree Medical Liability Funds; and $3.0 million in employee compensation and benefit
reductions. The latter category savings was dependent on the City negotiating compensation
and/or benefit concessions from management and City unions.
The City is still in .the process of negotiating with SEIU,
management, and finalizing a salary deferral with the Police
The Fire union has decided to take its contracted salary
Management and Professional Group has already made
management compensation program (VMC) totaling $657,000
latest proposal to SEIU is available on
http://www.cityofpaloalto.orq/Iabornegotlations
discussing benefit changes with
union (approximately $800,000).
increase this fiscal year. The
a contribution in the variable
for the General Fund. The City's
the City's website at
In the City Manager's FY 2010 Operating Budget transmittal letter, the possible need to revisit
deeper service cuts and savings strategies was discussed. These deeper service cuts were
described as the "Tier 2" list (Attachment C) and they included, for example: eliminating the
disaster preparedness program; eliminating the Police traffic team; and contracting out golf and
parks maintenance work. Layoffs could result with these recommendations, which the City has
CMR:394:09 Page 1 of 7
sectors, a permanent change in consumer spending would have a substantial effect on the City's
General Fund finances,
Results to date for the transient occupancy and documentary transfer taxes have not changed
since the September 8 report. TOT receipts from January to June in FY 2009 were -30 percent
lower compared to the prior year period and July 2009 revenues were -21.3 percent under those
in July 2008. As with sales tax, if receipts do not improve, midyear adjustments of between $0.2
and $0.5 million may be needed. Documentary transfer taxes, which fell from $5,4 million in
FY 2008 to $3.1 million in FY 2009, continue to show weakness. Revenues through September
2009 were -36 percent below the same prior year period. At this time, however, staff does not
foresee adjustments to the $2.8 million to be collected in this category for FY 2010.
Attachment 13 shows actual revenue receipts through the middle of September in comparison to
the FY 2010 Adopted Budget. As mentioned, it is too early to draw firm conclusions from this
information, but in addition to the areas cited above, those that bear further scrutiny and close
monitoring are parking violations, plan checking fees, and building permits. These areas had
especially weak results in FY 2009 which may continue into FY 2010. Property taxes, the
General Funds' highest single revenue source, is expected to be close to budget at year end based
on recent County projections.
FY 2010 Expenses
As with revenues, it is too early in the year to detect important expense variances. With the
exception of overtime in the Police and Fire departments, which typically exceed their budgets
due to minimal staffing requirements, there is no discernable expense trend causing concern at
this time. If the City cannot achieve the $3 million in salary and benefit savings discussed above
and incorporated into the FY 2010 budget, a deficit would result.
"Tier 2" Items and Action
Should revenues not perform as forecast or salary or benefit concessions. by the unions and
management not be realized, the City will be forced to utilize "Tier 2" expenditure reductions.
During the FY 2010 Finance Committee budget hearings, these reductions were discussed at
length and they were called to the attention of the full Council at budget adoption. Again,
Attachment C lists these items and provides a description of the potential cuts. These include,
for example:
o Eliminating the current Disaster Preparedness program
o Eliminating the City's shuttle service
a Contracting out parks and golf maintenance work
o Eliminating Police traffic control services
Tier 2 reductions will impact services to the community and will result in position reductions.
Structural or Systemic Budget Issues
To substantiate the position that the City faces structural budget issues, staff has modified the
Long Range Financial Forecast (LRFF) presented in the FY 2010 Adopted Budget. .Based on
new data and known liabilities, the Net Surplus (Deficit) line in the forecast has been adjusted
CMR:394:09 Page 3 of 7
The current rate of funding from the General Fund and Infrastructure Reserve, which is
around $9 million per year, is inadequate to meet the annual $15 million needed to offset
the $302 million liability in any predictable or reliable way, The Infrastructure Reserve
balance currently stands at $5.2 million and is expected to decline to $1.6 million next
fiscal year. Without replenishment from General Fund surpluses over the next few years,
which will not occur, the ability to sustain $9-$10 million of annual General Fund
;infrastructure work is unlikely. New revenues are necessary.
5. Although one-time in nature and supposedly to be repaid in 3 years, the City faces a $2.5
million property tax takeaway by the State to solve its budget deficit. This cut will
decrease the General Fund's Budget Stabilization Reserve, impact the City's cash flow
and interest earnings (the City currently earns around 4 percent on its investments and
the State has proposed repaying the principal with a 2 percent interest rate), and reduce
flexibility in dealing with unforeseen needs. The City, with the League of California
Cities is exploring our options. Even with statutory protections against State takeaways
of local revenues, the State can withhold revenues in fiscal emergencies and the State's
record on coping with such emergencies is well -documented. Having solid and
substantial reserves protects the City from the State risk.
In addition to the structural issues cited above, the City faces additional threats on the revenue
side. Outlined each year in the Long Range Financial Forecast, City revenues and the services
they fund face an array of risks. These can include, for example, risks to sales tax and the TOT
through: community opposition to new business and hotel development (e.g., the loss of Hyatt
Rickey's); the potential exodus of automobile dealerships; surrounding big box stores that cause
leakage of local spending and sales tax to surrounding jurisdictions; loss of sales tax to Internet
sales; and, most recently, the threat of consumers spending less in retail areas such as the
downtown and. Stanford Shopping Center. It is important to note that nearly 50 percent of the
General Fund's roughly $20 million in annual sales tax is generated by 25 businesses. The loss
of one of these enterprises can have a substantial impact on continuing services as we know them
today.
Additionally, the impact of Statewide initiatives and legislation such as Proposition 13 (property
tax); Proposition 218 (revenue thresholds); and required super majority (2/3) approval for
General Obligation bond funding limit the City's revenue raising options. And of course, the
financial markets crisis and impact on lending as well as the dysfunction of State government all
impact the City.
Conclusions
Actual revenue and expenditure data to date do not definitively indicate new downward budget
adjustments at this moment. As additional revenue and expenditure data materializes, however,
further adjustments at midyear may be necessary.
As indicated in a prior report (October 2007) on maintaining a Sustainable Budget (CIVIR:
387:07), the City may be faced with determining its long-term service priorities. It must be
recognized that the City provides a wide and high level of service and dedicates sizeable annual
resources in such areas as the school district ($6.6 million in FY 2009 for the Covenant Not to
Develop as well as additional expenditures on field maintenance and outreach programs) and to
CMR:394:09 Page 5 of 7
PREPARED BY:
JOE SA6 CJO
De ty Director of Administrative Services
DEPARTMENT HEAD APPROVAL:
CITY MANAGER APPROVAL:
L
Director o Administrative Services
JAME EENE
City �/�. ger
z
CMR:3 94:09 Page 7 of 7
ATTACHMENT A City of Palo Alto
City Manager's Report
TO: FINANCE COMMITTEE
FROM: CITY MANAGER DEPARTMENT: ADMINISTRATIVE
SERVICES
DATE: SEPTEMBER S, 2009 CMR: 358:09
SUBJECT: Review of Preliminary FY 2009 Revenue Analysis
RECOMMENDATION
Staff recommends that the Finance Committee review and discuss preliminary General Fund
revenue performance for FY 2009.
