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December 31, 1992
THE HONORABLE CITY COUNCIL
Palo Alto, California
Attn: Finance Committee
'P"T.IOIISHrp OP 'PROPOSED STRATBGIC P~~LJ'_~_~~TBER ~ENT CITY
BTUPIBS
Members of the council:
The purpose of" this report is to respond to a request from the
Finance COmll'littee that staff develop and prepare a flo..,' ch;lrt "Which
shows. the interrelationships on a time basis of the Economic
Futures Study, the Comprehensive Plan and the Organizational
Review, and show how council Member Cobb's proposed strateqic Plan
interacts with each of the oth.er studies. In addition, staff has
provided descriptions of each of the studies, i~cluding the
Economic Resource Plan which is currently being developed, de~ininq
e.ach study's. objectives and describing bo .. result.s -may contribute
to each of the other projects. staff is reco~~ending that Council
approve the concept of pursuing a strategic planning process, and
refer to the Fin~nce committee the actual preparation of a
Strategic Plan for the City of Pale Alto.
BackgrOund.
There are currently several studies and/or planning efforts
underway. which address the City Council's 1992 priority of Palo
Alto's economic future. The most prominent are the Economic
Resource Plan, the Economic Future Study and the Organizational
Review. In additicn l the Comprehensive Plan update is expected to
yield an interrelated set of policies and objectives for the
community, wider in focus than the cur-rent land usc-oriented
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document, which 'Will be a valuable tool for fiscal decisions as
they relat~ to community priorities.
There are a number of other efforts 'Which relate to the economic
futUre priority, such as the continuation of outreach efforts to
the Stanfo~d Research Par.k, the Econo~ic OutlOvk Committee and the
CUstomer Service committee. Each of t.hese !nay irwolve different
departments, but all have t~e same goal of addressing the City's
short-term and long-term economic future.
Ouring the 1992-94 Budget process, Council Member Cobb suggested
that a strategic planning process be undertaken, 'Wh ich ,",'ould
integrate the vario~s eccno~ic elements being worked on, to provide
a fram~work for decision-making. The purpose of this report is to
1) put before the Council a description of the prE>liminary model
council Member Cobb has proposed to vrganize the strateqic planning
process; and 2) describe the purpose of each of the various studies
and planning efforts currently underwCiY, in terllls of how they
relate to and support a strategic planning process.
Attached is a graphic that identifies the anticipated timelines for
the Comprehensive Plan Update, Organiz.ation Review, Economic Future
Study, Economic Resources Plan and the 1994-96 city Budget ~ It
should be noted that the very nature of the planning process is
iterative, and interrelationships whiCh are Tlot currently
contemplated will become evident as each of the studies progresses.
ThE narratives which fol1o~ desc~ibe what staff currently sees as
primary interrelationships and ho'W the re:sul ts of each project lti i 11
assist the other efforts. Also attached is a revised diagram of
how the various studies and planning efforts already undervay, as
well as ~ith a strategic plan, will interact~
Ca.preh.nsive Plan Updat~
The goals of the Comprehensive Plan revision, as adopted by City
council, are to produce a "visionary" document ... ith a time frame to
the year 2010; to be regional in focus; to reflect a ~ide r~nge of
community ideas and viewpoints; to focus b~yond the traditional
land use Qrientation of a standard General Plan; and to produce a
document which can be used in establishing community priorities and
in strengthening community assets~ In other words, the Comprehen
sive Plan is the picture of holt' Palo Alto WaTtts to be.
