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HomeMy WebLinkAbout0264.091I May 9, 1991 THE HONORABLE CITY COUNCIL PALO ALTO, CALIFORNIA l"l-,a IPPGIT IlQUCTXOH8 IX Members of tha Council: The purpose of this staff report is to keep you advised as to our progress in reducinq the 1991-92 budget. Please reter to my previous report (CM1H229:91 attached) for backqround directly relevant to this subject. Instructions have been qiven to departments which will lead to proposed proqram reductions for 1991-92. The shortfall is now estimated to be between $2.5 and $3.0 million. This is slightly more than anticipated in the previous report and reflects latest information on revenue/expenditure levelB~ In order to make up the anticipated $2.5-3.0 million revenue shortfall, approximately $1.0 Dillion reduction is proposed for the General Fund And a $1.4 .111ion reduction is proposed for the capital Improvement Proq~am. The balance is proposed to come from reserves. New pevelopments We received notice on Monday, April 13 from PERS that our retirement contribution rate for 1991 will be increased by 1~8t for qeneral government employees and slightly less for public safety employees. since we pay all retirement costs, this translates to an additional $500,000 cost to the General fund in 1991. Despite this development, I believe it ramains appropriate for us to work toward an expenditure re~uction of approximately $2.5 million. If the overall situation does not improve by miiayear (January 1, 1992), further adjustments can be made. The proposed reductions set forth below are in addition to the reduction of 40 positions in the general fund in 1988-90. Those reductions were accomplished by merely reducing but not eliminating se.rvices. That strateqy may not be successful as it becomes increasingly more difficult to accommodate revenue shortfalls. General Fund Programs which will be reCQmmeT!~Y for reductioD~ The $1.0 million proposed reduction in the General Fund will be composed of two basic components. First, approximate.ly $600,000 will be taken from operatinq departments, resulting in significant program reductions. At this writing the major program implications are as follows: CKR:264:91 '\ ; Page TVo 1~ Reductions in Police Department bicycle satety programs. (We are . investigatIng the possibility of re-assiqnlnq this function to another department which may ha ..... e more flexibility. ) 2. Reduction in library service throuqh the closing of Terman Branch. This facllity represents only 3' of our circulation and is the least -damaging-place to reduce library services. 3. Raduction in police Department crime Suppression Team would reduce the tea. from three persons to two. This will reduce the unit's effectiveness, bUt will preserve the service. 4. Reduction of staff in the Community Crime Prevention Division ot the Police Oepart.ent. This will cause a reduction in pul;)lic services BUell as coordination Of Red Ribbon week, Police and Fire safety Show, Neighborhood watch, drug education, cOllDtercilll security, and child safety. Efforts viII be made to continue the proqrams but the level of staff support will be minimal. 5. Elimination o~ recreational programs such as corporate Fitness, Ther~peutic Program, Jr. Ranger Proqram~ Brown Bag Concerts~ summer concerts in the parks, Leave Your Car at Home dl!lYs. ,. Reduced hours at community centers. 7. RedUced median strip and park maintenance. S. Elimination of publication of City Scape, Breeze, and Monthly Calendar. g.. Eli.inatio!'l of subsidy to qroups such as Theatreworks and other theatre groups. At this time the proposed $600,000 reductions will include the elt.ination of 4.0 full time employees. This will be accomplished by attrition. The second co.ponent, approximately $400,000, will be taken from temporary salaries and contractual services. (The General Fund noW inclUdes some $&.0 Billion in contractual services which represents the strategy adopted by Council to avoid addinq staff OVer the last few years.) Host temporary salaries are in the Community Services Departaent, especially in the Recreation Division. consequently. this Division will be hit the hardest in this reduction. CMR:264:9~ .< ' I • f I ;. ~ :l; ,. ':: ;,;: ,:. e Ii i l ',/ ;' /' Page Three capitAl Improvement progrAps which yill be reCOmmended fo~ r,duction· As noted above, approxieately $1.4 million in capital improvement projects will be recommended fo~ elimination or deferral. It is iaportant to remember that capital projects reduce expenditures only in tha year they occur, they do not represent ongoing expenditure reductions. Prominent among the projects now Dein9 considered for elimination or deferral are; Landscape improvement project for Mitchell Park Reroofing of public facilities Improvements to park pathways Terman SChool Site project Completion of Greer Park Art in Public Places program Athletic fields renovation Tennis and Basketball court improvements Additonal CATV equipment purchase Civic center Fire Sprinkler System This report has outlined current thinking on proposed expenditure reductions in order to acco~odate a shortfall of approximately $2.5-$3.0 million dollars in 1991-92. Full program reduction recommendations will be fo~arded to Council as soon as possiDle . . Y--.... pm.i tted, CMR:229:91 CMR: 264: 91 • , ~ . . , .' ",r "'; ~ o April 11, 1991 Honora~l. City Council Palo Alto, California 1'91-'2 appoRT R]poCTxQHs Members of the Council: Report ia Brief o At your meeting of April 1. 1991, you received and approved th~ midyear financial report for the City.. This report folloW's on that information ~ sets forth, in nont~chnical terms, the issues we face as we prepare to deal with the coming budget. h'o Year n ..... 