HomeMy WebLinkAbout2004-06-28 City Council (14)BUDGET
’04- ’05
TO:HONORABLE CITY COUNCIL
FROM:CITY MANAGER DEPARTMENT:ADMINISTRATIVE
SERVICES
DATE:
SUBJECT:
JUNE 28, 2004 CMR:316:04
ADOPTION OF THE 2004-05 BUDGET AND APPROVAL OF
A BUDGET ADOPTION ORDINANCE, INCLUDING THE
2004-05 CAPITAL IMPROVEMENT PROGRAM, CHANGES
TO THE MUNICIPAL FEE SCHEDULE, UTILITY RATES
AND CHARGES,AND CHANGES TO COMPENSATION
PLANS
RECOMMENDATION
Staff recommends that the City Council approve the following:
1. The Budget Adoption Ordinance (Attachment 1), which includes:
a. The City Manager’s Proposed 2004-05 Budget (Exhibit A - previously
distributed).
b. All changes detailed in the Amendments to the City Manager’s Proposed 2004-
05 Budget (Exhibit B).
c. Proposed 2004-05 Municipal Fee Schedule (Exhibit C -previously
distributed).
d. Revised pages to the Table of Organization (Exhibit D).
e. Amendments to the Proposed 2004-05 Municipal Fee Schedule (Exhibit E).
2.Resolution Amending Utility Rate Schedules to affect an electric rate increase
(Attachment 2). Please note the effective date of this rate increase will need to be
included in the Council motion.
o Resolution Amending Utility Rate Schedules to affect dark fiber licensing rate changes
(Attachment 3).
4. Resolution Amending Utility Rate Schedules to affect a gas rate increase (Attachment 4).
CMR:316:04 Page 1 of 10
5.Resolution Amending Utility Rate Schedules to affect a wastewater collection rate
increase (Attachment 5).
6.Resolution Amending Utility Rate Schedules to affect a water rate increase
(Attachment 6).
7.Resolution Amending Utility Rate Schedules for various refuse service rates
(Attachment 7).
8.Resolution Amending the Compensation Plan for Management and Professional
Personnel and Council Appointed Officers (Attachment 8).
9. Resolution Amending the Compensation Plan for Classified Personnel (Attachment 9).
10.Resolution Amending the Compensation Plan for Fire Safety Personnel (Attachment
10).
BACKGROUND
The City Manager’s 2004-05 operating budget was approved in-concept by the City
Council on June 16, 2003 (CMR:316:03). An updated operating budget was submitted to
the Council on May 4, 2004, and the 2004-05 Proposed Capital Budget was submitted a
week later on May 11, 2004. During the month of May and early June, the Finance
Committee held hearings and reviewed the Proposed Budget, including the General Fund
and Enterprise Fund Capital Improvement Programs and the Municipal Fee Schedule.
2004-05 is the second year of the City’s two-year budget process, therefore the focus of
the document and public hearings were on the changes to the in-concept plan approved a
year ago. Along with the seven public hearings held in 2003, four additional hearings
were held in 2004 on May 4, 11, 18 and June 1, and included 12 hours of committee
review and discussion of the City’s operating and capital expenditures. The Finance
Committee also reviewed several proposed rate adjustments within the Enterprise Funds.
As a result of the hearings, the Finance Committee and staff have recommended changes
to the Proposed Budget (Exhibit B).
DISCUSSION
This staff report focuses on the financial changes recommended by the Finance
Committee and the adjustments suggested by staff that have a fiscal impact. A wrap-up
memorandum was presented to the Finance Committee on May 18, 2004, describing
changes made to-date to the City Manager’s Proposed 2004-05 Budget (Appendix 5).
The following are a list of follow-up items that, while not approved by a Finance
Committee motion, staff has promised to report back on during the 2004-05 fiscal year.
CMR:316:04 Page 2 of 10
¯The City Manager will return to the Finance Committee in September 2004 with
an informational item describing the long-range plan for the External Services
Fund.
¯In the future, the City Manager will more formally present the Planning
Commission recommendations on the Proposed Capital Improvement Plan to the
Finance Committee.