On October 15, 195:2, the Ci~y Cou.ncil officially approved the
process to begin updating the City's Comprehensive Plan ~see
CMR:456:92). A contract for prof~ssional consultant services is to
be presented to City Council in Dece:mber 1992. By January 1993,
planning staff and the 36-mernber Citizens Advisory Committee; to be
appointed by the Mayor, will begin the task of updating the Plan.
preparation of a draft plan is anticipated to be completed by
December 1994~
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The Comprehensive Plan 'Will yield an interrelated set of objec
tives, policies and pCDqranls l -wider ir. fOCllS than the cvrrent land
use-oriented document. It is anticipated t.hat the Plan 'Will
contain an implementation section, as is currently required Py the
state tor Housing Elements~ The implementation frarneW'ork. will
?~obably be similar to that included with the Draft Urban Design
Plan, in thEl,t many Plan programs 'Will be identified as ongoing or
pro90sed for implementation within 1 to 5~ 5 to 10, or 10 to 15
year time trames~ As is the case in the 1990-2000 Housing Elem~nt,
ift'ple:mentation responsibility (e.g., Planning Division, private
sector applications) will Dc identified. The creation and periodic
revie~ of the Plan will establish community priorities and general
implement~tion expectations and be one of a variety o~ important
factors determining municipal expenditure priorities.
Comprehensive Plan objectives. policies and programs should not be
substantially revised based on very short term considerations, such
as a particular year's budgetary shortf~ll or surplus. Ho~ever.
the Comprehensive Plan should not be treated as completely
independent of the City's fiscal situation. Three important
linkages between the Plan and tr~ City's longer-term fiscal
condition as included in the proposed Strategic Plan are:
1) Land use generated municipal revenues,
2) The capital Improvement Program, and
3) Plan identified priorities for implementaticn of a .... ide
variety of programs (e. q., housing implementatio!l efforts,
urban design. parks, transportation) 4
City planning policies, espe;::ial1y for retail and ind'J.strial
sectors. 'Will very likely have mediUJ:l-or longer-term revence
implications for the City. The Municipal Code requires Planning
commission review of the City's capital I~provement Program and a
finding that the CIP is in conforl!"ance \dth the Ce·mprehensive Plan.
In identifying programs that are either to be retained or estab
lished, thE Plan clearly impacts the use of municipal resources.
The relationship of the strategic planning process and the
Comprehensive Plan initially focuses on two areas:
l) The Plan's policies, and especially land use designations,
impact municipal revenues, primarily for time frames of five
years and longer; and
2) The Plan influences the expenditure side of the ~trateqic plan
equation by identifying and establishing expectations for a
variety of municipal programs.
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It is important to emphasize that there are numerous municipal
revenue and expenditure factors th~t are effectively octside of the
Plan. Thus, thof': Com~rehensive Plan, oot,h because of the Ecope of
issues addressed in the Plan and the mid-and longer-term time
fra~e of signific3nt parts of the Plan, cannot effectively serve as
a strategic plan for the municipa! budgetary process. Howcver z the
Comprehensive Plan should be an important element of a st~ategic
planning p't'ocess. especially as the process addresses mld-and
longer-term revenue and expenditure expecy.ations and desires.
Organizational aevie.
In October 1992, the Finance Committee considered responses to
request for proposals from consulting firms to conduct an
orqanizational Review of the City's General FUnd functions. The
organizational Review work program and consultant selection proce~s
we~e assisted by a Blue Ribbon Task Force. appointed by the city
council. The firm of Hughes~ Heiss and Asscciates was recommended
to perform the review, and the proposed contract was approved by
the city council in November 1992~ The Organizational Review is
estimated to ta~e eleven months to complete.
The primary objective of the Review (soMetimes referred to as the
"lIlanaqement audit"') iJ:; to determine if the City of Palo Alto is
performing at maximum efficiency, in providing the highest level of
service to the public at the lowest achievable cost. In meeting
this objectiv~. the consultants will evaluate the current
organizational structure and use of personnel reSOULces in city
departments and current policies and procedures and operating
practices within the organization. In addition, they will compare
Palo Alto's current service level standards with those of
comparable municipalities and assess whether service level
standards for the City are presently being attained. Finally, an
identification and analysis of the major social and d.emographic
characteristics that impact the City's operations and resourCES
will be accomplished.