BACKGROUND
As a result of the current recession and consequent decline of key General Fund revenue sources,
the Finance Committee requested a late summer assessment of FY 2009 revenue performance.
This assessment was to include a comparison of actual revenue receipts to the FY 2009 Adjusted
Budget and to prior year results. The variance analysis could lead to necessary mid year budget
adjustments and allow the City to be proactive in resolving unforeseen budget gaps.
It is critical to note that the FY 2009 numbers presented in this report are unaudited and that
there are potential accruals that may result in subsequent changes. Staff is not presenting a year
end expense analysis at this time. Since accruals and incurred, but not reported, expenses in such
areas as workers' compensation and general liability have not been fully booked and allocated to
departments, staff believes an expense report is premature and could be potentially misleading.
In addition, the Committee requested an earlier review of FY 2010 quarterly revenue and
expense results. Staff anticipates presenting a full analysis in late October 2009, but offers the
following insights into preliminary trends in this report.
DISCUSSION
The crucial backdrop to the results in this report is the dismal state of the economy. In what has
come to be called the "Great Recession," the City's key and economically sensitive revenue
sources have declined significantly since FY 2007-08. Rising unemployment rates, tightening
credit markets, deteriorating residential and commercial property markets, and diving consumer
confidence have driven down public revenue streams across the country. The City of Palo Alto
has not been immune from the recession.
CMR:358:09 Page 1 of 5
Documentary Transfer Tax
This important revenue source, which is based on the number and value of commercial and
residential property sales, has moved down sharply during the recession. Rising to the mid $5
million level for the past 5 years, it retreated to $3.1 million in FY 2009. While close to the
adjusted budget, this result was 42,5 percent or $2.3 million below FY 2008 results. The poor
performance is a consequence of the commercial and residential markets coming to a virtual
standstill. Commercial transactions decreased due to low occupancy rates and residential
transactions were minimal due to sellers holding onto their homes during a period of market
softness. In addition, credit conditions were abysmal due to the collapsing eredit markets for
commercial and jumbo home loans.
As with sales tax and TOT, documentary transfer tax revenue estimates for 2010 may require a
midyear adjustment. Results for the month of July 2009 were nearly 40 percent under those for
July 2008. Currently, the adopted budget for FY 2010 projects $2.8 million in transfer taxes,
$0.3 million below actual FY 2009 revenues. With credit markets slowly returning to more
normal activity, staff hopes this revenue source will rebound and obviate the need for a midyear
adjustment.
Fines & Penalties
This revenue category consists primarily of parking violations and library fines. Revenues are'
below the FY 2009 Adjusted Budget by 16.6 percent or $0.5 million, and 4.7 percent or $0.1
million below prior year results. The negative variance is primarily due to parking violations,
which came in 28 percent or $0.6 million below the adjusted budget. The combination of
industrial injuries to Community Service Officers and fewer cars in violation of parking
regulations have led to this drop. Should vacancies continue, an adjustment to adopted budget
revenues may be necessary.
Permits & Licenses
The downturn in the economy has heavily and negatively impacted building related fees. Permit
and license fees were 16.5 percent or $0.9 million below the adjusted budget and 17.4 percent or
$0.9 million below the prior year. Compared to the budget, new construction permit fees are
down 13.7 percent or $0.4 million while .plan check fees were down $0.1 million.
In the new fiscal year, July 2009 building fee revenues are up by $0.1 million in comparison to
July 2008. This may signal an upturn in this revenue category, which would preclude a midyear
adjustment.
Return on Investment
Interest income came in higher than the adjusted budget for 2009, but was under prior year
results by 6.9 percent or $0.2 million. With the Federal Reserve keeping interest rates low to
stimulate the economy, the City's portfolio yield has declined to the low 4 percent range over the
past two years. It is expected that yields will continue to decline as higher yielding instruments
mature and. the City continues to buy securities in the 3 to 4 percent range. An adjustment at
midyear may be necessary if interest rates do not trend upward.
CMR:358:09 Page 3 of 5
PREPARED BY:
JOS
Depu
CIO
Director, Administrative Services
4., — SHARON BOZMA
Budget Manager, Administrative Se
DEPARTMENT HEAD APPROVAL:
CITY MANAGER APPROVAL:
LAL
Director of Administrative Services
ices
CMR:358:09 Page 5 of 5
Attachment B
CITY OF PALO ALTO
REVENUE AND EXPENSE RESULTS THROUGH MID -SEPTEMBER
COMPARED TO THE ADOPTED FY 2009 BUDGET
GENERAL FUND
(In thousands of dollars)
IIIIINIIIIIIIIIIIIIIIMIIII
Categories
- . ,: WJDGET•:... .. . :. :
Adopted Adjusted
Budget Budget
Revenues & Other Sources
Sales Tax
19,650
19,650
Property Tax
25,752
25,752
Transient Occupancy Tax
7,000
7,000
Utility Users Tax •
11,250
11,250
Other Taxes and Fines
5,633
5,633
Charges for Services
20,238
20,238
Permits & Licenses
5,056
5,056
Return on Investment
1,900
1,900
Rental Income
13,655
13,655
From Other Agencies
92
92
Charges To Other Funds
10,643
10,643
Other Revenues
1,605
1,605
•'Total Revenues •
.122;474
.. . ..: 122,474
Operating Transfers -In
19,664
19,664
Encumbrances and Reappropriation
-
6,564
:Total Source s:of Funds . .
' ,' 142,1.38.
. 148,702:
Expenditures & Other Uses
City Attorney
2,569
3,343
City Auditor
999
1,143,
City Clerk
1,512
1,524
City Council
296
309
City Manager
2,395
2,646
Administrative Services
6,761
6,910
Community Services
21,876
22,770
Fire
25,166
25,546
Human Resources
2,837
2,970
Library
6,385
6,666
Planning and Community Environment
9,858
10,603
Police
29,996
30,239.
Public Works
13,484
14,177
Non -Departmental
6,925
8,778
Total Expenditures
'. -.131;061..
- 137,624.
Operating Transfers -Out
11,028
11,028
Total Usesof..Funds
': 1'42,0.89
.• 148,653.
Net Surplus (Deficit)
..4.
.:.49
Beginning Reserves
22,176
22,176
p ,ji..,cted: Ending Reserves . ..:. .
.roe .
.. .....,225
2
: : .; :242s,
• Excludes encumbrances, reappropriation and infrastructure reserve
. ... .. :. ::•=
.:ACTUAIS •.,
Pre
Encumbr
.... :,. .-..--.(aa.01:9.�16'09
Encumbr Actual
• •
" `. .
% of
Adjusted
Budget
-
-
1,682
9%
-
-
77
0%
-
-
578
8%
-
. -
2,357
21%
-
-
1,204
21%
-
-
2,613
13%
-
-
943
19%
-
-
5
0%
-
-
2,450
18%
-
-
15
16%
-
-
1,781
17%
-
-
935
58%
_
. . . .