Finance Committee-Recommended Changes to the Ci_ty Manager’s Proposed Budget
¯The 2004-05 Council Contingency has been allocated as follows:
Reinstate College Terrace Library hours - During the Finance Committee
meeting held on 5/29/03, $12,000 was allocated to the Library Department
budget in 2004-05 to support the current five-day staffing level.
Downtown Lights - Although the Finance Committee committed contingency
fund support for downtown holiday light maintenance, the Public Works
Department has subsequently reallocated $7,500 in non-salary operating funds
for this service. No contingency funds will be used for this purpose in 2004-05.
Human Services Resource Allocation Process (HSRAP) - During the Finance
Committee meeting held on May 18, 2004, $75,000 of additional one-time
funding requests were granted to the following HSRAP agencies: Adolescent
Counseling Services ($15,000), La Comida Senior Nutrition ($35,000), and
Urban Ministry of Palo Alto’s Hot Meal Program ($25,000). The Urban
Ministry funding of a seventh weekly meal represents an increased service
level funded by the City. Permanent funding of this additional meal will need
to be requested in future years, as this is a one-time item for 2004-05 only. The
other items do not represent increased service levels.
2004-05 Council Contingency 2004-05
Beginning balance ........ $285,000
Library - restore College Terrace Library hours ($12,000)
CSD - Adolescent Counseling Services;
additional one-time funding ($15,000)
CSD - La Comida Senior Nutrition; additional
one-time funding ($35,000)
CSD - Urban Ministry of Palo Alto - Hot Meal
Program; additional one-time funding ($25,000)
PWD - Banners / Downtown Tree Lights ($0)
Ending Balance $198,000
CMR.~16.04 Page 3 of 10
Funding of catering expense council meetings - As a result of the motion, $2,500
was added as ongoing expense to City Council general expense budget for council
meeting meals.
Capital Budget
¯ Internet Site Upgrade (TE-05003) - As a result of the motion by the Finance
Committee on May 11, 2004, staff proposes a $240,000 capital project in 2004-05,
to upgrade the City’s current internet site and search engine (appendix 4). This
additional Technology Fund project will delay other projects due to limited staff
resources, including: Human Resources Class Registration system; Operating
System Standardization project; SAP training program; and SAP’s Employee Self
Service system.
Staff-Recommended Changes to the Ci.ty Manager’s Proposed Budget
Reserve Policy Revisions
One of the City Auditors’ recommendations from the 2002 Long Range Financial Plan,
was to relocate the Infrastructure Reserve (IR) from the General Fund (GF) to the Capital
Fund. The text of the recommendation is as follows:
Recommendation #2: To simplify tracking infrastructure funds, we
recommend staff assess the feasibility of (1) moving the Infrastructure
Reserve from the General Fund to the Capital Projects Fund, and (2)
retaining unspent project funds in the Capital Projects Fund
The main operational challenge with this recommendation surrounds the loss of interest
income within the General Fund, and the necessary budget balancing efforts it presents.
Staff has incorporated an estimated $1 million interest income shift to the IR for 2004-05,
as the IR will have an estimated balance of $30 million when it is moved to the Capital
Fund. This interest income will fund half of the current $2 million annual transfer from
the General Fund to the IR for future Infrastructure Management Plan (IMP) capital
expense.
A reserve policy change is needed to guide operations as of July 1, 2004, for several
reasons:
¯To establish a Capital Fund reserve policy prior to the IR transfer
¯To appropriately accrue interest income
¯To retain unspent project monies within the IR
¯To define the target reserve level for the Budget Stabilization Reserve (BSR)
rather than a floor/ceiling approach
CMR:316:04 Page 4 of l0
The City Manager will continue to state the BSR target (currently 18.5 percent) during
the annual budget process and will continue to observe the 15 - 20 percent range as the
acceptable reserve funding levels. However, with the relocation of the IR to the Capital
Fund, the General Fund no longer has a reserve for yearend net fund balance (savings) to
reside. The balance of the BSR will be reported quarterly to the Council, at which time
direction can be made to transfer fund balance if reserves exceed acceptable levels.
