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Home My WebLink About0226.093u. l~ ~ ~ I I April 8, ~99-3 HONOF~BLE CIT~ COUNCIL Palo Alto, California Attention. Finance committee ECONOMIC FUTURE STUQI Members Qf the council: &!mort in Jsti!-( THE SUBJECT OF THIS REFOr~T ISA I COUNCIL PRIO;lfTY J The purpose of this repot"t is to pl'ovide tht"l Finance COnJm;.tte@ and the City Council with the information Ijathered rlut"ing Phasa I 01' the Economic Puture St.udy: Exanlination of th4?_ Gel) .... ral Fund "St_ructural Deficit,·' General Fund revenues and expendltureg haVe Men exat'llined usiflg hi&torical data cGllection. economic .e."o'\lYBBs and atructur~(, intervieW's. Each major rovenue aoUrc(>. dnd (>xpemht'IJ:re t.ype l!:;' dit.~cUfi5ed in t,crm6 of the vari~bleS undet"lying its gro,*,~h or decline.. utiliz:ing a model developed by the Intern",tJ.onal Ci.ty M<\naqer'ti J\6Boc,iat.ion (leMA) for evaluatinq financial c·{mditior\, hiHtOT ieal information for 14 factors has hoAEm analyzed tl) idfmtify .... arnlng trends for the Ci t}J' B lonq-t-eTm f lsr.al health. Staff has a150 devBloped 8. (areca-sting model, into wnich reVPl"lu(> and expendit.\,l["t! information h .... s been J,.ncorporlltc.d~ Ae.sumptions about certAin ~ey variables are Made explicit i~ the report, with p8rticular ~tte~tion to those ar.e~s identiried a~ bein9 at concern in tho long-term. I-'our possible 8c.enarioB for the General Fund have been constructed, including: CHR:226:93 .;: , o o "What It l • Scenario (Base 'feaI' 1987-88, intervention) Steady State Scenario without council o Ftacally Positive Scenario o Fiscally Negat.ive SCenario Su.mary of Key ribqlng. o o ICMJ.. Financial Trend Monitoring System (F'TMS): Fourteen tinlSnci~l factors from the F'l'MS model were f,el~cted for evalul'Ition based on their reltWtWCH tor Palo Alt.o and the availability of information. OVet'all, the indicators are sat'::'sfl:l.ctory for Palo Alto. WhUe reVAmles are ba&ieally flat in real dollar term6. expenditun;>s have been ("urbed t.o match the lack of reaJ growth. Employee hl"lnefit..s. wh,ldl would have been enterIng t_he "warninq" mode abaent large credita in the p~st two years for retirement cont['ibutions, have no .... been stabiliZed, primarily through the C'it_y's d~cisi(Jn to chango t-rCJm a self-insured to III premium-based health care system. DiscretionAry fund bdlances are healthy. but ):,"aflect: the uncerta i.nties of the current 1JconOJl'.ic environment .... i th continuing multt-billion dolli'JIr defH~it.s in the State's budget. Palo Alto's citilenry :is aging, which .... ill have impacta on the structur@ of futUre City service delivery. wnile personal income is compqratively high, there is an ~ncrea5ing divergencp. bet .... een th~ highost income levels and the average. The lack of .infOrlllation a.vdil.able to dofinitive~ ly addre~9 the iSfoue at deferred maint,enance and the City's liability for its aging aSSets underacore$ the importance of starting to accumulate dato'l in this area _Ln futUrE' years. For"casting Scenarios: .Four POSSible scenarios Were con structed fOr the General Fund, using 37 revenwe variables and 25 expenditure variables wit.h alternative assumptio1l9 for each variable. The "What If" Bc~nario .aho .... s t-hat \rIit:hout four significant expAndit_ure reduc:tion and revenue enhancement decj.siona made by the Council botween 19B8 and 199;!, th~ General r'und 'Would be exper.lencing a severe deflcit $l.tudtion. These decisiona ~ere: reduction of 40 positions dU~ln9 the 1988-89 and 1989- 90 budgets; extens.ion of the Public Employees Ret irell1ent Systolll (PERS) fund.i.nq yea~ in 1992 i <'In increase in t.he City' a real property t~ansfer tdX ratE:!, in 1992; "nq Bwitching, in 1992, from the City's long-atandlng fee~for-sBrvice :indemnity hea.l th ~lan to a premium-based, managed Care network of CMR:226:9J , ~ : I~ ~ ~: i~ !\ _________ ~ _______ ~ __ .,._L _--"7'Y, ".; ..... , ... ,-"'.''1'.-,.'".'~~ preferred pl'oviders an., health malntanance orge.nizat.ion61 administerad by PEas, Toe impact 01 theBe COUncil decisions results in an improvuMsnt of approximately $4.4 million in the General Fund tor 1993-94. The stbady Stata Bcenario .i.ndicat.El8 to:;.t, given cer'talt'\ aS6umptions about:. inflat.\on, revenue growth, and capiud improvG~ent ~roqram l@vela, the General Pund 8tru~tural d@ticlt is under control. HovevlI."'r, this conclusion could chango, based on actions by the St_ate and/or Iliiubstllntial dumgefi in a01l\1O ot the revenue and exptmditure Vtlciables identified in this s~udy. Key aSBumptions ih the Stetldy St.ate scenario are: inflation ~ill remain relatively 10.... (J percent) for the remainder of the decade; salary .increases granted t.o employees .... il1 tr;ack inflation, I!lthough total 8o!ll.aries and bene1"ita \oIil1 .exCf~ed the ConBUill4~cr Pr.ice Indt>'X (CPI) due to benefit, costs; the annllal capital improvement program f_or -t.he General Fund wij.l l'p..>II<\in 5t~ady at. $4 milllon per year; and the return on equity transfers frol""t tn~ ut.lli~ tics tuntle will gru .... inc)-ementally as a resuJt of the infra structure program. 'l'he report conclude6 that the Stllte budgp..t is t.he critical unknown in forecasting a Steady st~te SCenar io. Given t:he atdtuB of the State's budget a.nd the likelihoud that not all of the Stl!-ady state aaeumptionn .... ill r,rrovp., val.id, the City should be c.autitl\.Hi \:'egarding ne .... expenditure-s and ahould pursue new and additional reVf"nuefi. Fisci'llly positivA and negative assumptions have been 1de.nti f led for the revenu(l and expend i ture Vlir iableA, Howev@r. d financial impact calcul .... t.ion of these two remaining BcentJT.lOS was not made because there it<; no rnal probabilit.y of eit_her all of th~ positive of alJ of the n@qative aB5umpt lons occurring. The vBlue of Ulese two "cenarios is 'that th~y provide a basis for disclissing the IH:.elihood of the va.rinbles diverging fro)CI the steady state assumptiOh5', and will he of value in the ongoing monitoring of the v.ariables as pdrt (of the City's budget process, 11.~.2uM In March 1992, the City Counl".!il rtffeTPc!d to t_he f"inanr:e Comnd._tt-ee the Council priority Qf Palo Alto's EconomiC': Future. During thPc 1992-94 Budget proca~s, the Council also referred to the Flnance Committoe t.he issue of dE'velor,ing a f;trategic plan designed to identify long··term solutions to the "structuri\l deficit" in the General Fund budget. The plan .... as to be incorporated into 'the 1994-96 Budget., and would strike C!I balanc@, acceptable t.o thp. comlflunity, betweOTj elements which included: new Tevenups relatAd to land Use policie!3, nnw revenues from fees and chargeli, savings (I'om operational Hfficioncie.s, taxeA, public/private partnershlpfl., anct service level adjuetmentB. CMR:2]:6:9) ) I I," ".,~""", ,,_l< i , I '.;\\\. ,~'t--' L", . ,,~, ::'t' . . ~' . \. ,', p , In July 1~92. at6ff ~ra.~nt.a the outline tar a proposed Economic FUture Study. desiqned to be oompleted in tbree phases: o Examination ot the General Fund "Structural Deficit" o Ge.ne.t'al R~..,ia ... of RDvenu6!Expendit.ure Alternatives o Oirect.sd ltevlew ot Revenue/Expenditure Alternatives Th1.A rnport. Bumm",rizes the tindi.ngs of Phase I: Exam,ination of the Gener~l Fund "St.ructural Deficit". The primary focus or th~ Phase. I effort ",as economic And del'tlographic data CQller.;otion and the development of a forecasting model. Historical informa~ion, along with structured interviews, have ~rovided the raw data (or constructing ecena.l:"iotl tor Palo Alto's General Fund for a 5-to 10- year period. S~ecifically. the task5 for phase I ineluded: (> DeVeloping hist:orical information on Gener~l Fund revenue!S and expenditures, including capital projects. o DevelOping demographic information pertin~nt to General Fund llctivitif"lS. o Conducting structured int-erviews wit.h business ahd economic experts. o Identifying ",reas of concern for the long-tel'rn flscal ~ealth of the General Yund. o D~ve16ping a torecastinq model for General Fund operations. o Preparing forecasts for General Fund revenues and expenditures for a lO-Yl'ar t.lnle fra~f!. tnaJdng explicit. all ilf3sumptions related to revenUe and expenditure qrowth/d~cline. The purpose of the stUdy .... as to determine whether or not a. "structural def:tcit" exist.ed in the General l'~und. It is im.port~nt to. recoqni;e that. "structural de-{icit" may be defin~d in a number of different Wai's. In ordinaJ."Y (lconoll:lic tarms, it. elm be Lake to mean II bAsic misalignment between ongOing revenues and e>::pe.nditures such th~t the General Fund will repeatedly experience it budget oQorttall. This "otru(;'tural deficit" OCCUrs ..,hen CUrrent revenue sources and e:l(penditur~G are allowed t.o grow in a "steady Btat~" CHF:2;!6:93 • I 8~vironment. ad8uminq no nigniticant change. in amount or rype of revenUe sOQrces on the one h~n~, or service levels or costn on th~ ot:.ne.r. "St.ruc.tural deficH.1I can also be used 1n a mora globol mensel recognizing that. the CitY'fJ 6conOl'l'ly does not 8xist in Go vao'.U.l.m but. i6 also vulnet'able to the .fiscal problernG of tha state and Count.y governments and t.he nbt.ional ac::onomy. Alternatively. a lt09tructural delicit" may be interpreted to exist it t.he C\Jrrent levels of exponditures for either services or capital JtI.,.inten"nc~ and replaoement are not d~emed adequate to the City's long-term reeponslbilities. In thi.6' 90nse, if iii $4 million annual capital improvsment. progrnm, for Itxample, does r.ot address 't.he Gfml!ral Fund's long-term infrastructure need~, one may postulate a "atructural deficit." Similarly, if Service levels c4nnot realistically be predicted to remaill Bt tneir current levels.. a "structural defiCit" ensuet;;. Each of these inter~retations is vali~. for this report w~ have chosen t". USB the definiti.on of "st.ructural deficlt" 8A an onqo1ng imb<tla'l1ce between reV('!nue6 and expenditures given current reVAY,Ue sourCes and service levels., in ord~r t.o prepare ths Steady 5to"lte scenario. It is iI\\portant to erophasi,ze thllt any alteration t.o t_h@ assumptions in the S~eady 5tate scenario to, for exam~lef inc~ea6e service levels, l!.ugmf;lnt the capital imprOVettlent program, ur pro)ect expenditures ifl exce'9li1 of infJ.).tion without matching gro\r,Jth 1" revenues, wi:Ll quickly result i.n the roappearance of .a C-eneral Fund "structural deficit.." CMR:226:93 5 OIDIBIIAL J'QIID JUnl'EllUBS CITY OF PALO ALTO GENERAL FUND REVENUES BY SOURCE For the year ended lune30, 1992 12.82% 4.07% 199i ~l!Y.£!!Hu I SOOQ) h~£IJ. s.,l •• tall P4,69J PropI)cty tAX.1iI .8, 55~, Tra~~iftnt occupancy tAM J,104 Util~ty \llIftC t&~ 5,1411 Otf'lIIIr taKftll and fir ••• ].3'>9 S.rvicH f ••• an~ p6r~it. 6,'>70 Joint •• ~vic •• ~rllll~mGnt. J .9Ch3 InY •• ~m&nt income :1,063 Other revenUUII ~ 'tot ... l dirlliH3t rlil'Y.nU'H~ ~O,1l9 Operating tranAt.rll in H . ...!il..? "i'otal r.VenU8e; 566,75] CHR:226:9J 6 !'2ISaJes Tax ClPrope:rty T IlXCS IIITtansicnt OccuplUlcy Ta\ Clthility User Tax r:'IOtht"r Ta.xes and Fines DlScrvice FC"es illld Pcnnits l!!IIII}oint Service Agreements Dlnvt'.'itment Income aOt"ter Rcvl!(Jue<; .Opl.'rating 'fri1Jl,..f~rs In Peccent lncreafl8 of Tot-al (OIilC'I'lIl1se) B~V@Olt{' U2."'--.J..!U 22.01 'i5J 1:.' .8:;> ", 4.65 lJ~ 7.7] ISl 5.03 pi'a} ~.B4 40' S.B5 347 3.0'1 )44 ~~I -ill 75.08 ~.265 ~ ,~ ~ i&1!l - GENERAL F1)ND R£VEN\1~S solei Tax Gales tax reprf!a~ntB $14.7 rolllion ot Gens:r~l. Fund rev"nue tn 1991- 92. or 22 p6rce~t of total revanues. salea tax generatMrl in Palo Alto car. be rouqhly divided into three ca~egorieB; genaral retRil, buainQ8a-to-b~sinQas ~nd other. General retail sales includo such t,raditional rettlil l'IIctivit.iel1 ~s clot:hinq ",tores and d~pat'tmRnt ",t.ores. Businoss-to-buBiness salos include silles of it.ems 81)ch as office machinery, elect'.ronic equipment nnd busir,ess 8erV~C~.£I. O~her aales consiut or automobile sales and r@pl"l~rs (i.e., transportation). food products (including re6taurllnts) t\nd miscellaneous sales (including constructicm lIIatet'ials}. In addition, the State allocates Bales tax that io collected w.ithout ill site specific point of ~ale. This allocation is based on the salos tax dctivtty in Palo Alto us a percentage of County totals. In 1991-92 gener~l retail sa).eG repreosentad rou9hly 30 percent of tot.al salea t.ax revenues; bu~inea6-to bus.ine66 30 pen .. enti all other Pftlo Alto-genf)Yatea Gource~ 25 pen~ent; and State and County ullocation& 15 percent. hI .... Till 8'1' C,t.gOfy (",on) 19!17·~ 19l1lHl9 1'1-l! .... ~ \q.o.-l-(l\ ,9q.,-'n c~~ Ir~t.\\ S1.tN.i $4.1l'19 '10-\.51)1\ "_4" .~.41'" I '.U.\) I ','}}:I\ 1 ,)8J 1~ 1 ".m-"'-__ -l l ~r_porut'll"'I I ',It')';! ~o , (.b'iI '.Jl~ I 1 ,'j1'l7 .~I ...... \" I!oUII' .... n I ~L-L 3 "59 .. I!lf> 4, UO 4 "~I I i'lln.!(I'/'IIP".". r 112 '6Ii W. Jill I! ~~ fOOd ProO,r.u. CO'.Jntyl$ttt. r<t()lIt.dj~'. \ l, \.,~ e1' , !IlI7 1. 1~~ 1 llrl Iii' ~ _ I. . _L: __ _ ,TOTAL -IIctUftI S 1 SIl,L~ ~()9 tl'i 9111 SI", 1l,~ ! Sl~.6~i 10lAI.. ' ConuAnr I (1'X"-9~ " ".0) '14,m 114,u84 I f,1S,1/ib 'lI.,l\n S14,6'Ill r: l"l-om 197(1-79 t.o 1991-92, Palo Alto't;, total sales tax reco! l.pts increased 24 percent. in term~, of const2lnt dollarI':!. In th~ I'Iid- 19S0 /s. salp.:s ta')( receipts )ev,?,led off l.n t.he City as well a.