. . .. 14;840 .: .
. .:
' 12%
-
-
3,808
19%
.
. 18,448
: 1.2%
21
667
539
37%
-
246
152
35%
-
17
466
33%
-
35
70
34%
33
61
487
22%
.5
187
1,296
22%
203
2,839
4,173
32%
99
495
4,800
21%
-
126
501
21%
-
164
1,169
20%
581 658
1,940
.
30%
- 18 385
5,433
19%
56 934
2,443
24%
2,000 -
1,953
45%
..
3;016 I• '6,81.4•]
...:.25,442
-.26%
-
-
1,831
17%
:...
3,016:..• ..,6,314
. :..:.•27;273
•
25%
Atta chment C
City of Palo Alto
Int ernal Budg et Heari ngs - FY 2010 S ummary
Tier 2 Items
General Fund
Department . Other Options Re venue Expense FTE
FIR Eliminate Disaster Pr eparedness Di v (33,400) (442 .826) (1.00) Occupied
CSD Park Maint enance - Contract out net e xpense (122,957) (5.00) . Occupied
CSD Golf Course Maint - Contract out net expense (176,352) (7.00) 7 Occupied
PIA Elimin ate Shuttle (256,000)
POL Traffic Team ., (100,000) (626,433) (4.00) Occupied
PO L School Res Officer Prg (161,772) (1.00) Occupied
POL Po t Record Specialist - Front Desk Records (82,773) (1.00) Occupied
PO L Program Asst 1- Crime Analysis (94,037) (1.00) Occupied
PWD Eliminate Tree Trimming Contract (379,000)
PWD Contract out Tree Trimming (46,737) (1 .00) Vaca nt
Subtotal (133,400) (2,388,887) (21 .00)
Additiona l Finance Committee "Parking Lot Recommendations
FIR Evaluate future organization of O ES Consolidation/Coordination
FIR Regionaliza tion options for Fire Services
Police Regionalization options for Police Services
Police Reduce the Police Department Budget by $500,000 - Ponce Chief to identify reductions
Police Reduce the Police Department Bu dget by $49Z000 - Finance Committee recommended reductions
Add back 0.5 Fte Volunteer Coordinator (Salary & Benefits) $ 52,000
Reduce the Traffic Team by one-half (instead of elimination)
1.0 FTE Police Officer (sa lary & benefits) (154,000)
1.0 FTE Police Agent (salary & benefits) (158,000)
Add back rev enu e 50,000
Reduce po sitions fisted below by one -half inste ad of elimination
School Resource O fficer (0.5 FTE Police Agent) (79,000)
Crime An alyst Program (0. 5 FT E C rime Analyst) (56,000)
Po lice Outreach (0. 5 FTE Pro gram Assistant!) (47,000)
Planning & Community Environment - $ 256,000
Eliminate the City's shuttle service. There are not City FTE associated with this program
and its termination would result in $256,000 in annual savings. Eliminating the shuttle
program would reduce mobility and transportation alternatives within the City.
Police Department - $ 865,015
Eliminating the Traffic Team would result in the reduction of $626,000 in expenditures
and $100,000 in revenue. Included is the reduction of four FTE. The duties normally
assigned to the Traffic Team would be assumed by patrol units.
Eliminating the School Resource Officer (SRO) Program. During the FY 2010 budget
hearings, one vacant SRO position was eliminated. The Tier 2 reduction would eliminate
the remaining SRO position which is currently filled. The expenditure reduction is
estimated at $• 162,000.
Elimination of the Crime Analysis Program. This would result in the reduction of one
F'1'E with an estimated expenditure reduction of $44,000.
Elimination of Community Policing/Outreach program, This would result in the
reduction of one FTE with an estimated expenditure reduction of $83,000.
The Finance Committee also discussed the possibility of evaluating the future of
regionalization options for the Police Department. Staff has not reviewed the cost/benefit
strips to property owners. It would require a change to policy and to the Municipal Code.
It would not impact Utilities line or emergency tree trimming clearing.
The other alternative for the Public Works Department is the contracting out of Tree
Trimming, This would result in the elimination of 1 FTE and a net expenditure reduction
of $46,000.
The Public Works Department is recommending either/or for these options, not both,
Attachment C
CITY OF PALO ALTO
FY 2010 FINANCIAL REPORT as of 11-20-09
GENERAL FUND
(In thousands of dollars)
BUDGET
Adopted
:.
Adjusted
Categories
Budget
Budget
Revenues & Other Sources
Sales Tax
19,650. 19,650
Property Tax 25,752 25,752
Transient Occupancy Tax 7,000 7,000
Utility Users Tax 11,250 11,250
Other Taxes and Fines 5,633 5,633
Charges for Services 20,238 20,238
Permits & Licenses 5,056 5,056
Return on Investment 1,900 1,900
Rental Income 13,655 13,655
From Other Agencies 92 92
Charges To Other Funds 10,643 10,643
Other Revenues 1,605 1,605
Total Revenues 122,474 122,474
Operating Transfers -In 19,664 19,664
Encumbrances and Reappropriation - 6,564
Total Sources of Funds 142,138 148,702
Expenditures & Other Uses
City Attorney
2,569 3,343
City Auditor 999 1,143
City Cleric 1,512 1,524
City Council 296 309
City Manager 2,395 2,646
Administrative Services 6,761 6,910
Community Services 21,876 22,770
Fire 25,166 25,546
Human Resources 2,837 2,970
Library 6,385 6,668
Planning and Community Environment 9,858 10,603
Police 29,998 30,239
Public Works 13,484 14,177
Non -Departmental 6,925 8,778
Total Expenditures 131,061 137,624 ,
Operating Transfers -Out 11,028 11,028
Total Uses of Funds 142,089 148,653
'Net Surplus (Deficit) 49 49
Beginning Reserves 22,176 22,176
Projected Ending Reserves 22,225 22,225
Excludes encumbrances, reappropriation and infrastructure reserve
ACTUALS
Pre
Encumbr
Encumbr
(as of 11.99-O9)
Actual
% of
Adjusted
Budget
-
-
5,510
28%
-
-
3,140
12%
-
-
1,781
25%
-
-
4,360
39%
-
-
2,092
37%
-
-
6,209
31%
-
-
1,455
29%
-
-
633
33%
-
-
4,780
35%
-
-
62
67%
-
-
3,540
33%
-
-
959
60%
-
-
.