It is anticipcted that the Review will present alternatives to
achieve cost ~avings~ improved p~oductivity, and better cu~tomer
service. Historical data and projections on revenues and
Expenditures generated by the Economic Future study ~ill be
important input to the Organizational Review. Since it "o&"i11
identify social and demographic characteristics affecting the
City/s current vperations and atte~dant costs for future programs,
the Organizational Review ~ill provide valuab:e information for the
City's Comprehensive Plan updatp., which will establish long-term
goals and objectives {or social .and recreational programs in the
cOmDll.i.nity.
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Economic Future study
The primary purpose of the Economic Future study (ErS} is to
provide information which ~ill allow the C~ty to get out ahead of
the current budget process and foc~s on lon9-range fiscal planning.
The .r.FS is proposed to be conducted in three phases ove.r a tws:lve
month time-frame. A prsliminary work plan for Phase I has been
com?leted and reviewed by the Finance committee (see CMR:406:92).
Phase I of the Economic Future Study will involve creation of a
model to identify tl.e so-called "structural deficit!'! for the next
five, and potentially ten, years. (The "structural deficit-].s the
shortfall between projected General Fund revenues and expenditure.9~
assuming both are on ~aut~matic plot-. In other w~rds, current
service levels, and therefore expenditures, remain; and revenues
qro'W according to the Consumer Price Index or some other comparable
economic indicator). creation of a model for projecting the
structural deficit 'Will allow for lcng-t.;;;;:-::. General Fund revenue
and expenditure forecasting.
Phase II of the Study will quantify the potential fiscal impact of
various revenue and expenditure alternatives available to address
the structural deficit, or alternatively, to finance enhanced
service levels, should the council so desire.
Phase III 'Will focus on in-depth evaluation of some of the
alternatives identified in Phase II. It is anticipated that the
Finance Committee and Council 'Will revie .. · alternatives identified
in Phase II and select those to be evaluated further in Phase III.
Phase III is targeted to be completed prior to the beginning of the
1994-96 budget precess.
The Economic Future Study was originally conceived as an internal
corporate planning project, involving the City Manager's Office and
the Finance and Planning Departments, which would allow better
long-term planning to he incorporated into the budget process.
However, by its very nature l it addresses many of the critical
issues raised by the strategic planning proce5s. Therefore, a
careful attempt will be made b)' staff to organize both the elements
of the EF5 and the schedule for "deliverables" in such a way 3S to
support the development of the draft Strategic Plan in time for the
1994-96 Budget process. While the EFS would have been undertak~n
even if strategic planning had not been proposed, the information
generated in the EFS is vital to the Strategic Plan; and, thus, the
two are very closely related. The EFS will provide extensive
demographic input to the ComprEhensive Plan update. Service level
data, demographics, and capital expenditure projections ~ill
augment the information available to the Citizen Advisory Committee
in the Comprehensive Plan update process. In adlii tion l demographic
information pertinent to future service needs, and historic,
current and projected in.formation on salaries and ben-efits may
provi~e useful backgro~nd information to the conSUltants in
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fortl!.lllatinq the Orgardza.tional Re"iew, depe!1ding upon timing of
com~letion of Phase I (relative to the consult~nt's progress).
An Eco!)omic Resource Plan is currently beiTlg prepared to be
forwarded to the City CounciL The: objectiv-e of the Plan is to
pre-sent a proponed set of policy .options or econo!flic strategies
that will address the City'S long-term economic future. The Plan
will focus on the important linxag~s between the business community
and the City" s revenue stream, and vil1 propose incorporating
economic consideratioT'.s as a component ot the City's decision
makin9 process. The Economic Resources Plan emphasizes existing
business retention in Palo Alto.