On June 1, 2004, a revision to the City’s Reserve Policy was presented to the Finance
Committee (Appendix 5) and is being forwarded for City Council review with a 2-2
recommendation.
General Fund:
Community Services
As part of a continued effort on restructuring, two staff members responsible for
Infrastructure Management Plan (IMP) oversight, specifically for parks, medians
and open space, are being transferred to the Public Works Department in 2004-05.
This change centralizes contracting and administrative functions, while leveraging
resources of the City’s professional engineering staff.
Capital Fund
The Finance Committee approved seven changes to the 2004-05 Capital Budget on May
11, 2004. Amended pages to the capital budget document are attached (Appendix 3), and
funding adjustments have been incorporated into the associated financial summaries. The
following are the amended projects within the Capital Fund:
¯Arastradero Preserve Gateway (PE-05300) - Staff proposes additional funds of
$21,501 be used to fund additional contingency costs related to the contract for
building the Gateway Facility. Grant revenues fund this expense.
¯Police Building Project (PE-98020) - Additional proposed funding of $75,000 for
City staff support to complete the schematic design phase of this project. The
Infrastructure Reserve funds this expense.
Other CIP
¯Enterprise Resource Planning (TE-02016) - Project funding of $0.7 million is
removed from the 2004-05 proposed budget due to delay in SAP phase Ill.
¯Permit Information Tracking System (TE-95016) - Project funding of $0.1 million
is removed from fiscal 2006-07 as funding is not needed in that year.
¯Telephone System Replacement (TE-O0010) - Project funding of $0.1 million is
removed from fiscal 2007-08 and 2008-09 as funds are not needed in those future
New Housing Development (SR-01053) - Project funding of $71,173 is removed
from the 2004-05 proposed budget, to match the Finance Committee
recommended funding of $409,312.
CMR:316:04 Page 5 of 10
Enterprise Funds
In response to an inquiry by the Finance Committee on May 18, 2004, the City of Palo
Alto Utilities (CPAU) Rate Assistance Program (RAP) is expected to grow by 9.5 percent
to $289,000 in 2004-05 as a result of the proposed electric, gas and water rate increases.
953 customers are expected to participate in RAP over the period.
Electric Fund
Baylands Undergrounding (EL-02009) - Additional proposed funding of
$150,000 from Electric Fund Rate Stabilization Reserve to be used for
undergrounding the overhead electric, telephone, and cable TV facilities on
Harbor Road from the entrance of the Baylands Park to the Interpretive Center.
Relocation - Alma Substation (EL-05003) - An additional 2004-05 Electric Fund
capital project is proposed for engineering design related to relocation of the Alma
Substation to the Quarry Substation site (Appendix 3). Project expense is
estimated to be $0.5 million in 2004-05. Please refer to CMR:298:04 for more
information related to this item.
¯Proposed 8.5 percent Electric Rate Increase -The Finance Committee
recommends the proposed 8.5 electric rate increase become effective on January 1,
2005. This is six months later than the staff recommended July 1, 2004 effective
date. The Resolution amending the electric rates (Attachment 2) has an open-
ended effective date, therefore, the Council motion regarding this proposed rate
increase will need to specify the relevant effective date.
Water
¯
Fund
Reduce Water Commodity Purchase Budget by $0. 7 million - Lower water rate
projections by the Bay Area Water Supply and Conservation Agency (BAWSCA)
will result in a 9 percent reduction in water purchases to $7.6 million. This lower
expense has been incorporated in the rate model proposed for 2004-05.
Refuse Fund
¯Cart Exchange Fee of $15 -On the proposed refuse rate schedule R-1
(Attachment 7), effective 7/1/04, the Finance Committee requested follow-up on
the need for a $15 cart exchange fee. The following are reasons cited for the new
fee:
o Residents allowed to change carts once per year for free
o Variable can rate remains in effect, keeping the incentive with the customer
to reduce service levels
37 percent of the calls received from the pilot area were related to cart
exchange
~ Minimizes cart inventory and program expense
~ Recovers costs associated with service level
CMR:316:04 Page 6 of 10
Storm Drainage Fund
¯ Removal of Debt Refinancing Savings of $50,000 - Recent market interest rate
changes may postpone the refinancing of 1995 debt during the 2004-05 period.