34,521
28%
-
-
6,969
35%
-
-
41,490
28%
8
601
970
47%
-
229
296
46%
1
16
655
44%
-
31
107
45%
6
62
814
33%
-
156
2,267
35%
86
2,308
7,993
46%
10
648
9,156
38%
5
104
911
34%
48
145
2,110
35%
158
953
3,331
42%
337
319
9,877
35%
104
936
4,510
39%
-
19
2,772
32%
763
1 6,527
1
45,769
1 39%
-
-
3,646
33%
763
6,527
49,415
38%
Httacnment u
City of Palo Alto
General Fund Revenue Changes for FY 2010 and FY 2011 - Detail
($000)
Detail
Sales Taxes
Property Taxes
Transient Occupancy Tax
Utility User's Tax
City Utilities
Telephone
Sub -total - Utility User's Tax
Other Taxes and Fines
Vehicle In -Lieu
Documentary Transfer
Parking Violations
General (Fines, Forfeitures & Penalties)
Sub -total - Other Taxes and Fines
Total Taxes and Fines
Charges for Services
Stanford Fire/Police Service Reimbursement
Golf Related Fees
Class Program Fees
Paramedic Fees
Plan Checking Fees
Cable Franchise
Other Fees
Sub -total - Charges for Services
Permits and Licenses
Street Cut Fee
Permits
Licenses
Sub -total - Permits and Licenses
Charges to Other Funds
Cost Plan - Admin. Support to Other Funds
Communication - Utility Reimb. for 911 Support
Public Works Admin. Support to Ent. Funds
Other Reimbursements
Sub -total - Charges to Other Funds
Rental Income
Utilities Facility Charges
Property Rental - Cubberley Tenants
Use of City Facilities
Other
Sub -total - Rental Income
From Other Agencies
Return on Investments (Interest Income)
Unrealized Gain/Loss on Investment
Other Revenue
Total Revenues (Prior to Oper. T'fers-In)
Operating Transfers -In
Equity & Utility Transfers
Parking Districts
Other
Sub -total - Operating Transfers -In
Total Source of Funds
$ `141,472::
$142,138 $137,840 $ 4,296
$144,035 $ 140,631 $ 3,405
Adopted Revised Proposed
Budget Forecast Change
$ 19,650 $ 17,645 $ (2,005)
25,752 25,778 26
7,000 6,850 (150)
8,180 7,966 (214)
3,070 3,451
11,250 11,417
200
2,800
2,020
613
200
2,900
1,560
614
5,633 5,274
7,832
3,153
3,087
1,754
1,763
600
2,050
553
4,431
73
Adopted Revised Budget
In -Concept Forecast Change
$ 20,050 $ 17,982 $ (2,068)
26,102 26,379 277
7,300 6,987 (313)
9,218 8,993 (225)
381 .3,086 3,520
100
(460)
1
7,832 -
2,919 (234)
2,727 (360)
1,754 -
1,460 (303)
600 -
1,841 (209
703 150
3,835 (596)
73 -
5,056 4,611 (446)
8,233
512
563
1,335
8,233
512
563
1,252
10,643 10,560
10,311
1,719
1,518
106
10,311
1,801
1,440
81
13,655 /3,633
82
(78)
(25)
1,662 (238)
1,605 1,523
17,040
1,044
1,580
19,664 19,664
17,040
1,044
1,580
12,304 12,513 209
208.
2,900
2;020
609
5,737 5,390 (347
205
2,956
1,599
629
(3)
56
(421)
21
8,166
3,153
3,087
1,753
1,788
600
2,050
8;166
2,900
2,800
1,678
1,600
600
2,050
(253)
(287)
(75)
(188)
20,596 19,794 (803)
553
4,506.
73
5;131 4,876 (256)
703 150
4,100 (406)
73
8,404
512
569
1,472
8,404
512
569
1,472
10,957 10,957
10,311
1,719
1,518
106
/3,655 13,805
92 92
10,462 150
1,719 -
1,518 -
106
1,900 1,646 (254)
1,502 1,502
$125,326 $121,922 $ 3,405)
16,502
1,069
1,138
18,709
16,502
1,069
1,138
18,709
Attachment E
Police and Fire Departments
Overtime Analysis for Fiscal Years 2005 through 2009
With Fiscal Year 2010 Data Through November 20, 2009
Fiscal Year Ending June 30
unaudited thru 11/20
2005 2006 2007 2008 2009 2010
POLICE DEPARTMENT
Overtime Expense
Original Budget
Current Budget
Net Overtime Cost - see below
Remaining Budget
$974,426 $981,862 $1,015,620 $1,036.815 $999,900 $999,900
1,028,337 1,009,705 1,074,399 1,071,005 1,016,900 999,900
1,096,077 780,647 1,025,718 1,096,894 886,568 215,550
($67,740) $229,058 $48,681 ($25,889) $130,332 $784,350
Overtime Net Cost
Actual Expense $1,229,851 $1,405,155 $1,785,657 $2,009,542 $1,665,842 $567,870
Less Reimbursements
Stanford Communications 30,941 30,937 39,342 65,079 42,160 17,468
Utilities Communications Reimbursement 17.404 17,402 22,130 36,607 23,715 9,826
Local Agencies (A) 32,617 34,565 36,457 41,770 37,413 13,413
Federal Grants -
State Grants (8) 8,135 65,835 63,344 4,672 10,998 -
Police Service Fees 37,188 49,185 43,218 67,390 53,812 48,035
Other 7,489 12,447 18,157 15,982
Total Reimbursements 133,774 197,924 216,938 233,675 184,080 88,742
Less Department Vacancies 375,515 426,584 643,001 678,973 595,194 263,578
Net Overtime Cost
Department Vacancies {number of days)
FIRE DEPARTMENT
Overtime Expense
Original Budget
$1,096,077 $780,647 $1,025,718 $1,096,894 $886,568
1,642 1,733 2,280 2,766 2,402
$215,550
508
$982,674 $959,389 $1,032,674 $892,674 $1,017,674 $1,017,674
Current Budget 982,674 959,389 1,032,674 996,674 1,353,058 1,017,674
Net Overtime Cost - see below 877,892 637,310 737,768 863,442 416,610 513,685
Remaining Budget $104,782 $322,079 $294,906 $133,232 $936,448 $503,989
Overtime Net Cost
Actual Expense $1,956,529 $1,582,858 $1,860,757 $1,744,076 $1,591,261 $1,040,777
Less Reimbursements
Stanford Fire Services (D) 592,828 479,606 563,809 528,455 482,152 315,355
Cal-FireIFEMA (Strike Teams) 66,269 85,531 140,224 453,619 43,000
State Homeland Security
Grant Program (SHSGP) {C) 17,203 72,254 40,897 10,164 4,342
Urban Area Security Initiative (UASI) 26,782 1,150
Department of Homeland Security (E) 5,800
Total Reimbursements 610,031 644,911 690,237 679,993 940,113 358,355
Less Department Vacancies 468,606 300,637 432,752 200,641 234,538 168,737
Net Overtime Cost
Department Vacancies (number of days)
$877,892 $637,310 $737,768 $863,442 $416,610 $513,685
1,980 1,230 1,740 810 780 636
NOTES:
(A) Includes Animal Services contract with Los Altos, Mountain View and Los Altos Hills.
(B) State Office of Traffic -Safety and ABC grants.
(C) Included in the SHSGP and UASI reimbursements is a small amount of per diem reimbursement.