The policy options, which will be included in the proposed Plan,
rely on qualitative rather than quantitative assu~ptions about the
City's long-term :economic and fiscal prospects. rn contrast to the
other studies currently underway I the Economic ResouY"ces Plan is
intend6d to be a plan of action with ongoing implementation as a
key component. Because the Plan will incorpor-ate information
generated by the organizational Revie~, the Economic Future Study
and tne Co~prehensive Flan, the Plan is expected to evolve as each
of these other studies produces results. The Economic Resource
Pl~n would similarly he the vehicle for implementation o~ policy
decisions made as part of the Strategic Plan process.
Integration with the Propoaed strategic Planni8q Proces~
Staff interprets that the purpose of a st~ate9ic planning effort is
to get out ahead of the cu~rent budget cycle, preparing' longer-term
responses to the exigencies of both reduced funding for current.
service l~vels or heiqhtened demand tor services beyond what the
current budget ... ould allo1ool'. This is an effort. staff endorses. 'l'he
strategic plan model proposed ~y Council Member Cobb attempts to
display the various alternatives 'alhich could be explored sho""lld the
City find itself needing additional resources. These incl1)da
revenue enhancements such as ne~ or increa~ed fees and charges,
taxes, or utility tra~sfarsi reduced personnel costSj manag~mcr.t
efficienciesj puplic/private partnerships; entrepreneurial
activitiesj land use changes; and service level adjustments. The
preli~inary ~odel is not all inclusive, and other alternatives are
expected to be considered as part at the strategic planning process
when they are identified. Council Member Cobb's conceptual
proposal for the strategic Plan is included in this packet~
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ReCOJ:U!lcndation
Staff recommends that the Council apprvve the con.-::ept of pursuing
a strdtegjc planr.inq process, ond refe~ to the Finance Comreittee
the: actual preparation of a Strat:egic Flay' for t.he City of Palo
Alto.
Respectfully ~ubrnitted,
'-~HLu.-,-J:) Jfr(y HARIU SON
Director of Finance .
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KENNETH SCHREIBER
Director of Planning and Co:mrnunity Environm.ant
lAM VINSO cri y Auditor ,
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.ry,,,,,,r-;::..>t;J£
(;1 E !'LEMING C I .. f;i ty Manager j
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COMPREHENSIVE ANNUAL FINANCIAL RE1'ORT
OF mE
cn-Y OF PALO ALTO
rOT th.
r"",,1 Year Ended Jun< 30, 19\12
pM'paffil by
DEPARTMENT OF FINANCE
EmiJy Rarru.on
Director of FInance
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AMERICANS WITH OISABILlrIE8 ACT (ADA) STATEMENT
In compliance with the Americans with Disabilities Act (ADA} of
1990, this document may be provided in other accessible formats.
For information contact:
Dianah Neffr ADA Director
City of Palo Alto
250 Hatr,ilton Avenue
Palo Alto, CA 94301
415/329-2313 ,voice)
415(328-1199 (TOO)
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CITY or FALO ALTO
Comprehensive Annual Finar.~ial Report
Y€ar ended June 30, 1992
TABLE OF CONTENTS
IN"i'RODUCTORY SEC'rrON:
city Officials
Organizational structur~
Department of Finance structure
Letter of Transmittal
FINANCIAL SECTION:
Report of Independent .l!..ccount.ants
page
Number
i
ii
iii
iv
FINANCIAL STJI_TEMENTS (General Purpose Financial Statements):
Combined Balance Sheets -All Fund Types and Account
Groups • . ~ ~ . :2
Combined state~ents of Revenues, Expenditures and Changes
in Fund Balances -All Governmental Fund Types. 5
combined statements of Revenues, E.xpendi tures and Changes
in Fund Balances -3udg~t a~d Actual -Generdl,
Special Revenue and capital Proj~cts Funds . . . 6
Combined statements of Revenues, Expenses and Changes in
