HomeMy WebLinkAbout0338.092I I . --
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July 23, 1992
HONORABLE CITY COUNCIL
Palo Alto, califor~ia
Attention: Finance committee
THE su BJECT OF
THIS REPORT
ISA
COUNCIL PRIORITY
couwcIL PRiORITY: PALO ~_TO/S ECONOMIC FUTUltE/S'rAATEGIC PLAN
Member~ of the Council:
•• port In Brief
This report transmits to the Council Finance committee a proposed
draft for a study, to be prepared on a scheQule which will allow
its results to be incorporated into the next t .. o-year budget,
addressing Council's priority of Palo Alto's Economic Future.
lackqroun:1
In ¥~rch 1992, the City Council referred to the Finance Committee
the Council priority of Palo Alto's Economic Future. Included in
thi~ priority were the follo...-inq:
o Address the structural problems that stand in the way of
balancinq revenues and expen,ji tures for tha: long t,.arIll;
o conQuct an organizational revieTJ that will provide a
comprehensive objective analysis of the organization and
its sta.ffing patterns and identify possible areas of
further economy and efficiency;
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o Continue the analysis of appropriate levels of service,
.. ith empr.asis on the del iver'l 5)'"stems of such services to
estaolish higher standtords of efficiency and quality
customer service.
'.the organizational revie'o{ is !:ieing addresse.d separately by the
Finance ColtllDittee, assisted "by a Blue Ribbon Task Force. The
Colllltlittee postpone<.i work en the ether elements of th~ priorjty
until the 1992-94 eudget process ~as completed.
COilncil took further action on the first elemer.t of the priority,
addressing the structural problertl.g that stand in the way of
balancing revenues and expenditures in the lo~g-terro. during its
deliberatior.s on the 1992-94 Budge~. The council referred to the
Finan~e Committee the issue of developing a strategic plan desiqned
to identify long-term solutions to the structural deficit in the
City budget. The plan, .... hich is to be prepared on a schl';!dule which
would permit its results to be incorporated into the next t~o-yaar
bur:lget, ·""Quld strike. a balance~ acceptable to the comItll.lnity,
between six elements!
oNe ... revenues related to land-use policies;
o New revenues from fees and charge!:>;
o Savings from management/operational efficiencies;
o Taxes;
o Public/pri .... ate partnershipsj
o Service level adjustments.
staff is proposing the preparation of an analysis of the revenue
ana expenditure components of the City's General Fund and special
Revenue Funds. The Special Revenue Funds are proposed to be
included since they represent revenues frolI't the State and Federal
governments fer General Fund-type f>rograms, including streets and
hi~hways, traffic signals, parking, housing, and social services.
The Special Revenue Funds inciude the street Improve~ent fund {gas
tax}, Federal Revenue Fund ,Community Development Block Grant},
Housing-in-j .. ieu Fund, 'Transportation Mitigation ?und and Special
Districts Fund.
The study 'Would bring together information, much of 'Which is
currently available in various pa~ts of the city organization, and
integrate it into a Single framework I providing the basis for long
range planning and projections. Examples of sources of information
internal to the city operation include Finance Department revenue
budget projections, Utilities Department rate projection data, and
sales tax information from the City's consultants. Demographic
info.nt1ation that will be needed in the corrtpt·ehensive Plan will he
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developed by the Planninq Division. Statf ~ou]d also propcse to
use the Economic Outlook co~ittee, the Chamber of Co~~erce, the
Palo Alto Board of Re"ltors, and dir~cted intervielllE .... it..~ local
business people for-further insight: into issues such as market
factors, hotel occupancy, economic conditions and potential impact
of l&nd use oecisions.