(D) Stanford reimburses 30.3% of Fire expenditures,
(E) Reimbursement from U.S. Department of Homeland Security for HazMat Continuing Challenge Training Conference (Sep 2009)
11/25/2009
Attachment F
FY 2010 Salary Savings by Department
In Thousands
Department
City Attorney
City Auditor
City Clerk
City Council
City Manager
Administrative Services
Community Services
Library
Fire
Human Resources
Planning and Community Environment
Police
Public Works
Non -departmental
Salary
Adopted
Budget
1,374
487
593
65
1,302
3,709
8,707
3,297
14,182
1,544
4,531
16,706
4,831
(1,313)
Total 60,015
Salary
Savings
Projected Year End
Overtime
Exceeding Net Salary
Budget Savings
124
25
67
5
151
147 -
276 (137)
156
1,539 (679)
193
390 (37)
1,891 (691)
337 (51)
(2,206) -
124
25
67
5
151
147
139
156
860
193
353
1,200
286
(2,206)
3,095 (1,595) 1,500
ATTACHMENT G
"Tier Two" Reductions
Dept.
Other Options
Revenue
Expense
FTE
FIR
Eliminate Disaster Preparedness
Div'
(33,400)
(442,826)
(1.00)
CSD
Park Maintenance - Contract
out net expense
(122,957)
(5.00)
CSD
Golf Course Maint - Contract out
net expense
(176,352)
(7.00)
PLA
Eliminate Shuttle
(256,000L
POL
Traffic Team
(100,000)
(626,433)
(4.00)
POL
School Resource Officer
Program
(161,772)
(1.00)
POL
Program Asst I - Police Outreach
Program
(94,037)
(1.00)
POL
Crime Analyst - Crime Analysis
Program
(111,353)
(1.00)
PWD
Eliminate Tree Trimming
Contract,
(379,000)
PWD
Contract out Tree Trimming
(46,737)
(1.00)
Subtotal
(133,400)
(2,417,467)
(21.00)
Attachment H
Budget Reduction Options
Near -Tenn Cost Savings
1. Institute a hiring freeze except for positions absolutely required for public health
and safety. The City will look at reorganization around vacant positions (short-
term within departments and long-term among departments), but it must be noted
that significant staff reductions and efficiencies have been implemented since the
"dot-com" bust
2. Freeze or cut all travel and meeting budgets unless critical to immediate public
health and safety issues
3. Institute furloughs
4. Review all consultant contracts, particularly those just starting, to determine if
needed
5. Defer any Capital Improvement Projects (ClPs) that are not absolutely essential
6. Close public safety building design CIP and return funds to reserves
7. Evaluate need for temporary positions including retirees who have been hired
back to work
8. Review staffing levels in departments where fee, fine or permit revenue has
dropped, e.g., CSD classes, parking violations, and in development center.
Design flexible budgets for these areas
9. Consider instituting a 2.5% reduction for small departments and 5% for remaining
departments
10. Institute full cost recovery for programs that provide unique and limited service to
small populations
11. Institute full cost recovery for adult classes. Revisit the non-resident fees and
examine all programs where non-residents are not paying fees for use of City
facilities.
12. Use the Budget Stabilization Reserve to balance the budget along with other
initiatives in 2010. The goal would be to make longer term decisions during the
fiscal year 2010 timeframe. The drawdown should not take the reserve lower than
15 percent of General Fund adopted budget expenditures
Medium Term
1. Institute a 5.0-7.5% equity transfer on dark fiber fund
2. Enhance and expand the Economic Develop Plan
3. Negotiate away minimum staffing levels in Fire Department
4. Have fire department use newest employees for OT work rather than most senior
staff; same for police (i.e., staff according to reverse seniority)
5. Have Fire department complete an evaluation (funds have been budgeted) on need
for current levels and configurations of fire service based on predominant number
of calls for paramedic service
6. Institute a two-tier retirement plan for public safety personnel
7. Contracting out services such as parks and golf
8. Decrease rental subsidies at Cubberley or restart negotiations with Foothill
College
9. Review all support to PAUSD to determine what the City can continue to provide
10. Review the Cubberley Lease and the Covenant Not To Develop agreement with
PAUSD to determine affordability and course of action going forward.
11. Revisit all HSRAP services to non -Palo Alto institutions with new budget cycle
and focus resources on needy seniors, children, and teens in trouble.
12. Revisit residents and businesses paying for cost for sidewalk work at 10% per
year and cap at 50% in year 5
13. Revisit policy on property rental rates to be at or close to cost recovery as
agreements come up for renewal.
14. Move all employee groups toward assuming greater share of PERs "employee"
contribution and all groups contribute towards the cost of health care.
15. Consider assessment districts — parks, sidewalks, fire and/or public safety.
16. Begin GF service priority setting process with Council and community
Long -Term
17. Revisit new conference hotel in Palo Alto
18. Develop LATP site as a source of rent or sell the land to Enterprise Funds
19. Negotiate away no minimum staffing requirement for Police
20. Review all police services for efficiencies and potential reduction in least
essential services
21. Contract out, with reasonable response time specifications, paramedic service to
outside agencies e.g., AMR
22. Begin discussion with neighboring cities e.g., Mountain View on sharing public
safety services e.g. dispatch center, SWAT, white collar units, border fire
response
23. Explore and implement new revenue opportunities
24. Revisit land'use policies to provide the most benefit to the community
ATTACHMENT B
ORDINANCE NO.XXXX
ORDINANCE OF THE COUNCIL OF THE CITY OF PALO ALTO
AMENDING THE BUDGET FOR FISCAL YEAR 2010 TO REINSTATE A
$809,000 TRANSFER FROM THE GENERAL FUND BUDGET
STABILIZATION RESERVE TO THE TECHNOLOGY FUND.
The Council of the City of Palo Alto does ORDAIN as follows:
SECTION 1. The Council of the City of Palo Alto finds and
determines as follows:
A. Pursuant to the provisions of Section 12 of Article III
of the Charter of the City of Palo Alto, the Council on June 15,
2009 did adopt a budget for Fiscal Year 2010; and
B. On December 1, 2009, staff reported to the Finance
Committee a one-time budget change to solve a $4.8 million
deficit for the Fiscal Year 2009; and
C. The one-time budget change deferred a $4.8 million cost
allocation transfer from the General. Fund to the Internal Service
Fund -Technology Fund in FY 2009; and
D. Pursuant to discussions with the Finance Committee, a
motion was passed to approve staff's recommendation to close out
the 2009 Fiscal Year by deferring the $4.8 million transfer to
the Technology Fund; and
E. The Finance Committee also passed a motion recommending
staff submit a Budget Amendment Ordinance to Council amending the
FY 2010 Technology Fund Budget in the amount of $800,000, which
was the excess from FY 2009 year end close, plus any amount
necessary to fund all of the Tech expenditures that had been
planned for FY 2010; and
F. City Council authorization is needed to transfer
$809,000 from the General Fund to the Internal Service Fund -
Technology Fund.
SECTION 2.
A. The Budget Stabilization Reserve is hereby decreased by
the sum of Eight Hundred Nine Thousand ($809,000). As a result of
this change the Budget Stabilization Reserve will be reduced from
Twenty Two Million Twenty Two Thousand Three Hundred Sixty
One($22,022,361) to Twenty One Million Two Hundred Thirteen Thousand
Three Hundred Sixty One ($21,213,361).