~ trw county, Bay Area and Stat.e. Palo Alto's tot.al ~I"lles tax recelpt~ for the recessionary period of 19U7-88 to 1991-9] tJeriod have declined slightly in constant dollars. In this re9pect, i'alo Alto has fared better during the economic recession than l1Iany ather jurisdictions d6 "'sll dG the St'lt.e. of California. "It-should b@ noted th~t t.he City's 19B7-e8 ",ales tax t.otdl loIoulo hav~ been l'Iuch luwer, and tharefore the 4-y~ar Change much higher, ... i thout l'l flOJ>: time 1987-88 adju6tme ..... t. of nBarly $1 {!'lillian fl'O~ a major @leCtl."t)n ics firm. C}Ul.:226:93 7 ,. In terms of business size, 29 permmt of Palo Alt.o's sales tax CONGS trom the top 10 accountH, while 66 peroent comes trom the top Ido. TOI' 20 SALES TAX PRQm1.~ x= 1986-87 1988-89 1/)91-92 Business Ty~ General Retail Busihess to Business Auto Sales & Leasing Total of Top 20 Total City sales tax 1986-87 General Retail Business to Business Auto Sales , Leasing 'I'otal of Top 20 Total City sales tax 191H}-B9: General Ret.ail Business 1~o BUBines8 Auto Sales & Le8sihg Total of Top .20 Total City sal~B t.ax 199]-92 CJ'lffi:226:93 Nultlber ot IDulines!!E!l? 8 5 9 6 6 7 7 7 9 4 S~lea Tax illQ.Q.l Sl,B48 1,605 ~~ $4,146 $9,139 $2,151 1,546 L..l.4.< $4,BJ9 $11,777 $1,97{, 2,207 __ ill $4,825 $12.241 \ of l:Q.tll 20.2t 17.6' -L.J;\ 45.:3\ IB.3\- lJ.n ~% 41.1\ 16.1\ 18.0\ --,'L.2.\ 39.4% •• M '" , _~.:;:+':.W ~~.': The top 20 .ale. tax prodQoer~ havy remained relatively con.t&nt since 1986-87, with 13 ot' tne 20 appearing consi"tently. '!'h. peroentaqe of total eale~ tax revenue attributable to the ~op 20 ~ale8 tax producers haB declined trom 45.) percent to 39.4 per~ent during the la~t five years, indicating b b~o~dening of the ~81aa tax base. The se~ent most sensitive to r.he general economy \8 4utomcbil$ 8,,1e8 and leasing. TwIJ of the top 20 sale:s t_llX producers in 1981)-87 were in this I;':ategc.r-y and have since closed, repre8on~ing an annual revenue 1088 ot ovar $200,000 in 11B6-87 Anu over $350,000 in 198B-Sq, All but onE! of the general ret"il atores in the top ~o are located at the Stanfcord Shopping Center. Sales tax revenues arA tracKed by geographical area as ~~]l 55 by type. The major goographic groupings include: Geographic~~ Stanfora Shopp-ing Center Stanford Rosearch Par.k San Antonio Industrial lInivexsity A.venue E1 Camino California AVenu& Town and country 1991-92 Sales Tax _-----R!iwt-~nues $3,;:06,287 1,741,549 1,66~),778 1,658,141 841,131 "111,647 190,121 J'erce.nt Q.f...:r~'clU 25.7 14.0 13.3 1). ) fi.7 5.7 1.5 The Stanford Shopping Center is by far the largest. generi\tor of 941es: tax for the City, contr.ibuting roughly on~-fuurt.h of all locally generate·.1. sales tax ["~Vi'lnue and thrpf! qUo'\rt_Of,;'re of all retail ealus tax. The Ghopping Center'", $t.t-en~t.h is its roF<:g,l.ooi\l nature. Shopp_ihg Center slJt·veys indicate that only one of every &ix customers t.o the Center is a Palo Alto reaident. Indo:=ed, h~!';.B than hillt of the Cent~r'li customers are eVen Santa Clara Cen.mt.y re&idents. Shoppers coyne 'to the Cent.er f.rom 011 nine ~ay Aro<.I counties and beyond. As a result., +:-he Center's J[lqrketing st_rateqy views its primary competition as ~,an Francisco's Union SqUl\rt,,-, rather than other e.hopping ITialls on the Peninsula or in r.an Jose. EVen the Center's regional strengtn, however, waG insuff.i.cilAnt. t.o insulate it. from the recent rece~sion. SlnCe 1987-88 retail $d1e6 at the Cent.er hava actually dacreasf1d 2.:2 percent cUlr,ulatively in real terms; during the a.arue period, the Ci'ly's total sa.lll!i tax deClined 2.0 oercent in real terms. It is cle~r thdt the Stanfon1 Shopping cent'er's continu~d viability is 8 key component for the City'S economic future. CMR:216:93 9 '~;' ,,- , ,', " ;1"1 , . I r~r I " , Q -... "".)"$ ~r;a"rO""d lies ~""Ond 1 4 "9" •• r::etpt,. ge-:;~il "",,"Jr, "/):iCh'~~~~e Ot a'l"" t." " '''1:"b':;;''':~ ~~. :."0;,. ,;:. '"''.%" •• J:-~, ~ ~":: ::: ,., ..... '. ,,,., ~ ... -~ !o~,~. "" h". " " • '''''U """'~' -~ ~''''''~ " ; .. "'H~" .",~ ,"'" ........ ,~, "n tile t1>ha <; "~le" Ql'l'!"e "l' 6" Pe""6nt tlU U~rt~~ or 1992, a J~rg. Ph~rm4: ~~ .br ,.. .... _ --P'Ctcty ti'tJt" Per.c-&r,.t ..r--e?'-e;,t)~.E"fo t h.". I>., <>£ "e"eraJ "'u 0'01 1"<1 $6' 55 , , Ot •• "'Y "" On n~tr"",. "" """""""8 ~"11l0n.!n 19, '~-"\'.::"':,,, ... ;~.:;,. ..,~.:;.::;;~" ,. ";;;:;;",~", .. .... ~(J<.:"tl .rat 'to"tttl Pr '''~t."". £". """ s<>""c."" . '~e. ". " '" H.. -'" '" .. 'n.. • .. •• u,. "b .. ~7::; ...... , 1.::;::, "'''''' , .. ~ ..... " •• ),. ....... .. . " '" .. . ',,,,, '" .f·· ....... , •• ''''. _. ,,' ..... .. . 0"ge '" th" o"",..~"etl in l"'''''e''t ":er c",,. d""i'>9 ~~ '''''1'1 6 i{-J..I3tor.iCitlly 1 J'e"l Prep.,rt Or", 1>0""""", e SO"'B "'"'''' . "'-~, . , ~"'" . ""'''' du .. to .. ,,;:, "hong •• 1n .ss~·"ag Il">,, $.'>""'0 .s" .... ",,$ •• y bSt"""n. Oaetl "~JU.i . • """""'i> ., " •• ~ ':C-.. , '" .. ~": .',~ ,~, ,;",. ""~"":' ... , .... "'" "" ":-". " .... , ',':;"'" ,.., ;':;'." •... '"'.~, "" '. V·' us "001 proP:~~:"9tr$14t.iOI).sJi..i" City. Or) thel1~,C"lntt!,OlJar .. : g;!ic::@ '"'''''' , .•.• ,. '''.. .. ,,~. "" ....... -, "'" P." ~, ...... n 0" ">ng '''ee '" .. " .. " ..... ,. " .. '-'" .... - is f'r"" ;,,~~~J"QLS, rouq~) dy""te.lDPOq b}, th(? s to-thlJ' Cit}'. L~,,,,,.[," . "o-t), , "nt. CJ and "'"Itit."il:,: 0; th" City;',;" C""nty ""flter "'&<1 L "9&. aGRess"" ValUe P.r-Opertt. t .r .i).\'~.g Co " f1S.J.St Of., .secured .'i'i-illion P.t"QP~1'ty title; " to" ""V"n~ J9 9 1 _92 , 0,. ~e"U""d ""0"8<-t , "'>g" a"" •. S""u,."" ,appro"''''.'''l } ta""" t"t« ~- -----" --------~" .. , ... ~"., ~ I '. . <> ti'lllJecu.r.cr "'l'<tll»!>e"t Pl'OP""'ty, PrOll'er.ty ta)(. <1"<1 t""'''1,,' tlnse""""d P.r" 0;",""""'''<1 t~!::";,Ot:~l t),~ 8~::ty ,.;~: !" l""le.1 Q, ' 'Joj $1.0 "ill"", t" ~"CUl'.d lJ l!.l91_9~_ o Othez-ProP-E'l"'"t ..OPro>:l""tSl y r3 ta"",,, , '1'h,.. "" COllections t'.r 00,000 in l'9J_ . '''<'8 11 .. " .. """ ~ ~,~ ~ '~~, •••• ., " .• ~ ..... ,,, <0,..,., ~. • "~tion~ or prop.,,.; P"i"'''"h O[ .Y as <l r~~u 1 t " COUht)' SlJ J'jf":,. p" ...... " "1' <;,.;;.. .~"'i"i8tl'.tl"" .t',,~, COllectl"" r • t .. t .. t.." Ye. ')Is • ""~Ult ;itY'1J Pl'OP .. :t" .. tt eo"""""" .. "." i~r;o "9.-0, the t::ourr~ry l~g..taJ.,t._lO') 01 17. (J(J(J J "~"s. 'l'h' r 1>" COSt ."'Poces ' .... .",::-'. ··~ .. ·,.:t.;':"" ' .. ' ... ;:. """"" .. : "e". "~t}V fro", tJ)" c,;"f"''''''''''tel Y QtiJ,~ . Y 6 prO~rty ~I~~ trtl J. i.ty uS&l"s P"rcent " t.k r@~enu. t utiliti ... :.G"""l'Ol FUnd r,,~tdl1"d $~" "':110 . .... Mo.. .. '" '~." ... " ':'~.. • ....... : .. , ..... ,. ~ , . ~-" .. iI· '-'e< ••• ,; ~""'~'" :~'. ,_ '>" ,.; -'" .. .", .... '" ., .. ,"" ~'" . '"'' ~" .. , " .... '" ,.: .'-.. ~. ··i:r·" ~'" "'" '; ............ , .. -: ••. ' .... '-... ~ ..... -., ' ......... '"'' ~;".,. ""'" ... 0:' Percent o/@~"e'U'ld i.,,,:~~ertl' t.x i~ f5 Percent a/Jed ~7'J6 IV 1;> .sse"""" v~, . "'ents .t ."i ed on! Pt'apar<y ).,,~, perc@n,c' '''Ot'on~.. "Ot. Of. ana ... ~11d "< <"'h ot , • "<>all,. '>"" Cit PPr"" _ r.C.'v'n" ~Ios, J''''%r';lY'';'h prOperty .%" "a,ce,;,"o. 'PPr"o"':.tel y 1 'h"t; be.' 'n r""",ini,, " "ch oOi di ,'6"'"<1, '" .'''''I:@_ "'''''i a ''"q:1''n '''0 thirJ. Be P6""0"t, ;;"'<;:1: ""<1 tl,; t~ ether '''''''',,'''1 propel'tlSG ·"d tJ,,..,, . h,,~ .0 •• " a"nty, 0".,. .. " "diU"i""", i> .or. st')l .foU",th" or tJ,""tl~dt"cJ """"BOcr! "aJ .. let, "'.ill "t P""-Pr o ,e CIty,s V". art''';<::'01) POS""on C""'<;>6'91 ::"~":. a"d gaa ';tfl"f~;';,'LlP"y ~ ;:: ",Ji ~ ~:':"nt. ";,~:7:,.~"'i~f"""j ".(, s, .\1, Co t ""nt Of 0,. <1"", Of G °"'''<-6 p. . e'r ",,,,'t"'i ' .... ,",' ". . , , """" " . ..;; .... '''d Uti)"> "& ""<:r.,.". Ot' drOught to Y "s"". t~" "'''''''iPtsdocr"."" o""r ti",,, ~'1.~,;,,, "t::: .f:!,,::'" .,,; .... ,;;:;; '0' .. ;;..;' ;'~'.7""'" .. -r ..... '.. • '" .~ .. "' .... ~... '",. -"" .. ."..... .. .... '" , ... '" .. """''''''. :. ""'" ,. ~.,"" .... ,.; .::: '-., "";': ' .... ,,,. ;." . "" .. ...... .. "'"'''' '" ",... ., ,.," .. ... ,,", ... '" "" ........... "-'''''' '"'' ....... """, y O.e.[" ~ q. t:~ th~ 10 n""t, ""'~i"g "",.," rat •• n'd}' .ctV.1~/h .. ''''''Pho" .. ,.~ , 0 Yo." roroca.ts d g; d",,<> ["om --... '_.. . '"'''' ~""""!!.Q"c£.~ Tl.~a.l')iJ i -ent OCCtl.Panc :;:"C""t '" 0""""41 " ta""" t"t~ll"". . • ':.:. ";:0'" "' ,:~ ;:::;0:.... ';;;.:, :;: ';;;' '.. ""'''. .. • ,,, ,~ ':;"'; ;-", "'";:'"1;;:~~, ,,,-;:-:";! '" ..... .;; -.. , .~.. ..... .. .. ," ". "" ... , .......... .. -. " '" ... :'''''''' .... ,,' .. ''''-'' .: '''''' ""., . ""'" "cal." as "0 tJ,,, ~u" " oQffl "'-tas .~. ""'" .. ", . ~"'" ' .. , .~ , '" % .... , .... ~c€ "'lth _ '_, 11 '''{l.ti o " -.\') '\1;'" (-+1"< • ;;b' f~ .... ".l" +;he Potet . "Co., ""te ... ' ~ J~ .. Ytt."'; i"t <'tty te" '!! >lot i"",. ........ "nrj ...... ":it}, hoteJ """'" ::;. '~'~'" '""""""~''"' '" '%"-'~. '~,~'" ...... CUt.("" •• ~'&~'i". to ~ ... e"V:0re.l 68tfthliol.. -l1lUD: Q ti'JIlt:1II .t'lItr. __ .. h.. • ~".l.l.". t< ". <"ta ... " "ln 8 nt. h _ _ .. ~.'''~" .• , "."~",, ~-""' "'" "'-~ " ... "'''' ' ........... "~"," "' ~'"" " '"', '''''''' " nl91).trciCdntlY' 'th,,, e uPP1y h " "e" .. ". PeC't '" "~" '-.. "... '. '''''''''', """" ,,,i''',,,, -.... ,--.., '-<0, , .. ,::' ,""ollia; 8 "00".). IIl'O't 7 tox cO"'.s prj , • ::~,,!~~(61 "~~o::7t .. >-"... crG.k.~~!O :"~tO(l (23600 "oo'::f~1ofI~:"t~" ill' .. tt '" or tOt • <'''9''tl:''r t roo,",,) , '1)n 0'4 --"'-.",,"'. ""-'".:. '" .. "-"''''~' ~, .... ' .. ; ,:-0 .. " ... ,.;. ~""'''~ ~ " ~~." ". ~,'_, .~ .. .::::~,. '-, .':; "'" ' .. ~:\:: ,", ,~ ,,~ :':"'" """ ~ .. ~:, '''~. ~l; ::' '~".".';~ '"'~''' "~""~"'. ~-. ;:.':; .:~;~~ .. , ':':;-::: ... ,,;.~ . .:;:-. "::';;'":; It ' ~nd th~ e~a" ,pr''''4r<1}. to." "bt,"lt io the '~.::;, "'" ".. '.. "" ., '" ., ,,;..~ i:::' ", "' '" f" •• , Y ~"c1 "t~~~. IIl'~ttG h.,~ • "n "~." -we" or b '< " •• be _~ ueon 1I01i~ . nth 0,,, ", Gn "o'-\)ly d ,expeq"nc>o " by St:~f~~'~ ~tj"4te':~~~tli~"ok"y,,, 40'1e 'lY~~t c1i"cUS$i"n~ :~;~C"..l:y h~tel' u"J"p~&jt Peraont , r~lo ~lto. '<"" -"';":-"'" ,.;, ~."" ,,,,",~;.,, .... " ... ,:,::,~, ." busin.ss l"""'nt b"" ey hov" be Or ",'direCtl """t"<1 QI'l the s: l~l}Q "lU~ni_ty.~t P~Oblell'l.9 .in <e t O O@9d:tiVIQ1Y a~r' J!I!)d ttJe ·0 'J Je,,,, V"lJ ~~ dCt'vit " ...... Of .Cted b '" t:,~ .. ", "' ". ,1;.-",_, ..ri,. ':'.::"., '"" ,: .,'.:;'. .. "': a~fj tt') S~~nf~~,",de",.,. r::oortn~:~:~.s e<StP"ci.l1Y";~S';.~:" "'''St Of :r:'P<a:,~nt "'''1<1!~ "l· .. to ." the h·" "~41-". or ""Qr ~;;:.::;:~, :;: :::;'::"~,;~,;;,:;::::,~,~~~;::: ' . -.rve p'i ma ,.,,! ,OUrt OVerq.,,, <!s tJ,,, y Pr1ce_"OOQ' '·"0 tJoe cJ.Ots£;: blJ&i_h£\Jls ~x~~"" Other--Take!;; d1'lQ' • apP""".iJhdtely s "<0". 'moUOted 'Oc..-lrfPOllenta i ... 1" Pe);"r.::ent or G to $3.4 \T).iJl iO ' h_ ,-~"" uQ'e, '''Oe''d1" , " "" '.,,, ..... ~l'""'J..ng Cit-.. t , ., "'at",. """ . ,uno rov ";""'1- 9 2 Or (<"~.s) ., ...tOlls-($ ~'I},cle 'f'i l' e1)ue~ "'h • . , '~'" '''''' '''.~", . '" '~'" '" ~" ' 1C '""e" (';5 0 '000/"".1 Pro""t-t 1,9 "'iq':O~J "',. '~.," •• " . <.. ". '"'''' 1, " ". '". ,.; ,::; ,~" ..... .::";> .. "'" "'~" ~, '''''' "'L ... ~~': '"'""";~ ~~7'''''''':';:-~''" '''''",. . $:~';"::::~:~~:::;t ~:, ;'.-;~i:~'~~; :;Ff6~~;;~ ~2.:~ ,rOugh JIB 12 9) <"t,,,. S"".1,/ h '. loegiS1.,,,,, 's boon C>f r,,'1"".o halE Of Olp ti",,,,,. t,.:" oOd the .,,,.," ." -" .. , .,,~. 1~ ~1n.8 ~ll(.t .t 2'.hi .. «c 01:"1"'91 t1.ll"$.JJ;; t q"l'l Cost ""1 '" t~anSf~ .. ,. P"""i " Alto $,,,,,, O()~a. to tha 5,,"t 8 1'0 , .i" " ng r.J.lr'fll!l ha:~",-"1 .to 199 1 _9-.z l"' thJ.liI Pul:'n-._. ' 0 .. r_" -~"o b .~_ '" tat ' -"~''''''l t" ."" t}", • ,.. dltq .. ~o" i&~""t1. I.j:;~~. "U"Ch~"w,,\;:t "'r St«te e"t, < .... , t-o,"~ " • .::. '''" '"'' ' .. '_" ... '~' ... "" '",-"~,,, ~~" . .:~~ " .... ,,':; .. ,,' .. ~ .. ,:. ... -" .. ' .. ' .. -: ' .. ,.,.,,~ ;;..-""C,,,, ~ "''''''";:''':'',,. "ct."" tit . ,"'1 1'''''9,''''' ' til" r""UZtt . l' " )99) "Ul e • v .... ,. .. ~ .. t" C",tY's P~"'J<;i .... ", "'K ... .,.t~i~. "9 impact 0" "~t C"~t. to ......... ,::; , """ "":;1.':"" .... _ •• '" ''''''~ ,; .. , •••• ,,,, ... e cent > he"" un,," -0 "ont"."t U &ur r .,,.,,,, > ot. t" ~t':::~?.! "it .. ~:';,~h"...,.~_ COJc;.,e::J~~ .C~;l<1Ctr:: .r~~:~_tto" p,.':.c:s,,:,;-""qt ' ~'< l' d. ~ -" _", .ar '." Q~., .~ """" '"" " "'"tOt,o"" t..," t" qe."i"g • bl'OU9ht bac" ,,,,,,,,,. """IrJ ce ' f """."" ~~~~ .. .. "-" '" , ' "-""00. ,'",,"0.,,". ,"< ",. '" PQt.Ot.ial ' " ""l>8"t"" to .,~" "o"k~d '''k!og Of ,,' '" ,,~. Of d""Oto", ' ...... c t ."" P't,.,," "0 ¢;:.bU i zp in by tb~ pr e y ["" "ProceSS"<l " pan,""" to ~ •• '<t.tio",ov OPeo,",,,'1 l'''''ro • "."do,._ I nn "ti '~u".. ·nu" ""01" t", 'h' AnOthe,. c .e n ues a~ ~'~mPact theQ~ ~'f'J~~ &Slet the ~co"o""'l' . " ""t""oio" ~,. In<,.,,,, ," h ••• " , ~oto,." ' "J<1><>~'t"<l .s"" ""ri n9 tn. ~o a,'to '''9lOt,. an!cJ. in-)i"" r '" ... " ~'7~" ~".,. '::::."'" ~~:~";; "'" "" 7:,.:,_ ~" , ..... , ' .. ·""f';:;' ".~ .,.:'~o~, '''"'' .;::: '''',,:.'::"~, ''"'''', -~ .... ''''': """ '" and toroo '" secur.o "Q t.~ ~."."U. ' g. 1><>>-""", c;-:~ (fr"QUAOcy' ",un'e o ",,,,, prQ~: tdepahr.l""t "" '" D"'3 1»>,.", "V.l". Of '·.le). 'rhe." y t,,<, Pro c @ G''''~ "ecei~ed f';.:~ Qnd the co;::; trdn.O"t,on -~'n.re,. t4~ rJ::r t y , .• ,~~ ' ... ".. ,~ ' .. " , ' ',,, ~ ... ";.,, ... "" , '" '," ,. '" "~"'" """.. '""' '. ' , ....... , • l'II-l 1 ,l,i Ok ""'_ted Co >,' e t." ,.~.' >283 noo c,_ ". -<")"e ",,, "" , •• s .. """",'l '''''1" Lncre'.e~ , .I; eCt_iQrts-i" ~ -.l.i) ~ 99~7""9.J '-&.i.ll.t.s e _v ' <LA,,~._ ~ ~t!.tQ Vl t -t U t't.lljr all 1·~1-9Z "as for tt,,, $3.9 mill' ""'erg """, St" :r 'On f"",,,, J ' ;;.