Any cost savings realized from refinancing activity will be directed towards
capital expense.
Special Revenue Funds
On May 18, 2004, the Finance Committee approved the addition of $100,000 within the
Residential Housing Fund to provide funding for a contribution to the Santa Clara County
Housing Trust in 2004-05. The City contributed $500,000 to the trust in 2002, with the
stipulation that the funds would be spent in Palo Alto. Two sizeable grants have been
received from the trust since this original contribution: Oak Court and the Opportunity
Center. Other cities have committed to providing additional trust funding during this
recent funding drive.
Compensation Plans
Several classification changes are proposed in the Management and Professional,
Classified, and Fire Safety Compensation Plans (Attachments 8, 9, 10). New or amended
classifications are further described in the departmental and Table of Organization
sections of the budget document.
Table of Organization
Amended pages to the proposed 2004-05 Table of Organization are included with this
report (Exhibit D). These pages reflect a reconciliation of reallocated staffing costs with
the SAP position control system that have occurred since the proposed budget was
produced. The majority of the changes involved Public Works Department enterprise
staff allocations. There is no change to budgeted staffing costs as a result of these
amendments.
Implementing the payroll and human resources modules of SAP in December 2003 has
moved the City to a model whereby staffing costs are allocated based on budget.
Employee productivity has improved as a result of reduced administrative burden of
tracking hours worked; only hours that vary from the plan are recorded.
Municipal Fee Schedule
Performance Permit Fee - The Community Services Department proposes to charge a
permit fee for participation in the Arts & Culture sponsored concert series (Exhibit E).
This item was presented to the Finance Committee on May 18, 2004.
Returned Check Fee - The Administrative Services Department proposes to increase the
returned check fee from $10 to $35 to more accurately recover costs associated with
processing returned checks 0~xhibit E). This change will increase fee revenue by
CMR:316:04 Page 7 of 10
approximately $7,500 per year. This item was presented to the Finance Committee on
June 1, 2004.
Contract Scopes of Professional Service Agreements Greater than $65,000
In the 2003-05 budget cycle, staff provided Council with the contract scopes of
professional services agreements grater than $65,000 (CMR:321:03). During the 2004-05
budget cycle, Infrastructure Management Plan project Photovoltaic Design and
Installations (PE-05001) is proposed for the 2004-05 capital plan. This additional scope
was presented to the Finance Committee for review on June 1, 2004 (Appendix 6).
RESOURCE IMPACT
The 2004-05 Proposed Budget as submitted to the Finance Committee resulted in a $0.8
million increase to the General Fund Budget Stabilization Reserve (BSR) in 2004-05.
The changes resulting from the Finance Committee hearings and staff recommendations
resulted in no significant change to BSR funding (Appendices 1 & 2). The projected
2004-05 ending balances for the BSR and IR are $21.5 million and $27.2 million
respectively. Additional changes to the Enterprise Funds result in an approximate $0.5
million overall increase in reserve balances in 2004-05 from the proposed document.
POLICY IMPLICATIONS
Adoption of this ordinance will revise the Council-directed reserve policy by removing
the current 20 percent cap on the General Fund’s Budget Stabilization Reserve, and
establishing the Capital Fund Reserve policy. Both of these changes are prompted by the
planned relocation of the Infrastructure Reserve to the Capital Fund in 2004-05.
ENVIRONMENTAL REVIEW
Adoption of the budget does not represent a project under California Environmental
Quality Act (CEQA).