Fund Equity -All Proprietary Fund Types. 8
combined statements of Cash Flows -All Proprietary Fund
Types • • • • . 9
Combined statements of Revenues, Expenditures and Changes
in Fund Balances -E:<pendable Trust rLJ!lds • • • • l{l
NOTES TO CCMBINED FIN'ANCIJI.L STATEMENTS:
Notes to Combined Financial St<'.tements
SUPPLEMEN'I'AR¥ DATA {Combining and Individual Fund and
Account Group Statements and other Financial Schedules):
General Fund:
Balance Sheets .••••
Statements of Revenues, Expendi.bn€s and Changes
in Fund Balances -Budget and Actual
SC',hedules of Expendi tllrc5 compared to Budget
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63
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CITY OF PALO ~LTO
TABI,E OF COl·."'lENTS
special Revenue Funds:
Combining ~,alance Sheets
Combining Statements of Revenues, Expenditures 3;r;d
Changes in Fund Balar.ces . . . • • • . ~ • •
Combining Statements of P,e-"enues, Expendit!Jres c:.nd
Changes in Fund Balances -Budget and Actual • . •
Debt Service Funds:
Combining 8alance Sheets
Coml:Jining Statements of Revenue, Expenditures and
Changes in Fund Balances
Capital Projects Fund:
Balance sheets
Statements of Revenues and Expenditures and changes
in FUnd Balances -Budget and Actual .
Enterprise Funds~
Combining Balance Sheets
Combining State~ents of Revenues, E~penses and
Changes in fund Equity .
combining Statements of Cash Flm!ls . . . .
Combining Balance Sheets -Wa$te~ater Funds
Co~binir.g Statements of Revenue, Expenses and
Changes in yund Equity -Wastewater Fu~ds
Combining Statements of Cash Flo~s -Wastewater
Internal service Funds:
Combining Balance Sheets
Combining Statements of Revenues, Expenses and
Changes in fund Equity . 4 •••
Combining Statements of Cash Flo~s
Trust and Agency Funds~
Combining Balance Sheets
Expendable Trust Funds:
Funds
Combining statements of Revenues, Expenditures and
Changes in Fund Balanc8s . • . ..••
Deferred Compp.f1sation program J..gency Fund:
Statement of Changes in .~ssets a~d Liabilities
Page
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72
74
82
84
88
89
92
94
96
100
101
102
104
lOG
109
112 I
114 I
116
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CITY OF P~LC ALTO
TADLE OF CO~~ENTS
General Fl>:ed Assets Account Group!
Schedules of General Fixed Assets -By S~urce •
Schedules of Genera 1 Fixed .r..ssets -By Functior.
and Activity ..
Schedule of Changes in Ger.eral Fixed Assets -
By Function and Ac::tivit:{ .•.
General Long-Term Debt }l,ccount Group:
Belance Sheets < • • • • • • • • _ _
STATISTICAL SECTION (Unaudited):
statistical Tables and Other Schedules (Unaudited):
General Revenues by Source -
Last Ten Fiscal Years
General GovernI"'.ental Expenditures by Function -
Last T~n Fiscal Years _. _ . _
Property Tax Rates, Le".Jies and Collections -
Last Ten Fiscal Years
Ass'3ssed Value of Taxaj)le
Property -Last Ten Fiscal Years
property Tax P.ates -All Overlapping GOVern:rnEnts
(Per $100 of Asgessed Value) -Last Ten Fiscal
Years . ~ ~ ~
Special Assessment Collections -
Last Ten fisca 1 Ye,~rs
Ratio of General Bonded Debt. to Assessed Value
and Net Bonded Debt per capita -
Last Ten fiscal Years . . . •
Comput~tion of Legal Debt Margin
Schedule of Direct and overl~pping Bonded Debt
Ratio of _;a.nnual Debt Service Exponditures fer
General Bonded Debt to Total General Expenditures -
Last Ten Fiscal Ye6rs . • • • •
Revence Bond Coverage -t,,'ater, Electric, Gas and
Wastewater Funds -Last Ten f'iscal Years • . •
Demographic Statistics -Last Ten Fiscal 1ears
Construction Activity -Last Ten Fiscal Years
Insurance Cov~rage
Principal Taxpayers _
Miscellaneous Stat:istical Information
119
120
122
• 124
126
130
134
136
140
141
142
143
144
145
147
140
151
152
154
155
CITY OF F~LO AI.TO
TABLE OF CONTENTS
SINGLE AUDIT REPORTS
Report of Independent Accountants on the
Internal Control Structure of the
City of Palo Alto ...