~<l :"iYt~~"~¥~y);:t;""n,,:;~jZ'::'i.V"~~~:~ ~~; ;~~:j',;,.~9tr~~Illf>."ts in '''nu" aCe "'r. and ' ... , "rd P.v '" ''''t ' 0,> --fPaJ nO~"'P~rk.ing :; , .. ",~ ;::~;:, :::. '.. ... .:'':'::;' ''''',.. .., :,':r:." '"""" .::..~ ,~~ J::;;:;;, '"""""'" • ';:C' ", 'M, ,;:c.;:; .:;0" ""':;;:';", '" ,. "'0 n,.,!;,,;: ... C~ .. ",.::;:::::"","" ...... :.: ... " ",' .. I:: "'"~"" " .. '7' _ ... " ,"""'" ........ '., ...... deCt'·'''Od rei",,, :""~r<"e dnd ~ ·'ty ""'NoYe~ h -'1 _reV-&"'I.J~s tw'~lJ ur "e"'''''t h """f n S " b 1 e ..... tl} ¢<te e '''''':<2':93 "'" St."r"I'q f "0",,1 "'ill,. CO~,~ <>r the <'"~l' SA "$~}t"" lJ -r\i)C~s. j 1 ,:1 'j I Service leee & Permits Service fees and permits tor 1991-92 totalled $6.5 million or 9.S percent ot General Fund revenues. service fees and ~ermit. nave baen incraasing over the paat 5~veral years and are expected to increase over the next tew years 8a stlt.ff attempt.s to approach 100' cost recovery l.evels 80 directed by council as ps.rt ot 'the Appropriate Laveln o! service priority lind the 1989 Oser Fee st~dy. Roughly 7~ percent of fee and permit revenue is generated by two depal"tlD(mts. PlAnning lind Community Services. Plllnning har. implemented several new fees and tee increases, and is close to cost recovery for many development applicat,iona. Ovor the PlIst YAar, Planning fee 8'ld permit revenue cenlained flat due to the impact of the recession on construction and development ~ctivity. However, development activity tlllS picked up in the current year. Future increases are Ijkely to follow inflation, but revenue qrowth beyond inflation is not likely since cost recovery lev€:ls are nlready high dnd there are decre~sing opportunities for larger developBenta that can generate significant plan check and building permit fees. Communi ty Services ia an area where potential revenue increaEH7=S are possible through ino:eased cost recovery levels for a variety of activities, In other revenue-producing departments such as Police (e.g. response to false alarms) and Fire (e.g. paramedic services) , cost recovery levels are higher, and higher revenues would probl'lbly be th~ result of increased services. A good example would be the propoa~d addition of a second paramedic vehicle. ~~tment Income Invefltment income represented $2.1 million or J.1 percent of General Fund revenues in 1991-92. Under the City's interest allocation methodology, interest: on the City's investment portfolio ($152 .million <'It June )0, 1992) is allocated to e3;ch of tt.e funda monthly, baSAd on average cash balances. Under th,is allocation process, the G~neral Fund received 20 percent o~' the total J..nvestment income (on an accrual bl'loSis) earned by the portf'ollo in 1991-92. The average portfolio ~arning8 rate haa bGe~ d&clining steadil.y over the past several years ad interest r8tes have gone from B. 94 per.cent in 19B9-90 to 7.86 percent in J.991-92, and to 6.€.2 percent. at February 26, 1993. Other Re~ Other Revenues accounted for $2.8 million or 4.2 percent elf 1991-92 General Fund revenues. This category includes prope):'ty and facilit.y re;ntah" and now includes lease reVenU& trom the Cubberl.,y Community ~enter. The Cubberley Community Center provides long term rentals for local 8rt,ists lind non-profit organi:lations l as CKR:226:9J 14 ;:., ,ryy:l'"" Ii . "rOr",,!: '":' '-". ,_~ ,:,",,-, well as ho\O.rly rentals ot rooms and athletic facilities. This revenue category incroaoed hy .<i6 percent in 1990-91 and 34 parcent in 1991-92 tram· activitles at Cubberley. Revenues; are expocted to remain IIltable, liincs the Cubberley toc:i.lit.ies are now rf:l:hted almost. to capacity. A change in the mix of subsidized organizat.ions could result in a slight inC1"8"'88 Or dacrftas~ in lease revenUl1S. Qperating Transfers Operftting Transfers totall~d $10.6 million or 25 percent of Genp.ral Fund revenues in 1991-92. The hulk of the transfara bce from th~ City's enterprise funds. Ent_erprise Funda make two kinds of annual payments into the General Fund: rEint and a rate of t"l!'turr; based OJ. net fixed assets. The rental payments ($6.5 million in 1991~92) come from five of the: Aix enterprise9 (Wa.ter. Gas, Slec:~ric, Wastewater, and Refuse F'unds). ahd aro for land aJ\d off_Lee spaCe owned by or bullt with money from the General Fund. The )~eturn on net filCf~d assets ($9.6 million in 1991-9~) i6 paid by the l':lectric, Gas, and Water Funds (Hi a percentage oapplJ..fHl to el)ch er,terpr:ise fund's fixed asset basel net of accumulated depreciation. The rat~ of return m~y vary from 8 high of the CO\lifornia Public tltilitJ..es Commission-approved rate of return to a low of ttle rdt~ of return on three-year Treasury bills. While it hl'ls been the norm to set the T8t'l of returl'l at. the hlgheat level. Council may choos~ t.o .edjust the rate, depending upon the fiscal health ot each indiVidu al 1.I.tility. CMR:226:93 15 "i:.r<1<I!At. "rn.n l!.ltIi:.r<n:r1'rll!l:s ~) Saillrili. fi if co.,.t~"Ct oS .neft'ta s. l' .~~~.M Pp ~1!Ir. to J1 .. r. WI .rill.l G../tn.t".!tl }:~J.l'IIoI"t._ "- GENERAL F~I1'Y OF P.4LO AL 1'0 'R lND ~Dfl7JJu;S lJ, TypE Or the Year ended June 3 0, 1 992 . l~5'''' ~ Q:r S .9l"'i", ""11 8,,"""'1 ~COotri'i.Ct Srryiee;s Q!SUpplic" itJJd M"eri." -General £XPt'llse ORent<> aner 1.eases Q&."", She i ...... P'I""~1 """F. . '." , .... 4Ci/"y <I: f"'jp » n.' '''f'' ~-U-''-::''la. .. ('S 4!lO_"io i1 ''''''''f." 0", P@l"cent: JUtllt • , 4 ...... ~.Cllltl .. ~ E~l SChool 0lt. 1 -0 ... "', •••• ..... P ... ~n..t .. 1"Ot_J ri· ... .lI'·C't ."'n... ...... " $·J:,8~6 "',1'6 6 J,8JS -:.319- I n r;rIj43l,J ~ ~J m '" 68.8& ~" ?6,s 7·6"S 3.01 " .. ·.w ... U1; •• O"",,,,.p l'r",.r ••• OUt ~Ot.~ .~P$4cri~u~ •• ('~~:.l.26:93 16 58, ". ~f S9 r .ll/9 ~ S't'i).t9J, (306 1 6,93 (1,:n1 '" .!~t'i04 '" " ~; (.1$OJ ~ 9S.:;-" ~ J,'jI49 100.00 I~I 2 57 ~~tI! ~l;tl".iGQ Ce~.~al a~<l benO~jt$ a~o l'~'r.. /Il~, or 68 ~ ""t8<l t" $4' 9 . ~ .... ~.,;-~~ .:::;;;:, :: ';';"':;:;:;::. '~"''''-'' '" ... ;:.:;! ~~::-.~. ;~}~?:t:~:~t::::Z.1~. :::if:!£.' ";,";~:'i .... ~: •. ". '''" ,,:;: ::-.. ~". ~::'!' ., .... ,:::;0;" '. '''' """" ., " .~ .... , -,.~ . ". ,.,~, "'" " .. ~ ... Cl"fJtlit' Y. I,)) .199,2 t:!-l .t'"@-'ttlrttllJ.·t·, .... lJ)ll..[io n C1."~d .'JiC;p@IlC'-.lt-or-en. Un~.,. ,-'"" G" "'(1) or ""t tX'n_ • -,~ ~ -'" ~ ~~ ... ., '''~. . ''-"'" -"",. ~~ ,,~,," ~,.. -. ,,;' 'Oo ~"'" :""»" • " .• : ~,~,~ Of >2,5 "'illio" "I'r:Rs. 'In .~<1Utdget ~9;'~~~~~nt ;l.J.:"'J.Q~ .,. ". """',. . "-'''' " ." rfO>tjr.o:_ 'r. """Pon"nts Q-ata" rot' J39:< ?Q~ ""n"".l -l> (p";;' • sala,.i . "' ..... " .. ';~":~"""" ::.1;: ":""" '"'''''' . ~ff~ •• )._ r" CO Gt " . S'<.r"~. ,........ ... "'11)"1 r i1T'ld 'oor ' ~ or 1 6 °Y~e S~l. . or'~r', . pe~cant rles ~h 1'0 11 0 """,, J '2.8 Pa"cent o"ed '".ill (""0,,, t:''';.;;;", ";;":" .,,:.: .... ~:' ';,;.~;,,,,, :~';::''''' ""'_ .... , .. : ...... ., ... '" ,._, ~,,' .... .~'" ~" , '''''. i:~~t~c~~::t~~~~J::~:~:!~~:~~~;«, .. t~~:~~:::~;:~~~:;:;~~~~~ dii' • "nlea~ "" to b., 8 .... ,. '~'~9"",,,,,t . • ,,-~ .~. """"""" "" "'%' -~ .... ,. ,,' '<0, ~ •• , ,... .., '~""" ..... '~"'"'' '''",> .... ~ , • "« ~, ,." "'" 1.:.' .,. '''' "" ~"'''' '" .;.,.1"'" c '. '" ... :-:., '" """"</ t" "qli "':'"<'entIat"" 0" ~"'t dOl,,,",, o"~r" ,,~ .. '"'' .0", . "" %,.. .~. '" '" ,~ .Y$~t"s r t""JhUtitons Jr.~ ....... b l' mnplo1' .... s oJ ~ontrd<'t to~ '6 ~~~ Y th ~" . d e cr .... e in .' ·l "'1./1",,, t ':.'Lty il.". inQ," :::':'" '~'~';"";:;.''''';'':';: ~h "". :::-:.: .... ~ ",. , ..... :::;:;: ...... "", ..... ; """'''''' ,:: '''I'' .... ~ •• : _«'" " "" .. ., .. '''' '''', " .......... ;~ " ' ..... ~.; .... '"' P<>"a' a""ual1Y~, or-a e~Pe~ ."" b",,,, . " Pdy",,", "., ';:; """"" ." \' -'" ., ." ';' '" .... ''':'';;'' 'e. ""; . ~, '''''' .... .:,.. """ ... ",;;;0 '" e ',,~;"" ~ '" . '""; .... , , . ' .. '" .... ". "" ".. " 0""., .f)~ >ty h·' lth "~r 1 •• ". .pprO~i"'t" ~ dental. . "d"" COOt . "'y "oX' til. . "n'l vlsi on "S ("nO],,,,,,, . :::"':;:: !,~ ... '.,::,~::;;.:;o l;;:;':: ::::; ''':::'';.::; .;;~ , ••. _"'" "'~"':~,:r'~ ' .. .'~;.,"" "" :::,,::;-" .. '. ;,~~."." """ ... .."' -... , .. '~ .... '. '" . " ..... """.: '" " """" 0 .... ::~:"" -';"" I;:;',,, ',,~ .... t;:i':~. _~'"''',.; Clfl;'"26,. 1><1" ... th" P!lb1h E"'~l~.S S"itOhDd-;;;" 1" ""'~lth 3 Yees >t"di C<ll" ~ """4q"" 17 ~ HoOP1t .; '. 1I.')~'.'. ". >~~ ~. /' ~ . '_II ! c .... ql'\g. ..\Ct (~f:M1'f~ """ .. l U .,_.b.o .. "" P ) ~$ or J"nu.,." "eg,. ... , Co~t f~ "99 1, ~lGo ~"'''' ."'~" .. " -,,',." '-. , .. Cit" ~~ """,pe""".;(o,, ,'. """ue"", " ,uL-I>""'a <_ ""Oth",. , "'" """" ' .. ~~ ... ~.;; . "'" ~ . .,:-~ ''''''-.. " ;.;,~ -..... "~ ""~ . ~ '" '~.-"'" "-" ~ .. -.. "'''-''' '",':;0' "'''' ""~ ':: ;0' '~'"'' _"":. ......... ~ ------- / 'I'lt " J>.o". ""~"r", y"",," G h,,,,, 6 19'''1£1"."t: 1' camp,," •• _ ' . "'" """'" '.. '-", <It'e "ot·9'o • ''''I'<>'' t1 ng til "'''n''.te" ry, ""'''' C.:ity "" ,. ""lory "l"",,,,,t . .. ~~''".::,-.~-.., '''''''''' ~ .. '··N. ,~,::! ", .. _,,, -".c, .... ""'" ,. '''''''''' __ .. ,,~ "'''' _"'''''' "" "'" , .... ""'., .... ,,," , ... -""'N,,'" '_",. "" . ""U .. ", ,~ ''''''',. .. "'" " .... ; .::::.~;>' ... .., .... ~ .. ,~, ,., .. '.:::~ ":": .... ~'" S, emploYee h""lt" • n ." til" Perurc" C'ltr~ eov.eraqe Oot' ~~~ CQntrll:Ct st\t' ""'''''Odhu"" Vl"",, aCCOUnt Y".,,& ~t ".tn 199"-92 ~d r",. "PPro ' ">lPe"i e .. r,n • ., 1"""t' . ex"."s"s "av. "'''''t''ly ".5 cOn'r'c::"c<>a J>, 19 9 1 _92 ~/).1l J'll"Jati01l. ft,""cre'aed ov",. ~,"C"'''t of :::~~ ,.",;;< .:',,::."., ;:~~ ':;;:' •• ~"'::.:.;;,;::;" '-,:.::":." ;~7;v:t"~~~,,~~ J ": ~"9;'~d: l~'~~h c~ ~~ l~~~:::~~CY C::~~!";:: t~~;~ ,,;:,,": i;-: t, ' "-S'lo,.y < .',,&' '''' 1t (. "Js cat. "~ r"aUlt.. °'"PO""" t u,. .. " .n to", 1992~91'; ''''",orOb,," to 9'o",y .ttl .. r@dU"ti O " ,"oUl" nOt h" 'd' «qget thl'l't .... notfl, '" r"l ~ 4USt8d < ~.n."'l ~ COlltr-aCt ,-~o?: l.nrl d 6.' '" 6 e "Vl e ". " o n; M. ~ PUtChases, C'O,st.s 0.1' S)Jp ~, p",.""n,OV& Pq"" ""d ""t"" bUdget, ,. the PaSt 0 'J.d l. hav" d 199i_9~"~ "ont"OJ.~, ~,' Y"~rs "'it; ftCr" .... q On 0 .,~,,;~::,.:".,. '''''';.'','-" .~~:;::~-~'~7:," . pro"'·am Co a r '4 ti o ",,, ""'act"d mO Stl Or 3 Perce"t and "ng es • ""Pect"<J $n .' Y by lnqOt, Of tile '-h.ls at'osa-' .lQn. N~ ~lthqtlt Itriljor fi"'lIfi.t:~",. CE'I'1O&l""a.:z 1?:/l:.1Ue ·"J>&nd j ture& r,~,,~ ·ec.O~nt"" fOr I!~""n S"l:~J.c to 1. 9 1 _92 , L10bl ,$4.~ mi1410,>, or .... ,-, .. ";,,,;~,,~,. '" ~:!, "'"'~. ~":;" ~.-, ., -''''' ' .. ""; '. "" . .., , .. ' ~"'. ....... .:, " .... '00, , Of CSne""l e"pen "t:' "gOOey ."Pens 8<d ...... 1)". see, 0$ ($3 85 ,000) Oat, 226, 9J 18 .----. ----------------- "---- ~O&t ge1lel'n..z b}. inb.ot./OI1 ""'P&"""" ""''' "" ""g''''''o g In' .l'J>tor '''9<!>"" ,,",cteq to ,.. ... in ,~ ..... ""0". i:t: .c.;oo ";,X, :::::::;. , ..... .:;.:; •. i:~ .. ~ ., .. .. """"';'~';;;'.;~" .. ,..:.~ ....... -: '::."00." ~. "'"'' -" """ ......... ,' ..... , """'" .' "...,. "" " . '" ,""" '''Be tlx ' '''''u''''''ee, " ~6".r'J e Citi"" 0" SJ ""lJ.Io" COSts, '>'1). Cit xP~ns" ""t"!?or I.': '" ):';;::'%''::''' ,;"';'.;;.: :::--.'.; "::J:; J;""~' ,'~ Z,';!,;; ~':;:':r ''''''' ":'-". " .. "I","" ""U,(,,~", i:" ... .,. """' " -U",. "':" .... ,,~ " ..... _ ~ ' ........ " -., ,;;, ''''"'''' ,", ;;;'" .... ." ':'~' ....... ' .. .,"'" " " .... , ,''' .. , .... " '" -.... ' "'" ...... .. ~ .... ,,-...," '""'-"" .::;.". '"'''''' "~'" ",. .. :,~.,,,:" . -""'" '"" """ .. , .. , ..... ,' ...... "'-'" ", .. ' ..... :;.~, .• ",". ,.::;;:::, ' ..... .,~,. ! '''U", .;;:; ,....... -. ~ ,........ '" "" . ,,.':; ':~'"'''''' "d"g"~ ; P~e""u", P·~~.~t , dEerE ••• or citi"G ":~i;4LO, 000 to '$~l;o ~CC"L h.v~ be. ;~ '" ... : '::?' ... " ":.:::,'" ~... ';";1'",,,,, ""', -.f.r,::'. "'-'"' • ~%! • ."" ". '" .... ;" ' ...... ~.:; : ..... " c., '"'.,,,' "" " .. , -..... "'''. -. """ "''', '. ::';;'.:;:f:[ ;;:,'i''':[;·::'~::;~:7'i;':;;.~ ~,;,!;~~;,;:::~:: ", .... '. ~ "'... "'" ~ ..... ,. '''' -. ~~ '"'' .... ,., "' ~... "':,"""" 0, ,,,! ,;'''. '''' ";~"'" ., "~': ;, .. .. ~J-'·8EU~d, '0 ""&<i<ted' """"'V""" 'Ods ' ar .. «Otklp.. "n ""2- 91 r <,,, rl,.~~ J2t.'l.~.<U.t!ir~ <l:ted 1.l'l t\jttJJ:'e " or. thfOl IfJ.8(;~ .r~ii»): S, Otl> aJ:" f:}(pentfitu . ""0"9&s" ond t',,~ lnclude ,,~ f01' J ," p&"<.,, Cont<nryenCl.. 11"t s , !,,~,o"s • E ::.~ '''''' ::":;"':-";",,,:.0;;;. 'or· ..• 3';;:''';;;" ", ..... , ~ '~'" '"-'",,"''' " '"<, '., '''., "" ,,,:", r·' .. .. • ,,~ .. ~ 0 '. """ '" ,,;:;:; .!;;, "" ".:", ; :.~ '., 'r. '" '"';;;''' '. '''' '" , • " ''-. '" "on. ""d """'" ". rn"Unt Of .• "' .,.,:. ''',,,.,. ".,; .::"" ' .... -'~ •• " • ., ••• "." c ''''''''';' '!, "........ • i ' ,:' l' '''"" ·";C,.'::';',, ~ .. , ;;'7." " '" ",. • ... 0; .... , .,' . '''' '''.... • ........ ".. " 0at'<26:VJ .,..~ ,..:; :, ~"~'" "":;:'''''''''' ... ,,::; ..... " .. ,,;' "., '"'''' ": "'';'' ' ...... ; .. ;;',,, ... '-"""', .... , .. ; , Jt,y pur,,",,".... lc<, i'Un<}" or $,;-,"re. lnCJUdeq dnd ·"""i"<>6, •. "'J1 1 ."". a"d )9 , , , ;' . . iJi·· ;if&f :.J'. '? I.; 'I t I , OperAting Tr$osfers o~ OperatinCj transfers tot.alleO $2..9 lbi II ion in 1991-92. or 4." percent or General FUnd expend! t.ures. Operating transfers out include an "nnual transfer to the Capital P~t"oje(:ts Fund for the ca.pital improvement program, a.nd trar~sterB to the Oabt service Funds to COVer principa.l and ;interest payments on General Fund debt. The City's utandinq policy is to transt~r $4 mil.lion annu",lly (including $1 million tram utility URer tax revenue) from tho G.eneral Fund t.o t_he. Ca.pital pro)&c~s Fund. In both 1'9'91-92 and 1992-93, fiscal Constraints led the City ~anager to recommend, a.nd the Council to approve, a transfGr or only $3 million. Transfers from the General Fund fOr debt service are based on the repltoYl'Ilent schedule of City debt obligations. These includo certi~icatee. of pdcticipation issued to structurallY imprnVf~ and modify the Clvic Center; and general obl1gation bonds issued in the 1970'a to renovate the golf course. Total debt service (pr,i.ncipal I.