Attachment I sho'",'s schemati-::ally ho..... staff .. :culd approach the
study. The assumption is that analysis of city revenues on the one
hand and City services 0:". :.he. other, on a historical, current and
projected basis, ..... ill identify iss' ~s, problems and opportunities
that can be addressed through e development of strategic
alternatives. Staff's proposed s • ..ldy aSS;"lJmes that the Finance
Committee., as part of the Organi~ational Revie'W, ilI111 identify
ser"ices warrantinq more in-depth analysis, including prOjected
need/demar,d for services, projected. future costs of services, and
alternatives for service provision, among otherS4
Provided t}-!at this study is undertaken in t~e n~xt year, the work
will be closely coordinated with ~ork on upl~ting the Comprehensive
Plan4 Ultimately this study will be important i~put into the Plan
update process~ both in terms of service levels and the revenues
needed to support them.
Responsibility for preparation of the report will be given to the
Finance Department and Planrting Department, jointly. staff's
involvement will, in large measure~ be handled through the City
Manager's Corporate Planning program r< ther than the departments'
normal work program. staff is conflden~ that the Council's goal of
having' the strategic plan ready for integration into the next two
year budget is realistic, and will return with a draft workplan and
schedule, including deliverables, once the f~nal outline of the
report is approved by the Finance Committee~
Recommendation
staff recommends that the Finance Cormr:ittee review and make any
changes to the proposed outline for the study to address council's
priority of Palo Alto's economic future; and direct staff to return
~ith a proposed yorkplan and schedule for completion of the studY4
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Respecttully submitted j
&, ~, E!!~'lARRISON -It.
Director of Finance
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and Community Envirol"'.1'!tent
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GENERAL FUND $ERVICES FUND!NG STUDY Ot~LINE
I. Where do General Fund revenues come from?
A. Sales Tax (1992-93; $14,550,aOO}
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1. Retail (i.e., non business-to-business) sales
Allocate sales tax by qeog=aphic areas (1980-
Present)
Allccate sales tax by activity areas {1980s
Present}
Refine assumptions about ~hat percentage
residents pay
ClaLify the market area for Palo Alto sales
Review
market
rv.C)
1980 and 1990 cenSU$ data for the
area and develop trend information (See
Develop scenarios for the future of the market
area
:2. Business-to-business sales
Breakdown sales by activity and generator
categories '1980s-present)
Develop assumptions and projections by major
s~les category and for leading generators
3. Thre-3ts to sales tax
Changes to the distribution system
State Budqet
Reqional revenue sharing
General economic conditions
Market changes
Demographic changes
competitiveness of Palo Alto's sales tax
generators
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B.
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Identify (to the ext.ent possl.ble) hoW' much of
recent tZ"enjs is a res'..Jlt of the recessioJ1 and
hv'''' mu.ch represents long-term structural
change
14 Resideutial property tax
Identity residential property sales trends
(lSSQ-Present) and correlate with demographic
data
Develop property sales projections
2. Non-residential property tax
Identify property sales trends f19S0-Present)
Develop property sales projections
J~ Real property conveyance tax revenue trends
4. Coordinate 'With future audit of the property tax
allocation process
c. Utility Users Tax (1992-93 : $5,600,000)
D.
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1. Identi£y utility use trends and projections
2. Identify utility use cost trends and projections
Transient Occupancy Tax (1992-93 $3,350,000)
1. Analyze trends
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-by establishment
-by location
-by type of establishment
Analyz-e potential impact of Hyatt closing (Le4 r
how much actual loss and how much of a stift to
other establishments)
Develop Transient OccupancJ' Tax projections
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E.
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other Taxes, Fines and Penalties (1992-93 = $4 1 500,000)
1~ Analyze trends by major revenue ~ate90ries (Vehi
cle licer,se fees, vehicle fines, property convey
ance taX -see I.B.3.)
2. Identify potertial trend changes and develop pro
jections
F. Service Fees and Permits (j992-9J ~ $6 1 800,000)
G.