ATTACHMENTS
Attachment 1:
Exhibit A:
Exhibit B:
Exhibit C:
Exhibit D:
Exhibit E:
Attachment 2:
Budget Adoption Ordinance with the following Exhibits:
City Manager’s Proposed 2004-05 Budget
Amendments to the City Manager’s Proposed 2004-05 Budget
Proposed 2004-05 Municipal Fee Schedule
Revised Pages in the 2004-05 Table of Organization
Amendments to the 2004-05 Proposed Municipal Fee Schedule
Resolution of the Council of the City of Palo Alto Amending Utility
Rate Schedules E-l, E-l-G, E-2, E-2-G, E-4, E-4-G, E-4-TOU, E-7,
E-7-G, E-7-TOU, E-14, E-16, E-18, and E-18-G of the City of Palo
Alto Utilities Rates and Charges Pertaining to Electric Rates
CMR:316:04 Page 8 of 10
Attachment 3:
Attachment 4:
Attachment 5:
Attachment 6:
Attachment 7:
Attachment 8:
Exhibit A:
(Please note the effective date of the electric rate increase will need
to be included in the Council motion.)
Resolution of the Council of the City of Palo Alto Adopting Revised
Utility Rate Schedule EDF-1 of the City of Palo Alto Utilities Rates
and Charges Pertaining to Dark Fiber Licensing Services
Resolution of the Council of the City of Palo Alto Amending Utility
Rate Schedules G-l, G-2, G-6, and G-10 of the City of Palo Alto
Utilities Rates and Charges Pertaining to Gas Rates
Resolution of the Council of the City of Palo Alto Amending Utility
Rate Schedule S-2 of the City of Palo Alto Utilities Rates and
Charges Pertaining to Wastewater Collection Rates
Resolution of the Council of the City of Palo Alto Amending Utility
Rate Schedules W-l, W-2, W-4, and W-7 of the City of Palo Alto
Utilities Rates and Charges Pertaining to Water Rates
Resolution of the Council of the City of Palo Alto Amending Utility
Rate Schedules R-l, R-2, and R-3 of the City of Palo Alto Utilities
Rates and Charges Pertaining to Refuse Collection
Resolution of the Council of the City of Palo Alto Amending the
Compensation Plan for Management and Professional Personnel and
Council Appointed Officers Adopted by Resolution No. 8353, and
Amended by Resolution No. 8378, to Amend One Classification and
add two New Classifications
2004-05 Compensation Plan Changes for Management and
Professional Personnel
Attachment 9:
Exhibit A:
Attachment 10:
Exhibit A:
Resolution of the Council of the City of Palo Alto Amending the
Compensation Plan for Classified Personnel (SEIU) Adopted by
Resolution No. 8056, and Amended by Resolution Nos. 8059, 8141,
8180, 8242, 8251, and 8313 to Add Two New Classifications
2004-05 Compensation Plan Changes for SEIU Personnel
Resolution of the Council of the City of Palo Alto Amending the
Compensation Plan for Fire Department Personnel (IAFF) Adopted
by Resolution No. 8362, to Change One Employee Classification,
and to Add One New Classification
2004-05 Compensation Plan Changes for IAFF Personnel
CMR:316:04 Page 9 of 10
Appendix 1:2004-05 General Fund Summary and Reserve Balances
Appendix 2:2004-05 Utility Fund Summary and Reserve Balances
Appendix 3:Capital Improvement Fund Summaries and Amended Projects
Appendix 4:May 18, 2004 Memorandum to Finance Committee detailing
changes to 2004-05 City Manager’s Proposed Budget to date
Appendix 5:2004-05 Proposed Reserve Policy Revisions
Appendix 6:2004-05 Contract Scopes of Professional Service Agreements
Greater than $65,000
Related Staff Reports:CMR:316:03;
CMR:221:04;
CMR:267:04;
CMR:275:04;
CMR: 131:04;
CMR:238:04;
CMR:268:04;
CMR:298:04
CMR: 190:04;
CMR:248:04;
CMR:269:04;
CMR:195:04;
CMR:255:04;
CMR.27.~:04;
PREPARED BY:
CHARLES PERL
Budget Manager
DEPARTMENT HEAD APPROVAL:
CARL YEATS
Director of Administrative Services
CITY MANAGER APPROVAL:
EMILY HARRISON
Assistant City Manager
CMR:316:04 Page 10 of 10