-etir-ement plus int_crest) for tneee t1JCI bonds is sliqhtly less than $1 million per year. Operating tranAfers out are thererore tied to Council-approved capital project spending, ~a well a& ~he extent to which the city relies on debt financing. EVALUATION or FINANCIAL CONDITION USINO THE leMA MODEL Tile International City Manager's Association has dev~loped .a model for evaluatihg the financial condition of cities cBlled the Financial Tr~nd Monitoring system (FTMS). The purpose of the mod~l is to provide a better Understanding of the forces tJ\at affect a city's financial condition; and to identity exlst.1ng and ~lh$rginq financial problems. r'inancial condit.iofl is defined as d city's ability to finance its services on a continuing baBis. This broad definit.l.on is analogous to the concept of 8 "structural" deficit or surplu~. Financial condition gOOR beyond cash solvency (JO to 60 day cash flow) and budget solvency (ability to generate Bufficient revenues over il normal bUdgetary period to meet expenditures and not lnCUI' deticjts). Specl.fically, it incJudes t_he ability to: 1) maintain existing service levels; 2) withstand local dnd rAgional economic disrupt.ions; and 3} meet the demands of natul'al growth, declihe and change. The FTMS is based on twelve "factors" representing ttu.~ lJJ'imary forces that influence financial condition. These include environ~ me:ntal factors (community nF!ods and resources, external aconomic conditions, intergovoarnmental constraints. nat.ural disiist.f'l.re. bf\d omergencles and political culture); organi7,,,tional fact-ore (manageftlent practices and legislative policies); and financiaJ tl\ctor6 (ravenues, expendi turns, opera t ing tJmii t.ion, debt struc tura, unfunded liabilities, lind condition of c."'pita}. plant,. The CMR:226:93 20 ---~---- fact..Jrs liTe then a8B~clated with I. indj cators," which lIIel!'lsure different aspects ot th(l factord (see Exhibit 1). Not Illl of the factors nave 1ndicators t because Bome tactor&, sucQ a~ polltic$l clllture, are not quantifiable. SOme indicators apply to mot"e thlln one factor. Not dl1 indicators may be useful fOr an individual city, and care nas to be exercised to determine the ~pplicabillty ot the possible indicators, as well as the cost-benefit of ac~umu lating lIIulti-year information for indicators wh.i.ch could he relev.nt. ENVIRONMENTAL FACTORS COlllmunq fleedalnd ,.IOUfCttt b1,"",1 ""'condition. Naturel diulttl'S IfId tltltrge!lciel 10 CMR:226:93 I-- [lIlIBlT I fllIS ,.,OEL ORGANIZHIONAl FACTORS FINANCIAl. FACTORS r"" .-:=. ... \ ::.':!. ~ .~t fWtdv L • &..nII".ctrt.f)' ~ Re .. , 1 ~~ ~J r .... ~ ... ....... nllf1CNI Gr~ l c :5-_ ',. //=~ H",,,·-I ... _ ..... ..,11.1 GrI1H·i",orj lA."~II'o::tIn'I. h;(:qlor.kJn II .. r YIQ"" hnhlll.'l'kt ,.,., '" Athtlldlll".~m tUft_ IIm:.Il _fd'r"t ~III~ MIIoagamMI t2 prJIetite. Ind ~1~mU't5 ~~....cIbMruo '-9i.lJw fIt_ po'd.. . ~ '"""'" J 1Jo""'" 21 ~S'~" · ~ IIf!t .1nIctLIre ""' ....... ... -l l_"""r"", I' [MlfImII) 1: Unllll'lded -..-. J ~ilbt!,ue, -hUI-..;nf\ "_ .. --... rntt.l~llY .tur~ ~ i l'llIr", ''''d''l ........ </ 011 or th .. lnai P·'"t: 1 0 !Jlo .. i y ~~.::.~~'i'~ tit" ri"ld to tf':'~O~"n,,~"1"/) "'''''8 !Jp tit .. l:'o""i"~. 41""'8t 0 .... )0 "Ito, 1>or aPP".red to 0,. P~oP"ny t·~ .. 4 ~~~"! Os "uen """"nUe n'::"~~e, ':-'''''" tit .. CIty a"",,)"P<tp"rty t""" .. . 'MioOtors h.v<n~ ["th "", tho" .fOndi.ng ita 0" tlte 1>!JaV" liIoploy .... " . -> 0 <10 ~xth Pension oeBe a n P.nsloo system, th .. IoI/)JJ@ '"Ueh OJ' tlte' . t " .. '" not <1<>"0101><><1, """il ahle In tit .. /)<~t";"".l iMO""Mtion 0$ , iCAf'R), the '1U.lit/~~YC~f'1<co""'rehen.iV" I\,,::;.~n in" FTI<S ""'<1"," ... as ., 19 07 _ •• , "<>110"le > ~.Porti09 "&Ollo"s ,,' >na nc.(41 ~epOrta """' ort l"g In til<, C.\l'" det">l"" Tin."",,,l <1"t .. ~gn.("'O.ntll' Prior City." ""n""""10/? 1" /?ot a".i!abl e f",. 1" .. tl)" 1""01 Of "'''' it10 'l eo ... " Of tt~ the oor""nt 8"<>000t1,,'1 !h:tyea,.s prior to th~ CO""",?0'''''11'. the de " ?"alYs ea Pr10r to fil'l elJJ (.Xl'AS) ~ fll.t"the.r- Pa"t 5 r1"e"1 c''''o" "os ""'de to (j eo. l'eo" 19.'_09 ;:Pti",.l 1 0 j,,,O";''';:''t1>( 198 7-86 t1><-0091> 1 ;::'i:~f) t"end c data to" th" • relOVa"t to p e ,"odel. So",. iOdi ' r d ,,,,,<-th"n th" time, dUe ~o to_ ~!~dA:to hOd to be ab.OdO~:~o~:rWhiCh "?P.'''ed to the ddt. ". Oil'. 0" ·"'e.Si" .. "e"""r . PU""""t dt tl>i. f.ctO,.s fo<, '1"0> ,td"1,, ."""'g tI,',; Of to" City,. ". "~n. ddt.b ••• ".r" tho •• ,. <1" ... "101><><1 "iv"" the ".""". ""pre",.:, tOl "nd ""Er".tr"Ctu"" Ol"t." to the ""'""Hio" ""Pl." .. "",,,, ~ChO<!~f:;) ···"t j" .... "<or'~$ •• se;; (d"t.~~.a mdj"te_ 4 l"c,l' >'f "O""ist& .. 2'bJs l»IO"""'t.;""'.,, ""~ntfl"4"ce end Y~.rs aM beeau"e or"~~.·" ,"1'~SirYi"9 "",,;:.;ot .""all'!.l. clu. to ""OUld b. ·"<'U'""""'. Jy'tor""'i,," . ~ r. 1" t01S .,,,.. 8"'1)'61. <>£ thl> £ Xh1 blt 2 surn ... "" .. s h . . . j' lr St cOlu,," Sho t " <'lctJe",ol"" <lo~"10 "hoth".<-an i o "" ... ;: to" <"'11".,o", the ~ P"<1 1'0,. 1>.10 Jllt o . 2''''' • "arning t,,<,"'I; aod ~~ drh"" •• " In tl> ... i",,~~ ,"""""''' ""di"a,&" "", "'he fioal COju"," ";~Vi./" '<0 ~"v '''PM ond<Cdted ~ny JOc> . ""P<>Mit~r,,~ "~~,, "'''''''' "re ba s 'C"111' r'at 2m""", P"Obl e "" ror P"lo ~".,~ ~'."" ".:;; ;"'"" " •• ". ',~, ~.;;"' , %""' ..... , mOde abSent lar'1'''' cre(j~ "'':'01" h,ve bee" " nter l,," "'e~l 'TrOWtl), COntr ibuti"", h' t" "" th@ POSt t"" g the ""a"'"i ng .. City,,, d·"js~~" :OVe;'h~~; b;"" Gtoonized, P8::::{O"h retjr .... "nt health car.> sYGtem . (> rom. self-lnsv,""" . Y 4Lt'O"gl> tit" rSflect the "n" .. ,.t.~"tOl.cl.etLOO."y fund balanc,,';" • P"""i""'-ba"ed COntinUing "'Ulti-bil1~':,~ "fA tlh~ current econo",o !:~.~e.lthY, but ~o 'or <lHlcits i ''''',rnsnt "'ith n th~ ''St<ite Of %'226.>9) 22 J I I ! J ::------ J _________ _ C4l!rat"ni4'« .bud h" ..... :t"'P 4c t" ")) g~".; ""10 "lto'« Cith e " . """ ~-,"-""~'<O "' ~,_ "l,," '''"" ~,~ " "-,~ "-'-'" ':'-h<o,,~, "% ,,' _,~ ~,,~" ~ e 19h~at '"Co"'e 1e"&1 e~e J& "n i~~e"~in '''eo<" fu." """n ""'''''1 " .. "" tl)" """ .. ~"''', hUdget P"""~"e Con rdnc<tbl e <liacu&~io~ in ~e ""', "'''"",:; "'"'''' """",-" .. <;" "" ..... ,., ,., "''''''-'W", ," '""" 0<,-. _ ,,' "'" '.'<0"", •. ;" lP o t e1Jt :;<'I.! ll"t:ili,~ to «0 "dnq.at e le""l a~%':;'~>"t:YlSteIJJ1:!I .ar-~ nOt ~ "-., .. , " .. ~ • ~",.., , ,."," ''->'' '.. '-, .. "" • i' "'" ''''' ".. ., ". "::':" • ""'_, "'''''' ''''''" .... '" ,.:,'" '''''' '-' .. "':':'~'''-"., .,. '-, "'" -'" ,., ", .. "'" "'" -. "" " ..... "'-.. : .. t~tlo "''''ding l,,:::iqf~ap> •• l l"PNV""'@nt ~;:~9V: re::Pon$e~ to till&--"n.... . .... "'-'0 " "" "''''.' , "" "" "',,: .... '""" <>-"" ..... ' .~~,~ '"~ .... ,-,~ ,~, ' •• ,~'" ". ~"" '" ""'~." " . ." 'oo ~"'" ,~.'" b. ~"'" ':'::'~;\"~",~ ""_ •• ~ :~!",:"'"~ .. "' """'; .. "~ ~ .. ~'"'' '", """'" " """ .. , .~ .... '" ... " :::'~m.":I, '':;' ",':'.~ :::. c' ';;;;' ,;';5.,;~, ..... ;:~, ~:;:;''':::'i;':': "'"" """" ';";". '., !'''' .. "''';''''''''' •• '"'' .", " .... "." •... J; .. ,:,;,~ ,,,, '~" , .... ;;;.::' ~: .. "., '" ", ~ • "0 th,s ."Ad in • " ""Porto n ". n. ,-'" Ut~lrq Ytt.:tc-s-. _ Cl<Jl'2:'S:9J 23 , >. j .. )i; •..• ,',/<,:' , , rI"AHCIAL rACXQ&~ P.~ Capita Rev.nu •• Ba1._ TaM Revenue Pft~ C.pl~. ~~~nd~tur.8 Employ... Per Capita Employlltv Pring. Ben.fita Opt!rllting S~~rplu. 0,· DaHcit DL.c~.tionary Pun~ 8111.nr: ... Dvbt Serv iee LOflQ-Tenn Debt Accumv~.~.d Employ •• L •• vllt ~NVI~O~HENT~L 'ACTORS PopulAtion Perllonal rflComfii' POT Capita Allllff ••• d Valuoe Conatruction AC1:\vity CK"R:22&:9) EXHIBIT 2 FINANCIAL TR~~D "O~ITORING SYST~ summary of Indicators Warning ...Iam- D.erll .... O.er •••• InCIBase lncr@&flft Incr.aBB Decr •••• Decrease Inertlill'll£! Increalle InCCalllll'! Incrl'las@o/ DflCf"I!UIIDI'! lUH'rflAaG DeCl"ljl'oIIlit' O,"ct"eIl.IiIIV PAlo A.lto Five-;C •• r H1.atoric.lll Tr-.ml rlaf' Flat Daccaall ad , now increalllnq Oecrollllled, now .lncrf'!II!I,.ing I no::),:""".11 , now atabili.r.inq surplulI". Incrllafltl' Flat Flat. Stab~li.rf!lcl St.&bill-1'.8d IncralllAe Incrllll41110Q lit.Abl ... 24 C9!Mllnt' Dec!ininQ l'IIIIyglnall'l in t'1I.l term_ but .till eub.tantially hl~hlilr tlllUl IrIOllt: oiti •• Retention CIt ()ur ... t1t baa. ",ill be ""ey Shoulo1 blit Inf)nitored Should b8 moni,tot"ad Nead tn adjuet e~penditur. fcu:ecaet..l..1'oQ Dependent 011 uno:;ertalnty of *COI'lO\!lJ.C ",nvl-rOnmllnt: And State budget Increaa& in aldar popula tion Qap blittwlIon mean and Rl*d,l.u'l incOlf,8 wid.nint'] ..,.--- FlNANCI~ FACTORS ~CapitA Reyenugs Over the laBt 4 years, General Fund ~evenuOB per c~pita, adju9ted for inflation, hnve actually duc.linfJd at a 0.5 percent annual rate, held down by the roc:es$ion. Still, the ansolut& level ot City rGve~UeB per capita is very high, reflectinq the City's diverGe and healthy economic base structure. TABLE 1: REVENUES PER CkPITA Description 1997-88 19R5-89 1989-90 1990-911 1991-92 I Operftt ing 57,26:1 60,689 6:2,61, 60,855 ! 66,011 , reVAnuee , ($000) -I I CPI Constant :1.19 1.14 1. 09 1.04 1. 00 ~ Oollar I AdjuEltment I t'Jet operating 68,191 68,882 6£,2."6 63,196 #)6,011 revenues in ($000) con- stant 1991-92 I , dollara I Population 56,900 ""T"' 56,000 5 5, 901}._~ , Net opel'at:ing 1,198 1,2JO 1,189 1,128 :J\ revenue per ! capita, in constsnt 1991-I 92 dollars , , , Cl'IR: 226:93 25 ! , A rece.nt, study of 'Bay Area citi6-fJ with populat.ion. b&tV-.AtJ .and 10(1:, IlQ~ snovea Pa.lo Alto."s C\lir.re.,...t ~r C«p1tA r9V6ffi}~ cf 'S1.20(,} to a6 BUQ6t:,JInti-lllly hiqher than any other c,it.Y~ 5(J~COO alf8:0-st titx Palo J\lto Sant.-a clara ~O\U':iti'l.irt ViQfo( San Leandro 'Redwood City So. san Francisc-o )filr.l';itas say:~ JlSatE"O Fa.ix{je:ld Dilly City CKR:22"'~; COMP~TIVE REVZNU£S ~ER ~AprTA 19n~92 population S5~9DO 94/(1.00. 6-7 (~,(\.{\ (iii I ':l(i(t: 66,QOO 54,00.0 S5,OOO -8.6,00.1,): 76,000 92 .. 00-0 <& Roe'l(\$',.\1VzS .ElSe capito .1,181 :e.S3 6.'5.5. ';S{l ~7£! 504 489 470. J4~ );)5 j 1 I ~~---.. ~---.... -~-~.------ SA10$ tax 8AYtnR«B In the tour years to 1991~92f the City~a total &a~OB CaK ~Y.nu& de~lin.d ~.5 pere~nt «nnually in r.~l tQ~~ __ oompor&d ~lth the high ainqlu-<tiglt-pt:.8-itivtl: growth Cflt.e.e;. uf tn. 1'970'$ and the tlrce MH' of the: 1!'l6{J"1l~ Thd' r&ee««ia(\ it". 'O'OlJibinat.ion w.i.th t.he. departure u-t S'Hf'0rlSl Jorge -corpo-ra-t.i",ne and their .&4.1.15. -o-'Ct"}cQ,$ loC!d to. the "'lo~ gr'C'V¥'tb.. OM-time atlju-st!!&otn.ts arli: CO:<nnon a.nd: -a.:'re included in t'~mj",S: in tn.. y~ar th~y ~r. "'«C'-elved.. One. nnu&u~.l.ly i~rg:& a.djustme.nt. Q.f M:arly $1 aillicn in 1961-89 Art.ii'iciblly inflates th~ b~ginntnq year~ It this i8 ~ov~d frOm th~~ 'l&b~~9 t;'Otill18. the four--YoEU.\.r '9r~ rate ..l,s. aJiqhtly p¢1$it.ive" but <)J.-o:.rtt# 1:e; Bti.!l t'iiqnificotl''J:'tly 1'$6& than in ~er.Hl:'~ yea.rs. Sll'1ce aa.l~~ tb:;( ~p.rim.Qnt.s 22 perc&r:;t <l~ -Ge:n1!t'al Fund revenues ... r~i\l 9't • .JWt.h. Anovp intltli:..ion lIiould h& xay to tUJppartinq :any f!.:ff.\tl'hQitut"e qrO\i'th .e:.oo(,(~ ol.Arrent,. levels or aal"vi{.'e~ TJiSJ .. !: "'! SALE$ 't'A): RB'f£mJES tmacl:'iptioo 19.e·r-RB 1'9'.8t-89,\ J989-lYQ 1.g .. 3B ..... '3:. 19'H-92 Sa I.e$. tin" , I 12,590 12~409 i 11,'.7 JII..l4.1) 14.69-2 n:ov$orw~6 {SaGO) cpr con«t~nt dol- 1&1'" a~.ustmetlt LJ9 L1.4 1_ 1. 09---loLO" LOa , Sa,3,S.9 t~)( l'l'irvenue l4:~:G'93 ~ ,t" ,£-84 1.4,(,9;Z I in ($OOD} COn ...... I I F s.t-ant-19>91-;"';? dal16re 1,.,0.41",247 ! -! f ~~;f;~§ Tho. per capH.:a ex.pl!odit'.Sl'g,s :ir..rJic<tt¢r r~flectta clH'Inq~8 i.l'~ Cit-y eX~ndituras L"elative to. c:h ..... rnt-E-» i:tl pnp~j1.at.ial"t~ ll. ~'Oir'l).in'9 t.rend tOY tJ'}io-i&4i.c..atot" 'Ioo'l"luld be -incrvasing nAt o-parat:inq (!X'pendj turee.. (in cs:mstant QQll..-sr'6) per c«plti\~ Sim:~ Palo Alta' a ,PoS1'&16tinn .1& r(J:lnt.ively st.abl~.. i nel"eafi in9 e.)(pf!t.od,i tut'es cc-u ld: indiclite the pro.vit:ri~n of l'Idditionill ~(n·\{lc9.s 'Dr cleclinlnq p-r,?Ql../.ct.ivity" if Bo!!!rvice luvels ~.r.«t C,Qnut.arrt.. 't'a;o:t"':3 sholol'~ incn:.a-ai 1'1Y !:-'P.!" capita expei.1.dttu1"~s f''OY 4 nf the laBt 'i Yo:!13.~:6. Bet'W'E!~n 198'1-8» a.nd 1986- 89, LJ posit,ions lI'li'.re Cl.\t frOl'i't t.he Generdl Fundi Wr'lich aC'counts to;; the d,e<a:'~:e;e. .in that ynar" Altlwug:tt 17 l'.iit1di tionaJ: posit_i_n~$, I,,!-ere cut in 1-'SI~~-9(\ pal." c.api ta. e)(.p~itur"-e$ incr@dse.d by 3,:J: ~rC.r;;tnt. 'l'ho fnllw;!ving 1:,).,11::.> years sa\.r' incre.otGe.-e:. of 0.6 pe.rC.ent ~md ).5 P9rc·ent:.. <'''fiH ! 226. % 9' j: 27 ,', ' ,\ j' )1')." .. : .