1. Analyze trends by major revenue categories
-Relative cost recovery
-Resident and non-resident fees
2. Identify pot~ntial trend changes and develop pro
jections
Joint Service
$3,900,OOO}
Agreements
1~ Analyze trends
(stanford) (1992-93
2. Identify potential changes and develop projections
H. Interest Earnings (~992-93 = $1,900,OOO}
1. Project interest earnings under diffe~ent account
balance and interest ra~e scenarios
1. Analyze trends by major reven~e categories
2. Identify potential trend changes and develop pro
jections
J. Operating Transfers (1992-93 net = $12,900,000)
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1~ Explain equity tran~fer
2. Explain rent structure applicable to utilities
3. Analyze t.rends of transfers into and out of the
Ge.neral Fund
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4. Identif)' potential trend changes and develop pro
~ecti~!lS
K. Special Reven~es
1. other
Block
aticn
agencies (gas tax, Co:mmunity Development
Grant (CDBG), !r.termodel Su~face Tr"nsport
Efficiency Jt..ct (rSTEA}
2~ City-generated mitigation fees {housing, trans
portation)
3. Analyte trends of major revenue categories
4. IdentIfy potential trend changes and develop pro
j ections
II~ What sources for additionineW' revem:.es exist?
A. Land use-related revenues
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1. Establish revenues and costs for "typical" land
uses
2. Identify recent land use changes ar~d reasons for
those changes
-Redevelop-oent
-Changes in occupancy
3. potential revenues from land uses consistent with
Palo Alto's policies
-Reteil sales tax
-Busine~s-to-business sales taA
-Transient occupancy ta)(
-Property ta.x
-Property co.lVeyance tax
-Utility users tax
4. Potential revenues from land ~ses requiring a
change in Palo Alta's policies
-R~tail sales tax
-Susiness-to··business sal es tax
-Transient occupancy tax
-Property tax
-Property conveyance tax
-Utility users tax
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B. Ne~/increased fees/charges
C. NewJincreas~d taxes/assessments
1. Landscape and Liqhtinq District
2. Business License Ta~
3. Maintenance Districts
4. Mello-Roos Distri~ts
~. Entrepreneurial activities
E. Equity participation
III. Undertake a Palo Alto Demographic Study
lL Historic trends (1970, 1980 and 1990 census and other
data)
B. Collect information from availa.bl~ public and private
sources
C. Develop proj ections/ future scenarios
D. Ida.ntify key trends ~nd aredS of likely change. from
his~oric trends
IV. Identify services that are not provided that may be
desired/necessary in the next 5 years
V. Capital improvement analysis
A· Identify City capital expenditures for 1980 to the
present
-General Fund
-Utilities
-Special Revenue F'und
B. Identify projected capital expenditures by general
activity are.as
VI. Historic staffing ana expenditure data (1980-1992)
A. Personnel and non-personnel expenditures
L Salar-ies
2. BenefitS\
B. Staffinq by department
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2.
Regular positions
Contract/temporary positions
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c. Ic:3:entify 'lr,a:J~r prograxc changes frot:! 19Ba to the present.
1. City ini'ciated
2. Mandated by another level of government
VIr. Identify a roaster list of services
VIII.
L Level of Service Study
2. Internal Services
Coordinate 'With organizational RE: vi e',,; I a.nd deter!il.ine
a~eas for more extensive analysis, such as:
A. Identify recent historic service delivery trends
B. Interview service providers
1. Public
2. Private
3. Non-profit
C. Changes to the need for/demand for each service
1. Changes to the recipients of each service
2. Changes to the 'Way that the service is provided
D. Projected costs of services
1. Identify fu'ture exr:e:1SE: s::::enarios
2. Personnel costs
3. Non personnel costs
E. Alternatives for provision of services
1. Feasibility and impact of dropping the service
2. Feasibility and irTipact of redu:::ing the level of
service
3. Can the service be cow~ined ~ith other government
agencies'?
4. Public/Private partnerships
5. Cc.ntracting out the service
6. Can service be provided on a full cost recovery
bas.is?
7. Identify ..,21Ys that the service can be provided :n-.cre
efficiently
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Historic, current,1 ,
future
D1LR{!\l~nu(~
Historic, c«rc""tJ
~uttlrp. _
lHues,
Problems.
Oppol·tunitie~
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Attac~ment I
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Str-at{!gic
illf;'rnit!i'{~~ o
-~-~.
!---''j'll Change ,ervice 10v"1. ! ~
Different ways of
i provid)nq sH'/icl's,
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