B. The Internal Service -Technology Fund is hereby increased
by the sum of Eight Hundred Nine Thousand ($809,000).. As a result
of this change the Internal Service -Technology Fund Reserve will be
increased from Fifty One Thousand Four Hundred ($51,400) to Eight
Hundred Sixty Thousand Four Hundred ($860,400).
SECTION 3.
As specified in Section 2.28.080(a) of the Palo Alto Municipal
Code, a two-thirds vote of the City Council is required to adopt
this ordinance
SECTION 4. The Council of the City of Palo Alto hereby finds
that this is not a project under the California Environmental
Quality Act and, therefore, no environmental impact assessment is
necessary.
SECTION 5. As provided in Section 2.04.350 of the Palo Alto
Municipal Code, this ordinance shall become effective upon adoption.
INTRODUCED AND PASSED:
AYES:
NOES:
ABSTENTIONS:
ABSENT:
ATTEST: APPROVED:
City Clerk Mayor
APPROVED AS TO FORM: City Manager
City Attorney Director of Administrative
Services
ATTACHMENT C
Excerpt from the Finance Committee minutes of December 16, 2009
FINANCE COMMITTEE
Motion: Vice Mayor Morton moved, seconded by Council Member
Klein that the Finance Committee recommend to the City Council
acceptance of the external audited financial statements and
management letter..
Motion Passed: 4-0
Council Member Klein asked if this would go before the Council in
January.
Mr. Keene said that it would.
Council Member Klein asked if this has gone before Council prior to
January in previous years.
Mr. Perez said it was usually 30 days after the Finance Committee
review, which would be mid -January.
4. Recommendation Regarding Adoption of Ordinance Authorizing
Closing of the Budget for the Fiscal Year -ending June 30, 2009
including Re -appropriation Requests, Closing Completed Capital
Improvement Projects, Authorizing Transfers to Reserves and
Approval of Comprehensive Annual Financial Report (CAFR).
Administrative Services Accounting Manager, Trudy Eikenberry
presented a summary of the 2009 Financials. She referred the
Committee to pages 29 & 31 of the CAFR. She said the General Fund
had a year-end shortfall of $4.8 million, which was addressed by
postponing the transfer to the Technology Fund and will be paid back
with a four year funding plan. Year-end also showed a net gain of
$809,000 due to year-end accounting transactions. Three major
factors were at play; a reduction in revenue, a reduction in investment
earnings and value, and an increase in expenditures. There was a
$2.3 million dollar increase from prior year in property taxes, it was
offset by a $2.5 million dollar decrease in sales tax and a $2.3 million
decrease in documentary transfer tax. There was also a decrease in
investment earnings of $1.8 million. The City was required to do a
year-end market assessment of investments, which had a decrease of
$1.7 million.
FIN: 091215 10
FINANCE COMMITTEE
Council Member Klein asked if there was an offset to the increase.
Ms. Eikenberry said it was unrealized gain.
Administrative Services Director, Lalo Perez said there was an offset.
They were required to show the net gain or net loss.
Council Member Klein asked if there was an estimate of when the
adjustment would come back.
Mr. Perez said that similar to utilities which are purchased in a
laddering methodology, staff invests in a similar methodology.
Council Member Klein said that with utilities a profit or a loss is made.
But in this case the City would receive 100% back.
Vice Mayor Morton said that when each bond matures the City
recovers the gain or loss, cumulatively.
Council Member Klein said he presumed that, since the bond portfolio
averages 2-3 years. The $1.7 million lost in 2009 ought to be
recovered in the next few years.
Administrative Services Deputy Director. Joe Saccio said that because
it is kept to maturity it's a zero sum gain over time.
Council Member Klein clarified there is no profit or loss.
Mr. Saccio agreed.
Council Member Klein said that at some point a profit will be shown
that will look like more than it is.
Mr. Saccio said that was why every year Staff reported that to Council.
Vice Mayor Morton said that five years ago there was a gain on the
bond and the public wanted the City to cash them all in. In retrospect
those were high -paying bonds, as they are sold the gain is eroded or
the loss is recovered.
FIN: 091215 11
FINANCE COMMITTEE
Council Member Klein said the $1.7 million decrease looked better than
it was.
Mr. Perez said because securities were coming in every month it was
difficult to give a precise answer.
Ms. Eikenberry said when there is an unrealized gain; Staff puts in a
reserve for that year so it's not spent.
Council Member Klein said he just wanted to make sure it doesn't look
like a profit a few years down the road.
Ms. Eikenberry said this adjustment was done every June 30th.
Council Member Klein that was his point.
Vice Mayor Morton said that on page 29 of the CAFR there were
unrealized gains. Prior year went down $1.7 million but it had to be
adjusted.
Council Member Klein said was not what Staff said.
Ms. Eikenberry said by the time a profit is realized, the investment has
matured.
Council Member Klein said it seemed that the best ever hoped for
would be a loss.
Mr. Perez said an increase would show in the current year.
Ms. Eikenberry said when the bond matures it's not shown on that line
item.
City Manager, James Keene clarified that before it has matured it could
show a profit.
Ms. Eikenberry said that if the value of the bond was more than what
was paid it would show as an unrealized gain.
FIN: 091215 12
FINANCE COMMITTEE
Mr. Keene said that it needs to be clear that an unrealized gain may
also be reported.
Vice Mayor Morton said that if interest rates were 9% or 15% it would
be a big loss.
Ms. Eikenberry said that the General Fund balances ended with $43.2
million. The encumbrances ended at $14.9 million. The Equitability
Transfer Stabilization ended at $3.6 million. Budget Stabilization fund
ended the year at $24.7 million. This was within the Council approved
range of 15-20%. The CIP Fund ended with expenditures of $21,5
million. The fund balance for Capital Improvement Fund ended at $36
million. Commitment Reserve ended at $29 million. As funds were
assigned by Council to a specific project they were moved out of the
infrastructure reserve to the encumbrance or reappropriations reserve,
The Enterprise Fund Profit and Loss Statements were on pages 38-39
of the CAFR. The Rate Stabilization is on page 86 and Exhibit B. The
Water Fund ended the year with $4.9 million net income. However,
there was a $7.7 million decrease to the Rate Stabilization Reserve for
an ending balance of $5.4 million. The Electricity Fund had a $7.2
million loss and $7.6 million decrease to its Rate Stabilization Reserve
for an ending balance of $46.7 million. The Fiber Optics Fund had a
$2.4 million net income with the Rate Stabilization Reserve at $4.6
million. The Gas Fund had a $10.5 million in net income with a $1
million increase to end the year at $13.2 million. Wastewater
Collection ended the year with a $62,000 net loss and had a $26,000
decrease to its Rate Stabilization Reserve for an ending balance of $6
million. The Wastewater Treatment Fund had a net loss of $3.2
million. The Refuse Fund ended the year with $5.4 million net loss and
a $6.7 million decrease to it's Rate Stabilization Reserve for an ending
balance of ($2.9) million. The Refuse Fund ended the year with a $5.4
million net loss, and a $6.7 million decrease to the Rate Stabilization
Reserve, ending the year with a ($2.9) million balance.