~' \ ) .. '. ' ;{·'I ,1:" ~i' l~' ";1 However, it is important to note th~t a significant service lavel increase occurred in 1988 when the City entered into its agreement wit.h the palo Alto Uniried School District, and took over tne Cubberley School sita. A more accurette reflection of the pre~ existing trend in per capita expenditures could be acnieved bY removing school ~ite costs tram the equation, since ~heee are paid for through utility user. tax revenues and site rentals" This rOflults i~ a decreasing trend in per capita expenditures during the firflt .. yaara of 6.1 percent; 0.9 percent, and 2.2 percent, .... ittt an increase of 2.7 percent in the last year. Although this trend has been t:.he result at increases to city stlrvices over the past 5 yeara, ~er capita expenditures should be watched carefully over tho next felll years. Expenditul-ea wa~'e reduced mainly due to position cuts made in 1988-90, and the increase in t.he final year could sign .... l IS chlSngfi in tbo expenditures trend. TABLE. J: PER CAPITA EXPENDITuRES I Description I 1ge7~88 198a~8'J I 1989-')0 1990-91 1991- : 92 1 I Operating 49,90J 50,64J 153 1 638 ~15, 289 59,349 I expenditures CPI constant-dol-1.19 1.14 1. 09 1. 04 1.00 lar adjuf'tments - Net operating 59,426 56,214 SS,469 57,416 59,)49 expenditures .in ($000) constant 1991-92 dollars ~~lldtion 156,900 56,950 i~'J,400 56,000 55,900 I Net opera.ting 1,044 9B7 1,019 1,025 1,061 expenditures per capita (constant 1 52,16B 1991-92 dollara) Adjusted net op~ 58,414 54,780 54,726 5],880 eratinq expendi~ I tur'iB in ($000) I constant 1991-92 dollars (minus school site C05tS) - Par capita expen-1,027 962 95J 9)2 964 ditures in con~ I stant dollars I (minus school Bi~e costs) CMR: 226 = 93 2B + 2' ' JIIgl, Employoes Por Capi.to As Was lfIt.'Intioned in the discussion of salaries aild benetits, the nmnber of employees in the General Fund \lOa redUcEtd by appro)(itllftte~ ly 40 pOBitions over t.wo yeaTS (1988-90). This reduction has bean offsflt by tite addition of 14 positions in 1989-90 in the COffllf,unity Servioes, Public Works and Fina.nce Departments to support the Cubberley Commuhity Canter, lind by the additioIJ of Positlonl3 in 1990·'91 in response to mandates and audit COnCE'lrh&. Absent. aiqnificant new liIorvicf3 levols authorizod by the Council, thPc nUh\ber of etnployoes is expl!)cteo.d to remain stahle in upcoming years. TABLE 4: EMPLOYEES PER CAPITA Deacript),on 1987-88 I 1988-89 I 1909-90 t 1990-91 t 1991-92 General Fund Em~loyees Public Safet.y Public WorkFl &. SOCilll ,. I 296.50 Other l.J..LllQ 291.00 I 1229. JO r lK~.L.l..2 1652.55 286.00 I ! 2fiS. 00 I Comm.ServiceB 1239.75. I~rotal 670_2~ 2B7.00 ~ 2J1. 00 II ~..l.~ jf 653.25 It Palo Alto I. 56,900 156'95~. 57,40~-ir; -5-6-',-0-0·-0-+-';-5-,--'900 ' II Population . -+---+,---f---- Elhployees per 11.78 11.46 U.37 11.&8 11.69 1,000 po-pulllitiQn ' 1 231.50 ~ 1652.42 231.!..Q D.L&Z 6~4,1? CMR:226:9J 29 . ,~ ~ee Fringe Benefi~ The warning trend (or this indicator is increa6inq '-ringe benetlts aa a ~rc6ntage ot B&lariaa and wa9ss_ sal~rie8 and wag •• oocsiftt or all direct compans~tion paid to employees including reqular, temporary and overtime Bblariea, pa~d luave. premiu~ pay and variable management co~pensation, and di.nability pay. TABLE 5: GENERAL FUNO SALARY AND BENEFITS Dascrip't.;ion 119(18-89 1969-90 1990-91 i ;991-92 s.alaries $28,975 $30,726 , $27,280 $32,826 BenEfits, in-1 $ 8.394 $ 9,648 $ 9,402 $10,070 eluding one-time I PERS credits , I one-time PERS credits -----~ \ ...1...J..'ta Total Benefits, $ 8,394 $ 9,648 ~lO,640 1$12,268 excluding PERS , , credits ------' Benefits as a 30.77% JJ.'lO't J4.63t 37.J7% percAntag~ of S81aries , I , I The. jump in the ratiO bet .... 99n 19EW-B9 and 1989-90 j,E due to increased payout of insurance cIa ims of over 30 percent between the.se. tlflo yeara. After adjustments for the anA-time distxibution of PERS surplUs funds of $1.2 million in 1990-91 and $2.2 million AS 702 (PEF3) rt'[Jat.e in 1991-92, the percentaqe cont.inues to rise. This is a warning signal for total benefit-a e){!1endltures. Two receflt, actions address this warning sir(nal. First, the extension of t"hlA PERS funding year should ,lower the retirement contribution£. permanently. Second, the change in January 1993 to ~ p~emium-based medical infi\lranC~ program should st.."bl.lit.e t-l'\e increa.a.e in this benefit category. CMR:226:9J JO 1 Qparot)nq SUrplu~ or Qetic~ 'I'he PTHS warning trend tot' this 1ndic&.tor i. incroadinq Genarol Fund operating deficits ae a percentage ot net operating revenues. The Ge.n«r"l fund has experienced surpluses fOJ; the most part, altnouqh one-eime events such as the $1 million PERS credit an~ AS 702 ~ff.batG. dist.ort this 80l1'1l1What. General observat;ono include: o The most volatile revenue t,ourCe from a budget furecast.ing standpoint }'Il:!os been sales tax, ..,.hiGh hl\a varied a6 much d~ $2.2 mililon from predictions. o overall, revenue torecAstio9 is muoh more acCuc/\te thAI\ exp~nditur~ forecasting: variancea in revenues trom bud~~~ hftve rl!nged fronl two-tl:Jnt.hs of one percent or tot.,.l revenues to 2.5 percent, wi.th an dvel'ag~ variance of ~.2 percellt of total revenues, Actual expenditures, on the other hand, C\a.v€ been under budget by a low of 3.09 percent to aG muctl as 12.25 percent. TABLE 6: GENERAl. FUND OPERATING SlffiPLUS (DEF1Cl"') , , Desc:t:"iption i 1987-BB 1988-89 1989-90 ls'JO-91 19'Jl-~~" General Fund 3,114 5,540 4,741 (181):~ O~erating surplus (deflc.it) ! OpP.rl'ltihg 5"/,263 \ 61,692 63,595 6-1,744 ~E.(I-,7~.1 i\ Revenues I --11 I General Fund I 5,44 I B.99 7.45 (0,29) 6.68 Ii Operatihg Surplus I :1 (Dnf:!.cit) as • percent or oper-( I ~i~9._ .. rBV~_~U~ __ L I l! ~~1"..:i.J?&~LYtl_ In November 1992, stdff proposed a General Fund re$ervo policy vhich was subsequentlY adopted by the City Counc.ll (C"'fP;o487:92j. The policy at(\tas that the main discretionary General Fund reael-v@. the B\1d,:]et Stabilization R~serve, will be If_A) n~ain~d at: " rninilllu'fI amount of 10 percent and d maximum of )0 lJercent of t.he ii.onual budgeted General Fund operatinq exper,ditures. For 1992-9), t.hl~ would place "the reserve target", at a rninim~m of $6.89 million and a maximum of $20.68 million. CKR:226:93 31 I'~'·'·' I ,; ,l , I , One ('of the key issues in determining a r.*.,rve policy vila th. volatility of the current politioal environtt\ent. especially 1n light at the State's continuing buoget problems. since 199Q-9~, the Stat. haG ellch year reduced local government revenues (parking tines, cigarette tax, and ~roperty tax); and given tho counties authority to. clulrqe for services previously provided ..,it.hout Oh4t.'g. to cities (property t.ax sdminiBtration, and booking of prj_Boners). The potential tor the St.ate to reallocate tl'\e 1 perceJ'lt of the st.atewide sales tax from a "point of sale.1I basiS to a par capita or need basis is still very much alive. ~hi& could mean lin annual loaa to the City of up to $8.1 million in Bales tax revenues. Tho history of balances in the two discretionary roservos, tho Reaerve for Emerguncies and the Budget st4bili~ation ~eeerve. are shown below. The FTMS warning trend i9 daclininq d,isc:retionary lund balancss lUI ft percentage of net operating reVOllU8K. Palo Alto's reserVAS ariOt hallltny with regard to this indicat.or. RoservA balances have ranged from 12 to 25 percent of net operating revenues over tho past 8 fiscal years I with an average of 17.6 percent. T1't.BLE 7: DISCRETIONARY RESERVES ($000) I I Description 1987-88 1988-8'1 1969-90 1990-91. 1991-92 I Emergency Reserve 4,000 3,000 5,000 E'OOO 5,000 Budget Stabilixa-4,912 4,336 5,399 5,415 11,366 tion Reserve Total Discretion-8,912 7, J 36 10,399 10;415 16;366 ary ReserVes I operating 57,263 61,692 16),595 61,744 66,751 Revenues I Discretionary 15.56 11. 69 16. )5 16.87 24.52 Reserves as a I Percentage of I operating ReVe- nues CMR:226:93 32 Ceneral Long-Term Debt and Debt seryiv~ ~h1. indioator examinop the chanqe in long-ter~ debt a8 a p~rcent~ aqe ot aase&ued va.luation, and of del:lt service all a peroentage ot net ope.rat.ing revenues. wat'T1inl'j imHcator. would ho increap;ea in either percentage. Foln Alto's long-term debt a5 a p@rCentagb ot aaaessed valuation has baen decreasing 8te~dily, and only increaacd slightly in 1991-92 a.s a rAsult. of t.he rofinancing of ttl" Civic center certificates of psrticipation being coupled with iSBuanc$ of ne'" debt tor tho Police wing strvctura;l retrofit and irlst.al1ation of fire. spri.nklers. 1n the ci'lic Center tower. Tl)e potential to utili~~ debt to fund larg~ oapit~l oX' deferred maintenanc~ ~ro)ect~ .le One conclu.sion that could he drawn from t.llie indicator. 'l'ABI,E R ~ Ct:NERAL J.ONG-TF.RM DEBT AND DEBT SERVl CE Description \ 19fJ7-88 1':~Se-69 I 1989-90 1990-91 j1991-Y2 , General Long-Term $ 2,916 $ 2,769! S 2,547 $ ),139: $ 2,76'5 Debt Service I I I ($000) I Operatir.<;J Reve-$5'1,263 $61,692 $63,59"> I $01,744 \ $66,751 r: nues ($OOO) I I Oebt Service as a 5.09 14.52 : 4.01 5.08 ~~~ percentage of net operatir.g reve- nues AaSlefised valua-$ 5,16J $ 5,340 , S,864 $ 6,502 $ 6,9<lg I • tion ($000,000) General Long-Term $20,671 $1.9,616 $20,3)(1 $19,001.6 i $20,605 Debt. Qbligatlon Ceneral Lonq-Term D.400 O. J67 0.347 0.29J 1 (;.2~t6 Debt as a per- cent.age of i I Assessp.d Valua-I tion CMR:;:!:;26:93 JJ Accumul1ttd Emplgye. LaAV. Th. "erninq tr.nd for this indicator is increa.sing amounts of .pou.ulat~ leave p~r employ •• in oon~t~nt dollars. ~ccumulated laaVA nas t~o components! unused vacation and the liability tor unused .1c~ leave tor certaIn employees. , TAIiLE 9. VALUE OF UNUSED SIC~ L~AVE Description 1987-88 198[t-89 1989-90 1990-91 1991-9~ Value of unused $ 1,917 $ 2/220 $ 2,231 ! $ 2,412 $ 2,541 siCK le3ve ( $000) , CPl (constant-1.19 1.14 1. 09 \ 1.0' 1.00 doU.ar 1991-92-- l.0) I , , , Value of sick $ 2/282, S 2,519 $ .2,4J2 $ 2,505 $ ;2.541 leave (conatant , : 1991-92 dol-I ~l($OOO) I , : No. of f;mployee6 18' 190 i I~O 179 ! 175 ~ ~ Value per employ~ $ 8,932 i '3 9,444 ( S 9,622 $ 9,96') $10,341 e@ (consta.nt \ ' II 1991w92 dollars) Employees hir~d before 19B3 who have at le~8t 15 ye~rB of service are eligible at termination fur 2.5 percent of the current v~lue of their a.ccumulated sick leave for e~ch year of service. Th& amount of this liab.il.ity has grown in const.ant dollars OVer the last (iv(I: yoars. The adjustment to constant dolli'.rs off9ata to 90me exte.nt increases in the liability resulting from salary increases, but .it continues to grow for successive years or service. 'I'ilef@ are currently 175 el.lgible employees. This liabUity is expe.cted to increase until 1998, after which no new employeea will bf3 eligible. The liability should level ana then decline until no employees are eligible. CMR:t';26:93 3' j j I \ , Tbe value ot unused vacation has shown ~n overall downward trend over the last fiVe years, although it has not been ~on6iKtent, and ahould be vatcheo carefully in upcoming yea~~. TABLE 10: VALUE OF UNUSED VACATION LE.AVE DSlilcription 1967-88 1~88-39 19B9-90 1990-91 19091-92 Value of unused $ Z,715 $ 2,747 $ 2.900 $ 2,907 $ 3, 0631 vacat.ion leave I ($000) CPI as decimal 1.19 i 1.14 1. 09 ]. 04 1. oo[ Value of holidilY $ ],]02 ! $ ],131 $ 3,1611 $ J,023 $ 3,063 I leave (constant 1991-92 dol- L .70.25 I 652.5~ lars) ($000) K I Ne, at Reqular 654.11 654.17 651.75 J: Employees Value per e~ploy-$ 4,'326 $ 1\,19B $ 4,8» I )' $ 4,621 $ 4,699 I: ee (constant J 'i 1991-92 dollars) li CMR:226:93 J~, .,.-:t I I I I!jHYXBmfJlIII'l"a.L J?CTORB PopulatiQn TwO major Qerno~rllphic chimg98 have impacted Palo Alto dUring the 1970'9 llnd 1980's; declining preschool and school a.go population ~nd increase& in the population ~ged 65 And OVer. Both trends have had significant imp~ct8 on the provinion of City arId School District 8ervice~. Wnile the preschool population has increased fcom 1980 to 1990. d r£tu~n to the levels of school age individuals experienced in thq early 1970'5 rand even more 80 in the 1960'8) i9 not foreRo~n. TABLE 11: POPULATION -I I ~~ :;'970* ! 1980 1990 Under 5 I ),455 I 2,168 2,701 S to 17 13,55] 8,998 7,101 , til. to 4. 22,929 24,004 25, O~/6 45 to 64 13.727 12,647 12,370 OVer 65 -~ _IdQa .~:u TO"!'AL 59.755* 55,225-57,400 --I Popul""tiQn per 2.7 (3 2.2 household • 19'7C pnpulat..ion includes then-unincorporated Barron i'ar'" area . E.m;:@Jl~_JJ:l.£Qnfi PeL Cap i til. -TABLE 12: PERSONAL INCOME PER CAPI'l'A IN 1990 DOLLAR;S Ii Incre.l!lfi@ Increase l~!!le 1.W! ,l97Q-80 1.2!4l ]Jl.!!Q.02Q Per Capit.a $21.690 2n 1$)2/489 50t I ----- Family , Median $53.894 5% $68,790 28% Hean $63,07.) lOt Se8,790 41% Family ~ Mea':l af> \ of 112\ 117'.t. Median --- CMR:;!26:9J 36 j 1 i 1 The primary conclualons 01' thQ per capit.'l and family inCOlbe statistics are t~at: n Palo Alto hll03 b&CCnllE'i significsntly marC! Wealt.hy duri.ng' the 10- year pariod; o Palo Alto's population shows a daclininq under 18 populAtion And increasil1Q adult and oldorly populatj.on, whien has reduced the size at fam.ilies. There are also more 'iriOrKers per family with increasing per caplta and !amLly income; 3nd o T~e gap b~tween m~di~n (i.e, midpoint) and mean (i,e., averf.lqe) family inooms3 nali videneo 6ign~ficantly, indic<'Itinq a broader-rangn ot incoltle llO'-velG and increasing numbnrs OJ~ families with signlficantly greater chan a.v~rO:\gf: ineOlTles. ~-"""-~ 'I'h.is indicat.or examines the ct"1<1hgl3i in <'I.66l'!Ssed VlIlue vf Leal 3.nd personal propert.y in Palo Alto, expnlssed in cOl'\stant dollars. Tho indicator has only bt\en negativp.. in t'l!;lo Alto once in t.he pa$~ 10 years. It. in interesting to not(l t.hat::, after adjusting for infll'ltion, assessed value haG increased an average. of Dr,ly ).04 percent over the past 5 Years, Thin contrast!;., incldenta.11y. to -.). l.86 percent real qro~th in p~operty t~x r~v~nue6 over the same s year pariotl. This is a heaH:hy 1:jro'Wth Tat.e, but 1e;;8 grolofth than would be expectE'.d bllltU'Id on home prices In Palo Alto. ThE.! low.,;>r than ... e.xpect.ed percentage dJange may, in p~rt, reflect. t_he }C'1r 6d} es turnoVer6 in Palo Alto/g llinqle-fi\\lIily houaing, CMR:1.26:93 17 , ~/ ,. ":-, TABLE 13: ASS}:S5ED VALUE Dat:'criptloh 1987-88 1998-89 1989-90 1990-91 1991-92 As.ossed $5,163 S:5,340 $5,864 $(;,50;1 $6,949 Value ($millien) CPI con~ 1. 