Report of Independent Accountants on the City's
Compliance -w.'i th La\¥5. Regulat.ions J Contracts
and Grants. .••. . ••.
Report of Independent Accountants on
Supplementary Schedule of Federal
Financial Assistance
Supplementary Schedule of Federal
Financial Assi5ta~ce
Report of Independent Accountants on the
Internal control structure Used to Administer
Federal Financial Assistdnce Programs . .
Report of Independent Accountants on the City'S
Compliance with Specific Requirements Applicable to
Major Federal Fiila ... .:-ial .~.ssistance Programs
Report of rndependent P.ccount:ants on the
City of Palo Alto's C01l1pliance with
General Requirements . • • .
Schedule of Findings and Questioned Costs
Pa.ge
Number
• .159
.161
162
163
. 165
• . 169
171
173
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Mike Cobb
Chairperson,
finance Committee
Ron Andersen
Dick Rosenbaum
Larue WheeJer
William Zaner
City Manager
Ariel Ca10nnc
City Attorney
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CiTY Of PALO ALTO
CI1Y OFFICIALS
June 30, 1992
Gary Fazzino
Mayor
Jean McCown
Vice Mayor
Liz Kniss
Chairpen,on,
Policy and Services Committee
Co\Jncil-AnpQi~_d_
Office-rs
Joseph Huber
Jean McCown
Joe Simitian
Gloria L Young
City Clerk
'W'illiam Vinson
CIty Auditor
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CITY OF PALO ~LTO
ORGM I lA TIONA L CHART
l"'OTEIiS OF PALO ALTO ,
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en;irl..,.ing Tril.,1por!.
1.d1lti .. In,poetic.,
Managoeme"t $.rtkes
Eqlll!Jj'M!nt Enllfr:m ..
Millln.II!j4'mt'nl COrltroJ
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W"~iller
Treltmant
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DrlIiNl!l<l'
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Polic:!! Ad"""
Animal Hum.an Serv.
Sc:rric:'" Contr.a~
Admin.
Comm.
Arts 5: Culbme
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Open S~C.
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PURPQSOOOAl:
PoyroII
Genenol
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Pa)'llble
Accoum.
Receiwble
EntarpriH
Accounting
em OF PALO At TO
ANANCEO£PARTMENT
ORGAN2ATlONAl. CHAJIT
FinIInciar
Planning
& Invest.
Relo'er\ue
Collections
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BUDGET I
MANAGEMeNT
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MaNgement
ANlysts
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PRumNG
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AdmlnlSlrltiOll
and Genera'
PurchasIng:
StorH &I Detivery
Printing Se<vien
(1l'1lernelServtce
Fund)
.... iling Strvicu
(lnltmiil Service
Fund)
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RtAL aTAn
DMSI()t,I
Administtltion
and Ci enerat
SchoolS"e
Administration
To cfnetthe Clty'l fi.n&nc.r operations Including .c(:ounting. twdgftiJ1i, Jon~letm 'Ilnancill planning, real property and
portfolio mlMgerr.ent. and purch.sjng 10 'S;~'l'! ihalthe City' .. hnam:iar matters Ire admInistered In accOC'dance with an
regulalOry requir'emantl and COfl.Iist~nt with glmenny accepted pil"!Cipln of budgeting and UCCIUnting, Addltionlny, t.a
ma:ximiz:e. the rehrn Q"n the City' .. fInInclal and rul property assets.
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