HomeMy WebLinkAbout2002-09-24 City CouncilCity of Palo Alto
Manager’s Repor
TO:HONORABLE CITY COUNCIL
ATTN:
FROM:
FINANCE COMMITTEE
CITY MANAGER DEPARTMENT: ADMINISTRATIVE
SERVICES
DATE:SEPTEMBER 24, 2002 CMR:388:02
SUBJECT:RECOMMENDED
REVIEW
APPROACH TO PROGRAM/SERVICE
RECOMMENDATION
Staff recommends the Finance Committee review and comment on the approach
developed by staff to list, . categorize, and prioritize the varied City programs and services
funded by the General Fund Operating Budget.
BACKGROUND
The ongoing economic downturn resulted in maj or revisions to the 2001-02 and 2002-03
fiscal year budgets. Since the peak of the economic boom in 2000-01, the City has
experienced a $10 million decline in ongoing revenues, including sales tax ($4.8 million);
transient occupancy tax ($3.2 million); and the documentary transfer tax ($2.0 million).
The "Strengthening the Bottom Line" process, completed in fiscal 2001-02, resulted in
operating efficiencies, reductions in operating expenditures and increases to revenues
during the 2002-03 budget process. These reduced the ongoing burden of the revenue
losses to approximately $6.0 million or 5 percent of the 2002-03 operating expenditure
budget.
After the March 11, 2002 approval of the proposed reductions to the 2001-02 budget,
Council approved a motion directing staff to prepare a list of alternatives for a 5 percent
reduction to ongoing General Fund operating costs. The City Manager noted that, much
like the "Strengthening the Bottom Line" process for fiscal 2001-02, a comprehensive
review of the operating budget would be necessary during the first half of fiscal 2002-03
to achieve the mandated expense reduction.
CMR:388:02 Page 1 of 3
DISCUSSION
The City Manager has stated that a permanent 5 percent reduction in General Fund
operating costs may require a reduction in service levels. The intent of this report is to
discuss the approach staff proposes to provide the Council with the necessary information
to prioritize the services and programs funded by the General Fund. The Finance
Committee’s feedback and recommendations will be incorporated into the process in
which staff compiles the financial, and non-financial data on the City’s programs and
services. The City Council will then need to agree on the appropriate criteria to be used
in their review of the listed programs and services.
The 2003-05 budget process will also be targeted towards the overall cost reduction goal.
The process will include a zero-based budget exercise, requiring operating departments to
reconstruct their budgets rather than the traditional practice of rolling over the prior
year’s base budget. This cost-saving concept is generally believed to eliminate any
potential surplus funds in departmental operating budgets. The ultimate goal of this and
the service prioritization exercise is to reduce General Fund operating expenditures by 5
percent.
Attached is a template staff proposes to use in presenting the City’s program and service
information for Council review (Attachment 1). The template was compiled with
citywide staff input and provides both financial and non-financial information. For this
example, the Budget Division in the Administrative Services Department (ASD) was
used. The first page describes much of the typical information found in the budget
document, including program title, program description, major activity code, full time
equivalent count, revenues, salary and benefits expense, non, salary expense, and
allocated expense. Allocated expense is the administrative costs associated with
providing that program or service. The Net Expense column refers to total expenses less
any revenues.
The second page of the template provides non-financial criteria that can be used in the
review process. These twelve category types have been developed not to be mutually
exclusive, but rather to act as guidelines in the process of prioritizing the City’s programs
and services. They are presented in no particular order of importance, with a specific
program possibly having multiple criterion apply. The final column will include a
weighted score as determined by the evaluation criteria established by Council.
RESOURCE IMPACT
The results of this program and service review will be incorporated into the 2003-05
budget process. The goal of the budget process will be to permanently reduce the
General Fund operating budget by 5 percent or by approximately $6.0 million.
CMR:388:02 Page 2 of 3
ENVIRONMENTAL ASSESSMENT
This is not a project for purposes of the California Environmental Quality Act (CEQA).
ATTACHMENTS
Attachment 1:
PREPARED BY:
2002-03 Program/Service Review Template
CHARLES PERL
Budget Manager
DEPARTMENT HEAD APPROVAL:
CITY MANAGER APPROVAL:
HARRISON ....
Assistant City Manager
CMR:388:02 Page 3 of 3
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