19 1.14 1. 09 l.O4 1.00 stant-de}- Ilir adjust- ment Assessed 6,148 6,061 6,392 6,752 6,949 Valutl (constant 199:1-92 I I Dollara) I ($million) Percent 2.60 (1.42) 5.46 5.63 :<".92 I Change in Assessed. ValuA (con- I stant dol- lars) , Permit .A£t..ixili In the early 1980'S, conatruction acti_vity in Palo Alto was marked by neW' and expanded buildings, especially ill the stantord Research Parle lind the Downtown and California Avenue commercial areas. Cbanges in local COmmercial ~oning regUlations, the 1986 Tax Reform Act and other national oconomic forces combined to decraas~ the amount of new non-residential development_ by t.he mid-and late 1980'5. The mid-and late. 1geO's and early 1990's wore marked by incrl!;'i1sed singlE'-family and commercial remodeling acti vi ty. Overall, economic factors continue to encourage maintenance and upgrading of bu~Jding~ in Palo Alto, . CMR:226:93 os l I j I ,. '"' H " H t " .. H ~ '" • ~ ~ ... 1 I ,I ~, "I h'i ~ " , 5 ~ ~ 5 ~ ~ ~ ~ ~ 2 :! , ~I > · " J . ' o • . ~ 0 ~ " , ., ~. ;;; " · . ~ " " ~ ~; !, ~ t.t ;; '" · ~JI 7, • ~ ;, ~ 0 ~ ~ s: " C:· -- il ;1 ~ ~ ~ ~ I i ~ ~ i ~ ~ ~ ~ g ~ ~ ~ ~ ~ : ill ~ ';;,;j ! R ~ ~ ~ ~ ~ ~ ~ ~ : 1 'I ~ & ;'i t-...-, '" ~ ; o~ « ? ~ '"' '. " ~ i , . ~ LI , 0 Z L ... j:::;~::':'2 I~' ; 1 -f~ , , ~ '~ ., , .. :;! ~~:~:~::~~ 1~1 ~~~l;~~~~![ ~ .' j ~ w ~ ~~ N I '" ~ , r; , ; 9 '·~ .• ···.··i·.! '. ;> ,. 1 IIlPACT or TIlE STATE BUDGET Tho California economy is increasingly dlvidifld bet-Tale en the tJortherr. and &outh~rn parta of the State. According to the Commis6ion on State Finance, Cali.fornia is in the midst of a "profound economic downturn. ,I After enjoying robust growth in the 1980's, the Stat."" is now oaught in a severe and protracted recession during which 800.000 jobs have been lost since August 1990. There has been a dramatic decline in the housing industry, Permits tor naw c:onst.rU(~tion are running at barely more than one-third of the late 1980's aver~ge, despite the lowe~t fixed mortgage rates in nearly two decades. Statawide, nonreeidentl.al construction has dropped 17 percent oVer the past year. E~ployment in california's aerospace industry haR fallen by 107,000 jobs since 1988, refl~cting national defense cutb~ckB and consolidationfJ among some of the state's largest defense companies_ Employment is falling ~nd unemployment continues to rise. The unemployment rate was approaching 11 percent in_January 199J, up from 5.0 percent at the beginning ot the recesS~on, In the aay Are<'.:l, there are signs th"t ·the recesEion is turning around. The uoe~ployment rate in the Bay Area waa 6.1 percent in January 1993, 0.9 points better than the national average, Experts are predicting thllt job growth in 1993, in areas such as .health care, servJ.cea, retail and tourism, will more t.h"'" offset job lossef:1. First IntE'_rstate Bank is pJ;'ojecting t.hat. personal incoTl'e in the Bay Area will grow 5.J percent in 1993 and 6.8 percent in 1994. This rise in income, coupled with pent-up consumer ~emand, could lead to retail sales growth above th~ J. 5 per(.~ent growt.h seen in the first nine months of 1992. Two-t.hirds of Bay Area merchant6 are projecting increased spend.i.nq dt their store a in 1993. contrasted to a littlE over 50 percent making such p~ojectionB in 1992. New construction was up 4 percent in the Bay An~a in 1992. Hay Area office vacancy rates have improved, and in moet Bay Area cities, vacancy rat_es are below the nat.ional average. Economic weaknes6 is Tnust pronoun..:::ed in Southern California, which represents approximate I y 60 percent of the stat:e's ftconomy. Over three-fourtns of the BOD, 000 jobs lost bet.ween mid-] 990 and mid- 1992 have occurred in lhe three-county region of Los Angeles, San Diego, and Or~nqe, compared .... tth it loss of about 100,000 jobs 1n the Bay Area. Southern California has also been plagued with an overwhelming surplus of comlllercial real est&te and the costs of rebuilding South C~ntral Lor. Angel~s after last summer'N riots. The followinq chdrts contrast economic performance for the LOfl Angeles and Bay Areas: C>!R:226:93 40 Southern California Has Suffered Dlsproportlonat. Share 01 Job losses Wages and Salarv Jobs In June 11198 10101.12.91111111 •• Job losses Since June 1990 Tol.l. Bl6,OOO Quarterly Gtmeral fund FOMC;lst. J~nuary 'j 993 .sout'CI.I! CQlIIliaalon on titat. ... Finlllnc .. , JtlIl'l\.lu·y 199_) CMR:226:93 41 , ~i ~! REGIQNAL gCQNQMIC ~~ unemploytnent Retail Sa lee (1/91-9/91 VB 1/92-9/92) Housinq permits (1/91"'10/91 VB 1/92-10/92) Office Vac~ncies Nonresid. Construct. (1/91"'10/91 VI-) 1/92 .. 10/941:) Projet,.:4:.ect Net. Hiring 1.2~ Aog.ill 10.4\ down 2.3' Clown 14% 19.7% down 27t down 3\ BoV AI:.'III 6.1% up ).2\ up 6\: 13.5t- lip 2.7' up 2\ SourCe; San franci'5CO BusineBs Times, January 1, 1993 E~onomi5ts do not expect Southern California's economy to rebound for ~t least another two years, and therefore predict that whil~ Hart_hern California's growth w.ill tr"ck tile national average, Southern c~lj fornia will have at least anot_he.r year of deelins/ resultl.ng in zero qrolll't.h Etate\.!ide. This could haVe siqnificant iro.plicatJ.-one. for ho ... th\.' stllote may .1.1llpact cit.y. county, and Bchool district budgets. since ther£' is precedent for Sacramento's pro~lema being "shared~ with local government. P~st actions and current proposals to solve the State's budget problems by taking local government revenues or pas5ing on expenditure6 havo been documented elsewhere. The chart below shows the commission on State Finance projections for the 199]-94 st.;;.'I,te hudget. deficit~ CMR;216:9J 42 i ~ Deficit likely Due to Weak Economy :1. :.~, )~, = $31 Million i~ ;;~ ~~ •• ~~ H_ ~~ "~ w~ .f~ Q' j!Q :-'1 • a: -s51 -SII.l BIllion r Governor's COSF COSF COSf Forecast Primary Pessimistic Optimistic Forecast "Iternative Alternative Sourc~; Commission on State F.inance, J"nuary 199J CHR:].26:93 4) BCONOlUC POkECABTlltG BCPAJtIOB For pur~o&." oC discussion. foul" scenarios haye boen crollted for the P810 Alto General Fund. The first, the Il~hat If" soenario, uses the 19S1-Sa budQet as ita base ye~r, and looks at what the consequences .... ould hltv~ Men j,r the Council had taken 1"10 ~ct1on to ~rin9 GfH'ler"l FUnd reYenues llnd expanditures into line with one a.nother; it. is intended to i!ll"Iswer t.he qu",stion, "Ht'ls t.here been a. st.ructu.ral deficit ~n the past in t.ho Goner&l Fund?" The oecond, "Steady St",te" scenario (Exhibit 3), based on the 1992-93 puctget, a8&umes .oderate levels of growth in both expenditures and reVenues OYer the next 5 to 10 Y86rs, prim~r.ily dependent on the Conaumar Price Index. The "steady St.at"""" scenario, "a .... ell as the "Fh-;Cl!Illy "Poa.itive" and "Fiscally Negat.l.vc" scenarios, are bailed on revenue and e,cpenditure factors, identified in the attached ~pread.:;heets entitled "Economic Futur~ study Variable&" (Exhibit 4). Th.is exh.ibit identifies action5 and eve.nts that would be "F.l.scally Positive " or "Fiscally Negative". Nate that in &Qme cases, positive or negat.ive events are not inherently desirable or undesirable (e.g., higher Inflation yields more interest inccme). The ·'fi!:.;calJy Positive ll scenario uses lq9J-94 as the base year, anu assumes amcmq other ttlinqs a fairly rapid recovery from the current recession and ~ Yeturn to the average qrowtn rates in revenues from the. pre"Y'ecesaionary 1980'5. The "Fiscally Negative" scen~t".1.0 658UmE.-:8 ~rnonq other thingB con+cinu<'Jtion of t.he current rece69J.on through 1995, with slow r~COVery trom th~t point to the end of the decade. Although comp)ete foCecdsts have been prepared for t.he "What. If" and Steady State forecast.!'!, including the net. imp"'ct. to the G~neral Pund Budgl!t Stabilization R@serve, the same revenue and expenditure sUtl\marill"1.S are not at.t.act..e.d tor the "Fi~cally .'ositive" and "Fiscally Negative" scenarios. This is bec&uce tho prObability of all t.he ?061.tJ.ve or negative events occurring-is unknown. St.aft anticipa.te-a that, finance committ.ee d:u'>cussiona will help establish Q rationale for assigning-probabil.ities to spAcific events. Which .... ould then gf'!tlerate cre8tion of fisn,lly positive and negative revenu.e and expendit.ure estilrlateB. I'what If" sC'S'~ DUl:'ing the last four yean;;; the CJ.ty Manaqer has recom~(,f\ded, a.nd the Council haf> taken, ~ number of signific"nt act.ions to re.duCft expenditure~ or increase reVenues in the General Fund. Those Gteps helped to keep the General Fund out ot an operating deficit (or, for 1990-91, to hold 60wn the act.ual operating deficit to a much lower "mount thiln it otherwise would have been). Furt.hermor6, t.hey reduced the expend i ture b~g~ Hnd J.ncreased U)(I reVlmUe base on 'i<.-hich General Fund c,p~r(\ting budgets will be built for the rest or the decade. BUdget projections fCJr the next lO years based on a CMR=226:9J 44 "What It" Ilcel'lal.·io 68I!JUmed none of thege actions had bee.n tak.u1\ (11.6 Table 16). They reveal a &ubetantially bleaKer fillca.l pictuT(o than iIlny ot the ather scenarios created tor this &t,\1l1y. There were tour significant policy d€'lcisionn th{lt. .,rfectoed tne long-ranqa Outlook for tne Gcner~l Fund: o RedUctiQn or 40 General Fund posit-ionn during the 19B8~a9 and 1989-90 bUdgets; o l!;)(tehsion of the Vubli.~ EmployoBs Retire"'ent Sy&t.em (PEP..s) tundirg yedr, in 1992; o An ihcrenSe in tha City's r~al prop~rty tr~nsfer t~x rate, In 1992; and o A switch trom the City's traditi.or.~l fBe-for-6ervic~ .1.ndel'l.'lit.y health pla.n to a prel\\.i\..llTl-bal3f'!d, rnanarJel.l cillre ne"t .... ork of pr"eflO:rr~d providers and health ina. i.nt@naI"lCf~ organizat.ionG -'ldminl6~eori!d by PERS, in 199). ~he first action, position reductions, ~as spredd OVer two years. In the 1980-89 budget., 23 posit.:ions were removed trow the GeniO!.ri!l . .l Fund, re"",ulti.nq i.n t'lnnual 5~ving6 of more than $1 millien. In t.h~ l~89-90 budget, an additi.onaJ. 17 pos.itioos were t_dk.~n out, "t <.\n annual 6dvings of approll:iruately $750,000. The second action I extension of the PEx5 fl)nding year, w<!.s dnalogouB to d refif\i'.>l"'\cing of a home mortgage. Like Virtually eVAry ot.her PERS city, Palo Alto fa.:::~!'> a mult..if\\illiCln~dlJllQr unfunded liability for fut,ure pension obLi.gdtions for its en1ploy ees, In accordance with PtRS rules a.nd actuarial gUldelihes, the city had been paying off thdt liability in annual inst.~Umen"!:.1i scheduled t.o end .in 2001. When PERS vffF.rf!d dJ.l public empl.oyers the actuarial option to extend the fundihg date to 2~16, t.he city accepted. The result was to reduce the <1nnual paYl"lliJnt by al.moat $0.5 million per ye,'it" , dnd ineroe.ase the. number of years Over which paymerts will be made. The third action was an increaGe in the City'::} real pt"o~e.rt.y transfer tax rat'?! !nlm $0.55 per ~l,OOO in Vdlue of a rei'\l propert:y transaction t·o $3.1.0 per $1,000 in val\l~--the sam"" a~ SuTl .jose and Mountain View. The inCrA~$('. became eff~ct;ive on June. J, 1992, lind ~t thai:". time sT.aU Ilnticipat.ed that the h..igher tax rat'! would gene-nlte an addlt"ional $1..2 m1.11ion of revenue annll",11y. During the current r iacal year, howevt'lr, the continuing slu9gi.6h !lace ot' real estate tran&actlono and stable-t:.o-declini.nq pr'icAn CMR.!2.26:91 4!) .,ppe~r8 likely to hold the if'lcrease t·o only $0.9 m:lllion, and th"" Hid-Year Financial Report (CI(R; 178: 93) contains ail adjustod reVenue figure, Staff atill believe!! that 1n the lonl)' term, an additional $1.2 million each year will be raised by the higner rata. The fourth action, a 6vitch in h~alth-care plans, waG errectlvQ January 1, 1993. Replacinq the City'S ~elt'-inQured he.alth plan with the series ot PERS-administered preterred provider and nealth maintenance orqanization& (to ~hich the City p&ya a set prdmium tor coverage of active and retit'ad eMployees) will raduce the wide swings in year-to-year costs at the previous fee-for-service t;tructwr&, ane:! aave money through PF~RS' qt.-eater pnrctlilsing power and higher overall ratio ot active to retired employees. (Reti:r:eee. usually have the ~ighest per-capita health-care coste under n fee for-ssrvice plan.) The tablt! below illustrates the. drllm&tic fluctuations: of city nealth"'care cos'Ls (all funds, not. jUtit t.he Gefleral Fund) in recent years, from a high of a 58 percent .incr04se in cla.i1':\s pilid during 19139-90 to a low of d 16.2 percent decline in Dlatms paid durtnq 1991-92: ~J..2.L ~llLtl.thJ.TH CARE COSTS: CITY JiML1'!L.tl.ArL_EL.~~ .liQ..Q.Ql cu. ....... """',,_, ell y " •• lth PI." )1.0, .. '1 .... "" ....... IY~X_8') &-~ SU1h ~()J -~~-qf) , ~~ ~].\16" .~K.J~ ~I i U -First six months, at annual r~te ----1~L , .. 'Illn~ Q>~! \J,7Mf. 27Y' ... ... , -----.l')9i-"~ __ I?~ • • ~U! Q..!!ll< A"",," ~ n,P2 -11'.2'!f· U.I>I)('· 11..5" '" 1Il.