Council Member Klein asked for a total amount between the actual and
the budgeted amounts on the savings in projects with regard to the
infrastructure reserve.
Mr. Perez said Staff could provide a report, but it was not being
tracked at the time.
FIN: 091215 13
FINANCE COMMITTEE
Council Member Klein said it might not be as bad as Staff is
portraying.
Mr. Keene said it's about $1 million.
Mr. Perez said they were not tracking it in 2009. He gave the example
of College Terrace, which came in at $1.4 million under engineering
estimates, so it was being tracked for the current year.
Vice Mayor Morton said that he was concerned about the Storm Drain
projected construction costs. He said that if this continued it should be
easy to move the money to projects traditionally difficult to fund.
Mr. Perez agreed that the reports were that bids were coming in
beyond what was estimated reducing the ability to include projects.
Staff was adjusting.
Vice Mayor Morton said that while not every project may be
completed, it may not be as bleak as it had seemed.
Mr. Perez agreed.
Mr. Keene said Staff should provide Council a report on this. The
College Terrace example was 60%, Cubberly was almost 50%.
Mr. Perez said it was not a bond project so it helped fund some
temporary facility needs for the bonded area.
Council Member Klein asked about the infrastructure reserve system.
Mr. Keene said that sequestering funds with all the money going in
and out was difficult. Staff wanted to create an accurate snapshot.
Council Member Schmid asked if the CIP and Infrastructure
Expenditures were different from the $400 million, 20 year
infrastructure goal.
Mr. Keene said the infrastructure need was reflected in the deficit.
Within that was the CIP, which was a five year plan.
FIN: 091215 14
FINANCE COMMITTEE
Council Member Schmid the CIP involved both infrastructure and other
things.
Mr. Perez said that included streets, sidewalks, bridges, parks, open
space, city buildings, and facilities in the Palo Alto Unified School
District (PAUSD). Other items were funded directly from the General
Fund and the expenses were not infrastructure.
Mr. Keene said that within the CIP a large portion was devoted to
addressing the infrastructure back log. Some items included in the
CIP were not infrastructure.
Mr. Perez said maintenance was included in the CIP.
Council Member Schmid said $21.5 million each year, times 20 years
was $400 million. He asked if the City was doing a good job on these
expenditures.
Mr. Perez said more was needed.
Council Member Schmid said the $21.5 million was a good solid
amount to invest in the City.
Mr. Perez agreed, saying this was a cumulative amount. It could be
multiple years' budgets.
Council Member Schmid said it would be transferring into the future.
Council Member Klein asked where the extra $11 million came from.
He said if the City appropriated $10 million in one year and didn't
spend it, then appropriated $10 million the next year and spent that
plus the first year's money; $20 million had been appropriated. But if
only $1 million was appropriated, then over time it would average $10
million.
Council Member Schmid said he was referring to other Capital
expenditures not included.
FIN: 091215 15
FINANCE COMMITTEE
Mr. Keene said there was not enough of a contribution on an annual
basis to close the gap. Additionally, added demands were being put
upon the existing dollars for expenditures outside of the infrastructure
deficit.
Mr. Perez said the maintenance level was five years behind.
Council Member Schmid requested a breakdown of the $21 million.
Mr. Keene said Staff would provide that.
Vice Mayor Morton said the Capital Project Fund was eroded by three.
Most of the $30 million was built up in 2002-2006. Money was
transferred then because the concern was that the City was far behind.
When using encumbrances instead of commitments, assuming the
math was correct, the total encumbrances of this schedule would
support the $21 million.
Ms. Eikenberry said the matrix didn't include some of that information.
Vice Mayor Morton said if the spreadsheet were complete it would be
shown.
Mr. Perez said Staff will provide the report and then include the
information in future reports.
Council Member Klein said there was a long list of projects that need
to be done. But nothing was said about public safety. He asked if
other essential projects should be on the list.
Mr. Perez said the list needs to be updated.
Council Member Klein asked if there were other items that should be
on it.
Mr. Perez said he would double check with Public Works. PAUSD may
not include everything, and the Cubberly site may need some work.
Council Member Klein was concerned about the public perception of
the bond measures.
FIN: 091215 16
FINANCE COMMITTEE
Mr. Perez agreed saying it should be addressed.
Mr. Keene asked if the study will inflate the costs.
Mr. Perez said the numbers had been discussed but it needed to be
updated.
Mr. Keene said the issue was about how the community understood
the range of the needs the City had. Currently there was an
opportunity cost because of reduced prices. If projects could be
funded immediately the deficit could be cut in half.
Chair Burt said that it may be difficult to quantify but Palo Alto's share
of San Francisquito Creek needed to be factored.
Vice Mayor Morton said the rateof deterioration was much faster than
anticipated. The expectation of what an upgrade at Cubberly would be
like was very different now than it was 15 years ago. He said the CIP
may only include the cost of the mechanical and air conditioning even
though that's only 50% of the cost of renovation.
Mr. Perez said it should include the maintenance, deterioration,
replacement, potential size and use, cost of construction and
materials, and the lack of extra funds going to infrastructure to
increase funding, which was the plan.
Vice Mayor Morton said that the unfunded Retiree Health Benefits Fund
will be fully funded.
Council Member Schmid said the Library Bond was based on an
estimate made several years ago. Under current market rates there
was a 10.15% decrease, which would show up in the pockets of the
residents. He asked how that bond issue could reach the market when
the rates are at their lowest.
Mr. Perez said that Staff planed to take the issue back to Council some
time in the spring. The bidding would probably start in two processes
in July and September. To avoid paying interest, the debt service
would start soon; the assessment deadline would be in August. There
FIN: 091215 17
FINANCE COMMITTEE
was a timing difference. There would be a lesser amount issuance at
the end. In phase one, if some was left -over, it would be used in
phase two. If some of phase two is left -over it would be used for
future debt service payments.
Council Member Klein said it was frustrating that 90-100% was
completed for Mitchell and Downtown but if that were the case, he
asked why there was CAFR in July & September.
Mr. Perez said he had not been updated an the subject, but would look
into it.
Council Member Schmid asked Staff to come back early next year with
an status update to provide options for financing.
Council Member Klein said the construction cost reductions may not
last forever and there could be an increase in 2010. He suggested
that if architects were paid more for overtime the schedule could more
tolerable and the extra cost would be lower.
Mr. Perez said they will have a meeting with the Public Works director
and update Council on the status.
Motion: Council Member Morton moved, seconded by Council Member
Klein that the Finance Committee forward the Ordinance and Exhibit to
the City Council to close the FY 2009 Budget, authorize re -
appropriation of FY 2009 funds into the FY 2010 Budget Exhibits A & B,
close completed capital improvement projects, and transfer remaining
balances to the appropriate reserves, and approve the City's
Comprehensive Annual Financial Report (CAFR) Attachment B,
including $809,000 to the Technology Reserve.