1991-92 represents the second year of our first two-year budget. In retrospect.. preparing a two-year budget puts us in a very aavantaqeous position. It has allowed us to concentrate on the rapidly shiftinq national and local economic situation in the context of an adopted blueprint. The tva year budqet assumed that it wou~d be necessary to dip into reserves in the amount of approximately $300,000 to operate in the current year (1990-91). That assumption has not held; instead, we will finish the year havinq used approximately $600,000 of our reserves. The primary reason for this increased use of reserves is the county's new policy of charqing us for prisoner booking and property tax collection. This charge is the res.ult of a state law which, as council knows, was completely unanticipated. Since ~e started the year with a reserve of approximately $5.2 million, this $600" 000 expense will bring the reserves to approximately $4.6 million on June 30~ 1991. (ActuallY, the reserve will be lower temporarily, ~ince we are lendinq $1.8 million to the storm drain fund until that fund issues bonds and repays the General Fund soaetiae next winter.) The two year budqet also assumes that it will be necessary to dip into reserves in the amount of $400,000 to operate in the second year (1991-92). CKR:229:n \ " • . , • (j t i' , • . , ---------- • r-- '- In other words, tor the two year period covered by the budget, we will reduce our reserves by $1.0 million. Given the poor perio:raAnce of the econoDy, this amount is not especially alarming. We create reserves during years when revenues exc~ed expenditures, .0 that we vill be in a position to cushion the bloW' when the cirC\DIStances are reversed.. Our use of the reserve is a prudent and reaaonable strategy. which allov5 us time to adjust to chanqinq circumstances .. awrenu.. for 1"1-'2 As noted above, except for the unanticipated changes by the County for booklnq and property tax collection, our endinq reserve balances for ~9g0-S11 will be on target.. What we expect for 1991-92 1. another matter, however.. When we prepared the two year budget, we estimated the revenue for the second year (~991-92J .. We have nov refined those estiaates, based on actual experience with the econ01D.Y in the last twelve lIlonths~ Our best estimate ilS that 1991-'2 revenues vill be approximately $2~O .illion-below our previous esti:aates. (The lIajor problem is sales tax" although there are other anticipated reductions in income~) There are only three ways to accommodate this anticipated revenue sbortfall and balance the budget: 1) dip into reserves even further,. 2) reduce expendit\:res" 3) find new/additional sources of revenue. Since we are already scbeduled to USe $400,000 from the reserves (see al>ove). that option is sOlIIewhat limited. Consequently, 1 have ins~ staff to concentrate on the remaininq options: cutting exp.~iturea and raising new/additional revenue. 8tzategy ror ~"l-'Z Bu4;et Before atteapt.ing to balance the 1.991-92 budget" it is necessary to consider the context. in which we are operatinq and to make some jUOgJlents a8 to what we think will happen in the near and long-term future. Bere are Some of the considerations I believe to be most qerwane: 1. The economy is beg inning to show siqns of a turnaround .. The last half or fiscal year 1991-92 may not be as bad as the first half. 2. state government financ::es are. in a desperate condition .. with a $13 billion deficit, there is no telling what the fallout vill be for cities. with less than 90 days to go, the Governor and the Legislature seem to be a long way from resolvinq these issues. 3. There i. continued and increasing discussion about the .yet .. tor distribution of sales tax. The ·situs· system may not survive for much lonqer. Palo Al to depends beavily on this systea~ CMR:229:91 -2- • \ 4. 5. /' o o The Ceneral Fund Capital I.pr-ovement Program is rLmninq at approximately $J~O million/ye4r~ Some programs could be delayed or postponed. since approximately 85 percent or our costs are in personnel, 'We will have to look to some reductions in that area in order to ef~ect any real savings. When faced with personnel cost reductions, our lonq-standinq policy has been to reduce staff while 1Ilaintaininq sala.ries and benefits at a competitive level. The continuity of this policy is necessary in order to retain and attract productive employees. Given these considerations, we embarked upon is two-month long etfort to identify possible reductions in expenditures for 1991-92. In addition, ve began to look at lonqer-term savings in the event the situation does not ease by the end of the next fiscal year-. As a working hypothesis, we deter.ined to take half the redUctions .troll the general operatinq fund. Wherever possible, we will substitute new/additional revenue for reductions in service and proqrUU!l. We determined to -.ake u.se of the extensive work the Council did two ~_.ar!l .sqo under sailar circumstances. Each d.epartment reviewed the werk we presented to Counc i I at that t ille and upda ted th e material to assure that it was still accurate. The next step is to rank eacb proposal in a biqh, mediu. or-low cateqory~ The result will be a list of $2.0 million in possible reductions/increases for 1991-92. That list will be presented to Council (F.PW) as soon as possible • .In sUldiary, if there are no further unexpected events, tbe reserves will be reduced by $1.0 million for the period 1990-92~ No further budqet adjustments are needed for 1990-91. Revenues for 1991-92 are estimated to be short by approximately $2~ 0 million. A COmbination Of Capital Improvement Program delay; General Fund reductions and new/additional revenues will be necessary to cover this shortfall. A recommendation for such a combination will be torwarded to council as soon as possibl~. RespectfUlly~itted. i$~ ..io WILLI ZANER City anager ) CJ(R:229:91 -3- .--.,.---' -.