~ 1.11),11 IH Over th~ four-years from 1988-89 through 199.l-9) (estimated bl1sed on 6ix months of actual data), the Clt'y self-insured health plan costs grew by a. compound annul'l}, average of 17,7 percent, sliqhtly below the recent annual trend of 20-22 percent cost lncrBa~ea for manaqed indemnity pl~ns that have beeh tne norm n~tionally. },ssuming tha'c the City self-insured health plan would have continued to gI.O\rl at the 4-year average ra.t.e of 1?'7 percent, one CMR:226:9J 11(, can cOlIIpute the eXpected dollar sl!vinqa from th., 6wi.t.ch--Peca\\sa the costa ot the nev, premiUtft"bllPad plan al'e known with a high doqree ot certainty. (PERS recently ann~unced thnt it h~B neqo~iated 1993-94 premium rate i~Cra~8&a with its prer.e~red provider And he~ltn msintenance orqanization~ that ~ill cout thA Cit.y I')hly 2.1 pera~nt 11\or'e than in 1992-93.) 'Under thes~ MI&\Jmp~ tions, the total City savings from the switch in health-care p~an6 is $0.2 million in 1992-93 ($0.1 million Gen~ral Fllnd), !lind $1.0 million in 1991-94 (SO."' million General FUnd). There are sevet"al reasons for the relatively 10,," s-",VJng8 figure for 1992~9.1. First, tne new ha.al.th plan is only in ef.fact for half th@ ye"r. .~"cond. c.lai!!l8 paid in 1991-92 Were unusually low; thus, the baSI! from ~hicn future claims projections are calcolated lIIay ne unrcalistl. cally loW. The table below SUlIIlftar.iZes the annual dollar tmpact of all four I\\ajot' long-term blJC'qet~red\lction step£; taken by Council in recent yeATs. !M~ GENERAL UllitLmJ.~;~---,~JiG_~EAC11;l2 BY COUNCIL U_~C'~-LT.~~B9~~ij j 99)-9< .L~.l.lliQn) '<,tX~_~" l~_:·'il L~!u.!! l\I'll-H ~'£l:':'} ~~~~.lIf 23 fl>lili"lIIlO 19U;-R-,>, \'j.~. :D -f" /7 .. 40 p".ilin". in 1",~u.!Jn ~)'~~ \, '} II" \Ly hI",.",,, Dr PEltS fuM<n1l y •• r 0 . .1 !';""I~I>. ... to.. .. I\!'n~J>I ...... "' ~ Jt.ol P"V'''Jln ... r ... n '00 T01'I\.L~fllytI\'1.I4 .. lji .... illj. n;; *;"sPUmes six rnonthH ot fjl1vingr:; in the first fisc"l ye~r CPIR:226:93 47 .L~L.'!.:! 1~ tl (I' ,. ' U '" '. '! . :~': il 1 : For 1993-94, tbe table shows that t~e lour council act.ions already taken havo improved the condition of the General Fund by nearly $4.4 million. since allot the sHvings are ongoing through Bt least 2001, the long-t~rtn budget, outlook haf) been similarly improved every yesT aft~r 1993-94. ~!~ady St.ate" Sceoariq The ten-year forecast using the Steady state assu~ptions is ehown ae Exhibit J. A key asau~ption in building a Steady s~te acenaric wa6 what the Consumer Price Inde~ would be, The model ~gaumes that infl8tion will ramain relativelY loW" in tbe next 3-to ~-ye.ar period. Significant real growth in the nation~l economy sufficient to re-ignitl! ihflationary pres9u::=-es dOBS not app~ar imminent. Forecasters have been generally reluctdnt to go o\lt ll)ng~r than 2 to 3 years, but there. aplJear6 to be consensus within that time frame on a ) to 4 percent rate of inflation. absent som~ fiscal or political crisis. Household income wll1 probably se~ minimal real qrowth: 'the impact of the second wage earner. evident in the 1980's, 'Witl. not be repeate.d. I'YDc'ructlvity improvements to ensure .i.nternil.tlonal compectitive position, especially in the high tech irldu~t.ry. would dampen gro""th in the labor force. proposals trom the new ~dmi!\i.fitration to inVest in hl.gh~technolollY infrastructllt"e and to legislate an investment tax policy, if implemented, could sl.milarly increase productivity wittlout re9ulting in loJ.t"ior torce growth. '1'h(e "Steady State" scenario aSSUf\lf>5 i'I perfectly halanced City General Fund budget for 1993-94, i.~., tot~l revenu~a and expendI tures exactly equal. Some assumption ~h()ut t-~he ur;t.arting ~oint" for the years aft~r 199J-94 waa t-equl.red for thin stUdy, although the City Manager has (lot yet recommended, and t:he Council ho'\s not yet adopted, a 199)-"4 Interim Budq{~t. A net operatlnq surplus of zero w~s determined "to he an appt'oprlate assumption. It is important to ernphqtiize that the steady State forecast io no ft\ore than one iteration of an econometric model, and it wouJd )Je incorrect to infer that it represents staff's "best guess" ot the futlJce of the G£!"neral fund_ The forecllo::lt i'6 extremely sensitive to chang&& in t.@y V<1riables --for example, a~6uming salaries will grow at their histor.i.cal rate of 2 percent. abOve inflation rather than the model's assumption of 0.5 percent above inflation results ~n a ~~fitTuctural deficit" of $0.5 million in 1994-95, ri6inq to almost $5 m.Lllion by the yahr :WOO. Similarly, <1uqnll,mtation of the al'lnual capi tal irr,~rovf!mel':t program to addn~.f\s infrastructure needs wlll also result in a "s~ructural defi<.:it," a~ will increases in Sei"v.i.cc levels. CMR:226:93 48 REVENUES Sa.las Tax: The "Steady St.ate l • Roenario a&DUmes that COnsumer retl1il B410s tal( (currontly $-4.4 million per year) ... ill Cont).nu& to grow at 1/3 of one percent above the rate of inrl~tion--ju&t a~ it; has during the lalBt 5 years. Simil~"ly. bUl:li"~&S-tD-buBin~S6 Ral~a. tax growth la projnctsd to match its real 9row~h rate or ~h$ last 5 years--2.4 p~rcent above the rata of inflation. No expansion of the stL'nford ShoPlJing Cemt81:' is aefsumeo in t',his scenario, and the sscondllry and neighborhood ahoppinq cent.eCI:I are as&ui1led 'to cLlsO continue 'the !idles tax growth or declint't pattern of the 11't8t S years, although market trends like the aales sttift to deap discount stores are imllactJng the sales of til"" City's secotvjary centp.:l."I'i. No change in the currant ealae tax allocatlon iF aSSUmed to ~ p~8sed by the Legislature; i.e. .• "i-r. situs ft sales tax tl.llocat.io~ rules are expected to pe.~sist throughout the forecast period, eov~n thouqn there is periodically talk of chanqing the allocation to a pf':r capit.a, or other, method. This scenar.io does aSGUme. hoW'@ver, the City's liability for the AeroB~ace necision ($1.1 mill10n ~o $2.2 Illil.lion tot~l) w111 be discharged over 10 years "t $11(1,000 t.o $120,000 \ler yea.r, although this payback agre<ement has not ner~n finalized with the federal governNent._ finally. in recQgniUon of the recent trend of saJe£> offices (,'loving out of t-he Cit.y, t.his sce.nario l!ISSUl\1es a further det.eriOl-at.lon of the 8al~:3 t.ax t;\dS8 of $100.000 per year through 1994-95, most likely in the RI'Gearch Park. Property Tax~ The two key Vi1ri~b)e'6 in for@cdat.ing lOT'lg-rang~ propert:y ta,x t"flIVenUe arA turnOV~r 1:tod <16BeSs~d valuation. Under current bUdget projectlon9, tne ar.sumption is that property wilj turn over at a rate suff)cif'lnt to .lncreas~ the City's tot.~l a9S0Bse~i vdluation. For Assessed valuation, the expl.icit asSump tiOh i6 that the record of the last 8 y~ars is t.he be&t pr-er.hctor of fut.ure a5sesAed v.-lluatl.on increas~s; during that p~r1C,d t-he City's aaB~Sse.d v1.tluation has grown at. an a.nnual rate of :>.0 percent above the rolte of inflation. Property t.ax receiPts, however, grow much le~G than the increase in aS6eGSe(\ valuath'll, 1'>0 the forecast aesurne.o:; ... real gro""th rate (i.~ .• growth ilbovt" t.l'le assumed ra.te of infl.atiDll) of only "} _'" percent. '1'nf;: forecal;t assumes the permanent loss of the 9 percerlt of the City's property tax revenue that wa!'> taKen aMay by t-he 1992-93 state budget; t.hat AmOl,Ant5 to $856,000 i.n 1992~93, :and carre!ipandinqly larger amounts in tuture years. The Steady state scenario <5.)50 ~ss.urnes the Governor's propooal to take 8wa'l anothE'r $}. 7 milhon annually ot City property tax with the 199)-94 budget. This 6cenariD dOfi~ ndt ft89~me any additional Ci'ty proper~y t~x revenue fro~ S~anford West or Urban Lane .. "Ir any Pula Alto Medical }-'oundation expansion_ similarly, the commercial property naso is atH;llmed La be essentiaJ Iy unchanged; that, is, l\"Y busil"lasf:>e~ that leave P().lo Alto hn~ assume.d to be l'aplaGed by Ot.ot:lr occupants who wi 11 contihUt'l \..0 pay pl-operty taxes. CMR:226:93 49 \ , I \ I \ \ I ! J utility user Tax (UUT): Nearly three~quarters of the r~ deriv4S from the sales of city utilities; thu6 the total revenue from OUT depends primarily on rates charged for and consumption of Cit.y provided water, gas, and electricity. The Steady st~te scenario assumes that total salsa, and thus UUT revenue trom City utilities, will exceed infll!.tion bY' appr'oxirn&tely l' percent each year. under a long~term in!l..tion rate assumption of J tJercent, city utility UUT l"eVenUe if> ftssulII~d to qrow by a total of 4 percent annul"Illy. The remainlng quartar of UUT comes trom telephone use, dnd this sogmnnt is projected to grow approximately 1 percent ~J! than inflation Hnnually throughout t.he forecast period, based on the dselining real cost of tlBlephone charges that has been ev.ident in recent years, and appears likely to perslst. . Transient Occupancy Tax: The number of tlotel and motel coollla in the Cit.y is expected to remain const.ant 8.1: just over 2,000, as is the average occupahcy rate, at 69 percent. With averaga rOOm rates only expected to keAp pace with inflation as the projected economic rpCoVery takes hold, total revenue fr.om the transient occupancy t.ax ~s project~d to increase at the rate of inflation over thp forecast period. other TaxE's, :Fines, .)nct Penalties: The largest of these is the Tl\otot-v-c:hic]e in-Ueu tee, which generates nearly $2 million annually for the City, It 16 expected to incre~ae at the rate or inflation, as the number of new carB registered recovers from the reCeSf',lOn of the last J years. 'rhe Q('cond-largest. sotiree of other t.l:txe~, fines, a.nd penaltJAs is the real property t.ransfer te.x, wh.ich depends on the nUmber of 9ale!s ot real property and the average sales price. Staff projects that. once the slump in local real estate prices and sale9 is oVer, the real pt·operty transfor tax wlll gen~rate $1. ~ million annually, i.n 1992-4) dOllars--but that t.his will not appear in full until 19~3-94. Revenue fram parking finfl8 and movjng violation fines is e>cpect.ed to gro\li at t.he rate of in.flatlon, adjusted for the one-time large amount of parking rev~n\Jt;' collected in 1992-93. servi.ce Fees and permits: The la.rgest source of City service fees and permits is in the Planning Departtt1ent ($1.7 million annul.t.lly). In thi6 Steady State scenario, the level of development, planning activity, and fees is a6EUmed to be high enough to generatE< revenue that increases at the same rate as lnflation. 'rh.a second largest source of service fees is Golf Course green fees, and these are also nssumt'!d t.o increase &t the rate of inflation. F'or thA rent of t.he Community Service~ Department, keeping the current level of cost recovery should allow for total revenup: also to qrolal at the rate of inflation. The s<\me is true for p~lblic safety ·fens in the Police o'lInd F J.re Depal-t:lneilts, Al though an extra. $100,000 is assumed to be raised annually from the establishment of a sec.:ond paramedic unit, this will be offset by increased costs to run the unit. CMR:226:93 50 1 , , Joint Service Agreements! ~evenue from the City's agreement to provide tire and emerqency communication aervices t.o Stanford Un;'verBity i. ftSeUmed t.o grow by the inOatioh r",te t':!':om 1993-94 onwards. The 1992-93 reVen~~ is artiticially low bec~u60 Ste.niord received lts proportional snare or th~ C~tY'B AS 102 PER~ rabnte that year. Interast Earnings: In 1992-93 the General Fund is eXp(lcted to earn a 6.5 perce.nt rate or ::-eturn On a total a"er&qe cash ba.14l"H.~1I.1 of $33.5 million, yi.elding $2.2 million of interest earninga. With the recunt decline Qr interost r1!.t.el;; likel~' to persist j n i. t.s effect on the portfolio tor the next 12 to IS months, th~ as£lulllp tion is that t.he 1993-94 8arnings rate will be only 6,0 pll"rc-ent, and thftt the portfolio rat~e will cont.inu@ ~t t.h.at level -c.hroughout the forecast horizon. C';'fih balances ~n the General F"Und ","~e- 8ssurued to hold steady at their preSAnt. l~vel thr~ugh 1994-9'), ~nd then to decline by $:·.0 million in later years on the ';'s6urnpt.ion t.hat the General FUnd'g $5 Illillion port;i.on of the AB 702 J'ERS rebate will be Spent. Operating Tran6fer~ In: Rents frOm El"Iterprise r'unds fOl' land and buildings they occupy dt"(> e)."pe["t~d to increase with thE! rate of infllttion. as they have over th.e years, Tne annual P.gulty t.ranRfers from the Water, Gas, and Electric Funds are dssurnt'!d t.o continue to range frOm J1.0 (Cf\S and Electric) +::'0 11.1 perc~nt (Water) of the d(~preciat:~d fixed asset hase of, {Inch Utility, 016 during the last d~cflde. With t.ne UtJ.litie5 !nf;;-<\strlJcture Plnn under way. the net f" i.l(~d lHiSet. /:lase is expected to grow fl"1n:r~ ra~idly ($5.6 Illill.l.o n per year) t.han J.n t.he post., ..... hlch traru:;1ah's to a highel.