Mr. Perez said Staff was open to taking direction from the Committee.
Mr. Keene asked if that should be part of the motion.
Vice Mayor Morton said it would be included.
Motion Passed: 4-0
FIN: 091215 18
FINANCE COMMITTEE
5. Additional Information Provided in Response to Finance
Committee Questions on the 2009 Year-end Close
Administrative Services Director, Lalo Perez said this was a follow-up
item from the December meeting. He clarified the benefits on page
two. He said that based on his review of the Actuarial Report he made
a conclusion that the reason the Internal Service Fund was drawn
down to a point in which they could not help the General Fund and it's
deficit. The way it was structured was a complex transaction at the
fund level. The cost of the draw down was not apparent. The focus
was on the General Fund because that's where the shortage was.
Staff knew the General Fund was short by $4.8 million. Staff could not
pull assistance from the Internal Services Fund because it drew down
to under 1 million. When Staff reviewed the liability activity, they
realized the actuarial level went up but the cost did not. Overtime
data on a quarterly basis has also been provided.
Council Member Klein said he heard the explanation and read the
report but the problem was still not clear. He said that $2.9 million
becoming $4.8 million was human error and not attaching the targeted
salary savings. The other $1.9 million was because of increasing
commitment.
Mr. Perez said they had a target deficit of $8 million.
Chair Burt clarified that it was a targeted balanced fund.
Mr. Perez said they had identified a deficit of $8 million and had a plan
to address it, which included reducing the budget for salary and
benefits by having positions stay vacant. There were errors in
calculating and tracking those savings. The General Fund was $4.8
million short.
Vice Mayor Morton clarified that it was $4.8 million short of budget.
City Manager, James Keene clarified that it was $4.8 million short of
savings.
Council Member Klein wanted to know if the $4.8 was all due to human
error.
FIN: 091215 19
FINANCE COMMITTEE
Mr. Keene said that there was a confluence of things that targeted the
$8 million savings in 2009 because of the gap there was a range of
strategies including freezing positions. A credit was set in the General
Fund for the salary savings. Additionally there was a benefit cost to all
positions of roughly 50%. At mid -year, benefits payments were
reduced by that amount. In one sense the amount of money available
to the Benefits Fund was artificially reduced, which played into the
impact on the Benefits Fund. The contribution was low at the
beginning of the fiscal year as it was kept flat to the prior year. With
only $3.2 million in reserve there was not much flux. Combine that
with some increase cost two things happened; it depleted the $3.2
million reserve and left $1.8 million over with no reserve.
Council Member Klein clarified that the $2.9 million was human error
and the remainder was insufficient planning on the budget.
Mr. Keene said it's a combination between the benefit savings
multiplier and the experience was worse than status quo budgeting.
Council Member Klein said Staff had attributed some of this to claims
against the City by third parties. He asked if that assertion was being
withdrawn.
Mr. Perez said he was referring to the actuarial valuation not the
number of claims. When he revaluated the numbers the funding was
there.
Council Member Klein asked if they were going to consider breaking up
the Internal Services Fund.
Mr. Keene said he spent some time the last few days reviewing that
with Staff. The system tracks the Internal Service Fund also known as
the General Benefits and Insurance Fund as one consolidated pool of
money. Yet it's broken up into sub -funds that include Workers
Compensation and other funds. The reporting system rolls them all
into one so it wasn't immediately obvious.
Mr. Perez said it would allow them to have a better understanding on a
month -to -month basis.
FIN: 091215 20
FINANCE COMMITTEE
Council Member Schmid said he thought benefits were accrued. He
asked how they could be misestimated.
Mr. Perez said it was set at the point of booking, but it could vary by
the time it's paid out if. For example, an employee may move up on
the pay scale. The difference in the funds was 5.7% of this variance,
and within a reasonable number. With the funds broken up Staff
would be able to create a better model.
Council Member Schmid said salary savings was structured to allow an
employee to stay longer. At that point they would make a contribution
to PERS. He asked if the City is consequently paying the employee
twice for Pers.
Mr. Perez said the strategy was that all positions were detailed out
with salaries listed. Human Resources monitored positions temporarily
frozen and key to be replaced. If the position can't be held it could be
filled temporarily. This gives Staff the flexibility to load it at a lower
rate at least temporarily.
Council Member Schmid was concerned about incentives for people to
retire at 55 with 75% of their salary, then coming back after
retirement, causing the City to pay their 75% and a salary, with a
payment to PERS.
Mr. Keene said separate from the action Council took last night, an
existing employee who comes back would be capped and limited to
fewer hours than required for CalPers.
Chair Burt said he didn't think that was clear last night. He said a
portion of the shortfall is attributable to a further deterioration in
revenue.
Administrative Services Deputy Director. Joe Saccio said that in 2009
the revenues were very close to the adjusted budget.
Council Member Klein revenues were a slight increase
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FINANCE COMMITTEE
Mr. Keene said the decline that was reported was the decline in
revenues from 2009.
Mr. Perez said that the FY 2009 beginning budget was $146.57 million.
It was adjusted down to $142.13, and the actual was $141. 47. The
problems were not in estimating the revenue; the error was in tracking
the salary and benefits savings.
Chair Burt asked what percentage of the Documentary Transfer Tax
was residential versus commercial.
Mr. Saccio said it was 60% residential and 40% commercial.
Chair Burt said that residential could to be on an upward trend but
commercial could trend down.
Mr. Saccio said that subsequently the City received one extra
remittance that was $40,000 more than the prior year. That illustrates
a potential up tick in the trend.
Vice Mayor Morton asked if the differential was $300,000.
Mr. Saccio said it is three or four.
Chair Burt asked if that were due to conservative projections.
Mr. Saccio said the most conservative would have been $2.9 or flat to
last year. Because of the last discussion, Staff was more comfortable
raising it to $3.2 or $3.3.
Mr. Keene said there should be a better trend for budget choices in
April.
Mr. Saccio said more data was needed to draw firm conclusions.
Council Member Klein said the CMR said the City Council salary was
$65,000 with a $5,000 savings. He asked if their salaries had
decreased.
Mr. Keene said Staff would check.
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FINANCE COMMITTEE
Chair Burt said it would be useful to have the average percent of
annual revenue from each month for the Transfer Tax.
Mr. Perez said Staff will need to further enhance the reviews.
Mr. Ramberg said that the budget may be slightly higher for a reason
that needs to be corrected and yields a run rate analysis for a small
remaining budget. Actuais and that calculation in mid -November
created actuals for payment to City Council Members that were lower
than target. These numbers were based on what was in the budget
system, which may need to be adjusted.
Herb Borock, PO Box 632, gave a presentation regarding the $809,000
transfer to the Technology Fund.
No Motion Required
6. Discussion of Future Meeting Schedules and Agendas
Administrative Services Director, Lalo Perez said January 19, 2010 was
the next tentatively scheduled meeting, The Long Range Financial
Forecast in a bigger context could be brought before the Committee at
that time.
ADJOURNMENT: Meeting adjourned at 9:16 p.m.
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