-rate of gro\lith fot-tlle transfers to the General Fund than in recent. Year.;>, EXPI:NDITURES Service Levels: The OVt"l'all assumpt,lm:. for 'iervice levels undt;", this Stei.'ldy State scenario if> t.hat. current scrV.lCe5 and C"un .. er,t. etaffinq levels will persist throughout. the forecast p'ilriov . Salaries: Salary .i.ncreases grdnted to m~nagement, rEpresented, and miscellaneous: employeB~ are aSSUm~d to be equal to the rate of inflation (3 percent), but. total 61l1ary QK£~£P~. are expect~ri to increase 0.5 percent: more ttldn inflatiun. It~ 5hcruld bl'! noted that this I:Isaumption i6 not Ccngru~nt W~ t~ r~Cent }'e~rs' expt".ri snee, When naw, high.er~paid PQsit.ion$ replaced old, lower~paid pOSitions; when existing empl.oyec6 rnOVe{j up in their salary rang~a; and when promotions, rec.ld5sifications and speci"l salary n"jur::t ments oCcurred. liistox·ical ~atterns h~v(t 6holrr'n ~ ;,! percent above CPl growth rate for salaries. CMR:226:9J 51 J¢: :, ,,' ,r ! ' ",',,',',,".,1' i' ,,~' ~" Benefits: PERS oontr!bution9 tor retirement are assumed to be the .ame percentage as is in effect now for 1992-93: 25.22 percent of payroll tor public i1~tfJ:t,}. GlTlployees t and 12.97 percent ot payroll tor a.ll other BlDployeliB. Unless actuari(ll assumptions change or the state ta~~8 other action ftff~cting tho oontribution rate ot publ.i.c agency employers, thi& lIssumption !s lik.ely to be vary accurate. The rate ot increaae for the city's health-care coats 1s equal to the annu.etl percentage increaso in the p£MHCA premiums l"Iegotteted by PERS that the city paya on bei'u!llt of its active and retired employees. FOr 1992-93 that increllse vas 6.1 percent, or approximately 3 pe::cent above tha asaumed general rate or 1nt1a tioni for 199)-94 PERS negot1~ted very emaIl increaeoD (and, tor aome hea.lth me.intenancu organizations (Hf"{OA) and preferred provider organizations (PPOs), actu.al deereages.) that w:Lll raJae the Cit.y~5 honlth-care premium expenditures only 2.1 parcent-~or 1 percent ~ the ae.aumed rate of inflation. Givon the continuing getlet-Ill ~i8~ in expenditures for health care nationwide, and the slow but .steady rise j.n the number of City recipients for whom premiums are being paid (as employees ratire, thay continue to hllve their health-car9 pr~miumB paid by the city, and are replaced by new employees for whom the City &160 pays health-care premiums), st~ff feels that inflation plus J percent is appropriate for a long-range assumption of. heHJ.ttl-care premium incTeases. In addition, the Stelld~ State &canario I:Hi5Umes no change to the current st.ructuru of the Cl..tyls health care benefits, The same aSBump'::lon6 hold tor dental" ilnd vision insurance, which ieo proj$ct~d to grow at the histor~cal rate of the lHst 5 years. Contr"ct which is services: This category is assumed to grow clo~e to its higtoric~l rate of increase. by inflation. supplies and pr.;)jected to Materials: Expend:i.tures for this TiSe with the rate of inflation. category at'e also General Expense: Liability insur"nce is projected l.~o _lncreaae in cost by the rate of inflation, but t:o be offset by large refunds of prior-year ACCl':L contrl.butiona that are gro .... ing by more than the rate of inflation, beci'luse they have been earning interest since the year they were paid, and the interest earnings rat,a hlis been substantially hiqher than the CPI increases over that period. Expenditures for Human Services contract!:' are expected to grow in lin-e with inflation, as i8 the lease with the Palo Alto Uniried school District (PAUSD), p~r the City's contract with the School District. Other general expenses are also projected to rise with inflation. other Expenditurer.: Like most of the categorie(; abovo, t.heso, too, are assumed to increaBe ..... ith infiat.ion. CMR: 226: 9) 52 , ill '"PPV'e'6iW "p .-~, .. T? <e!""'~" _M_ rom -U. °11'·1 -szj; ; Rents, r~aa~s, and Equipment: Thi~ category, too, is projected to grotlrf 6t the sam. rl\te as ,inflation. Alloc~t~d Charges (net): Tne~~ are three e19ments to allocated ch~rges. The first 1u the Balerias and bonG!it. charged hy 0entral adminiat:rative-departnaent.s to tne Enterpr i.a F"unds; th8&e lire) aBsumed to incre.a&~ by the tlolllrftu PQrcentages as de-scr ihad I\buve Under "Salaries" nnd Undar "Bene-rita. I. The 'itJcond .is Vehh~le re~lftcemont char-qeD made by General Fund: depart_M~nt'" to the Equit"lment. Replacement f'und; theall". have b!!e.n computed bas",d on BApected replaCQlllent fl-chedutes and values over the next ll) YOhrs, Tho third is Generftl Fund payments to the Enterprise Funds for th~ use of electricity, water, gAs, refuse Services, etc,; these charges are computed as the iJI."oduct of eXIJected usage t i'lles anticipated rates, by yea,r, projoctl~d by th~ various f.nterpn_se Funds. Operating Transfers Out.: ThA Generdl Fund tl;"'<'JnSfer to the C<J-Pl t:.dl lmprovement Fmld is assumed to return to itB normal lev~l of $4" 0 million (including st.r&Ats and sid~wdlk$) beginning irl 1993-94, and to remain at 'that level, Unchanged by inflation, t:hrough the ramainder of toe forecast }:Ieriod. General Fund e~pendj.tures for debt set'vice on thp, Civic Center and Golf COurse b0nd6 t:.ot~l <'Jpproximat@ly $0.95 mill.ien <'InnlJally, and are aSSlJmed "t,0 be identical to the current ~martization schedule as }"'ld Llut in thE< bond covenants. 'rhe pr~cerlihg pages h~v(! listed all the key v.)riables th.,t make up the "Steady State" SCena):" io, The ~rojections contain@d in UnG scenario and alternatj.vt'! OIles dl'e most he<\vi 1'1 influ~nced by thr-E"E partiCUlar aSBurnptl.one. One if> the aESUIII@,j increasA in sal!:ir i~F.> rel",tive to i.nflation,-aVllry one percentage point abOVe or below it'Jtl.!:ltlon if> worth $45("),000 of Goneral f\.Ind e)(pend~tures in 19'J4~ 9S, and more in future yean.. Second iEl the net fix~d asse-t b"'~e of the thr'tie util.ities that make equit.y tr"nsfer_"f to the Cpn@r~l FUnd (Water, Gas, and Electric). Every addition.)l $1 mllJ lon In the het fix€d asset baBe is 1o'orth $110, GOO narc <\nnudlly tD thp General F\Jhd; the Stear.iy Gtl.lte 5cen2lrio "'$sumptions .,bout:. th(> n~t fiXed base ten years in t:1e fut.lJre at-a only estlrndt:~5, and l.q11 J:"equire further refinmr.ent. Third is the: af\surnpban ahout a.ddi tional State bud gat. "takeawa,/s" from t.he Cl ty. Th.;>: .st,Pcl'.iy State Sceniu"io i'JIlitfiumes t.tJe Governor'!'; propOsiti of another $1.-" million annual prO}:l8rty tax takeawt'ly beginning _\n 199J-94; th~ ultimate amoul"'lt could he substantially rhff~rftnt. Similarly, futur'e budget yeal"l~ may seC! Hdditional sacrifices required to Bupport the state's bUdget problems. m~lliJ..9J!ili~---1k_f?l1lii2 The critica.l inflation <'J6BumptI-On for tne f"iscdlly POSJtlve sGenarto is the same J per-cent annual t"ate at'> used in the Steady C!iR:226:93 5] ,~,; ,;': ~} • -<~ " State Bcenario~ cow.ment.8 on !IoorM! of the other revfulue expenditura v~riableB incl~de: and Sflles TftX' Rot-ail sales activity eig'nificantlY higher tha.n CPl increases is contrary to recent trends, especially the sl1ifting of significant ret~il sales to the "larqe boX deep discount tl a sellers that are not located in Palo Alto. a Tne value of the assumed expanaion of tpo Stanford Shoppinq cent aT is qualified by as yet undefined effects on the rest of the center, as well 69 other retail areas in Palo Alto. prope.:t-ty Ta)C.! Niqher turnover l'I\B.y .. ell occur if propert.y valueR st.art to rise, interest rates remaln relatively low, and long-timet older l·e~ddents decide to cash out their equities. State Action. .\" assumpt).on that the State doee not take away mOf"e than the $1.700,000 assumed to be lost in 1993-94 may be unwar~ant~j given the State's likely fiscal pLoblems after 199)-94. Trd~Gient occupancy Tax~ A Bignificant increase in t.he numper& of hotel rooms is unltxely to happen before the end ot th~ century. salaries and Benefitg: It i6 probably not realistic '(.0 expect all of the benefit items to remain at or below current rates plus a sl.gnificant decrease in worker's compensation expenses. Regulatory Requirement$~ H~ving a transport.at.ion demand Trlanagemel'lt program fUnded at $25 per employee aSsumel't that regiondl ana state e~pectations are reduGed. fisc~lly ~e~ive SC~~ The Fiscally Neqatlve sc~nario include~ such variables as a co~ti"uing r~ce5sion. rising infldt.ion, lOBS of retail lind bU6iness-to-buaines6 sales. ana substantially increaa~d shifts of reVenue. to the st.~te. specific possibilities include: Fetail Sales: o No expansion of the stanford Shopping Center pl\\s t.he closing of a tIlajor atore at the Center ~nd increasing ret.&il sales tOt' the deep discount retailers locateo outside of P~lo ~lto. CMR:226:93 54 --------~ .............. ------ ? ~ o a A siqniticAht lOS6 of buoine5s-to-businss. sQle& tAX due to either a shift to non-&alQ8 activities or r~loc~~ion outside n! Palo Alto to b~ closer to their cU8to~er8. Closinq of two neighborhood s.hopping ce"terli l in }",rge part afi B r~pp(mae to Palo Altdne spending 1lI0re-money o\\t8ida ot the City. l>ropeTty Tax: o a o o Continued d(tcre8.sing property v .... lues results in few propl!'T''CY snlss lind 810\11' incrOl'lse in aSflH8Bed v",lue. Urban Lane does tlOt redevelop and the Medics} YoUndati(m decides to "make do" \o.'ith exir;thlg faciUt.ies. S~anford West does not get con5tr~cteU. The State chang6s the propert.y 1'_8X alloc;ttion formula. to a per ca,}nta .basis and Palo Alto lOSes S4.3 raIL.on. Tra,nslent. Ocr.upahcy ~ax: sitetJ C}OSEh No tu'!\{ hotel d~vt!loprnent io'lnd t!l@ Hyatt. 'I'ra.nsfers stretches frolfl Ut.ilitie-s: The Util .... ties In!rl'lrot.ruetUre l'rogrdnl oveT a longer period ot' -time t.han is no,,", planned. Ser .... j,c@ Levels! Addit.ion.:'ll with service levels and use~ salaries dnd Benefits: ma.ndates, l;'~venl)ea do not k.c-~p p~Ce fee£;. can~lot Cover incr~ased casts. o lnfl~T.iGn increases result .in luqht-"t ui\lClry levf'!:lB and beneflt. ~opts ihCrA:asfI fOr a vnriet.y of r.ea~lJn_'i. o Significant work~r'6 cowpen$atlo~ lones. It is importtJnt to r~cognize ~hat both the Fiscftlly Positive dnd Fiscally Negative scenarios are e)(tremes. Each of, t.t.e Vlllril'lbles, if t.hey becb\Tae reality, would prob!Jbly have ripple e!tects 01'1 ot.her variables. for oxample, riaing .inflation (Fiscolly Nog/lltive) would probably occur .... ith rising interest rat.os (fisca.lly POEi'tivl'l). Ea.ch oi the v.,riabl@G are assoctated With varying levols of probability. staff/s intent. in presenting the matrix of fa,ctorE/o. CMR:226:9:J 55 '/' :~t; ; ,. ;. w •• intendMQ to spark discussion, not to provide a picture of the Palo Alto economy that uta!t believes will conta trua. SOma combination or the steady Stato, Fiscally positive and Fiscally N6gati ve scenarios viII realistically r8~regent Palo Alto's economic future. CONCLUSIONS Identifying the numerous variables that impact City revenues and !3XpenditureAj researching hiBt ... ric expenditure and revlBnue patterns; defining current conditions, as WEill as lJ0tliitive And negative acenarios; and c~lculi1ting the financiAl implications of the ~hat If and .st~ady State scenarios provides crit~.cal intoNa tion for the City's short-term and long-ttlrro fihl\ncial planning. Several conclusions emBrge from this undertaking: o o o o If the City council had not mo"lJje difficult bud~et decisions sta~tinq in the 1988-89 budget, the City's General fund would be in serious financial difficulty. Tne greatest budgetary unknOWn is the State of California and its a.bility to reduC~ city revenUes and .i..ncrAaA~ city expendl tUres. to the short term, and assuming no .further Stdte i nt.(!rv~ntion beyond the GOVernor's lY93-94 budget proposdla., it is unlikely that the City will need to face substantial F.lli:'rvice reduo tiona, a.lthough the ability to respond to changing servic£! needs or aging infrastructure is severely lil'lited. G)ven th~ role of the state and the l.i.kelihofJd that. not all of the Steady state aE;sumptions will prove valid, the City 5hould be cautious re':l~rding new expenditures anq should lJursue n~w and addi~ional revenues. o Discussion dnd refinement of t.he revenue dnn expenditure var iables and continUF,!d developlt\~nt of tho leMA F~nar.ci"'l Trend Monitoring System variables Can tacil itate evaluat.inq realistic future fiscal 6cenarlOS. o Only one ot the 14 factors evaluated (benafitlS as a ~orcentaqe of aalar.les) indicated nl!".ar--t.erm problems fOr Palo Alt.o. The factor ahould he tracked closely to enSure that savings from the new health plan and extehsion of the PERS funding year do indeed stabilize expenditures for e~~loyee fringe benefits. CMR::226:9J S6 ;;"'i ';J " ·il .;~ <' • •• IIi .......... lllll111m=IIII.I!I=IIII-IIIIRi'"I.-rJ.I.'~* W .Wjlf,l'F.l~ o There is Ii need to collEct lind analyze data rf\9ardinq t.he City Assets. staff 1s soliciting discuBsion from th8 Finance Committee O~ th~ information in thia report. ClHrific~tion and refihom~nt of the assumptions for the revenUe and oxp~ndlture variablAs CAn lead to ne~ model runs r~tlectJng increa.sed underotahding ot th£ St!!hdy St",te, Fiscally Positive and }"iscally Negativ.l scenHriu&. Respectlully submitted, cE, / l" , < ,/;,' EMILY HAl\R1SON ~.~-- Director of Findnce K~P,S-~ KENNETH R. SCHREIBER Director of Flanning ahd ~. ommunit,Y tl).vk~otlr"ent r ~, , ~:;t:h , n!!MfNG (7' ty Manager _/ -FTHS Model Exhibit 1 Exhibit. 2 Exh~bit J Exhibit 4 -FTi"IS: f;ummary cf Indicators -Steady State Scenario: Ten-Year -EconOm~c l"ut_uJ:""€ Study V<lriables CMR.:226:9) 57 Forecast. .,;;/- j ,I ,\~ 'I , I I , 1 l REVENUE YARIAB~f,_~_ fllftiM><!! s..~ Gruow"J.lDedme CUm:nl ~u3!:e1 m.e.;:_(;',,'I1'So S~.4 mill\'.m!)~r·, p.:1N 0 )01 '1C: 1It...1'>'e" cpr In la~ 5 )"_ $4.7 mIH;t1n/)'e:ar BU:W 2."0'1 .bov.: cPt in h~ 5 )':1"'. $0 ·,i .. :.:","--"';~"'::"""""::~ <' < ii,.«Y«lI;'-'< ;;:·~:""~~~fo[ tfAI!M?, EXHIBIT 4 £.!9NOMIC ftrTlJRE...)'TUP'r' VAR;lAJ1..J,£S. fiS(;illy Neglli~,t Sct1""'rio Dttpenini reo::t-~",i.",; Major S~ing Cmter ~1ore clo..ure; if<.'nd lu~·i.nJ \h~\hI!\t :<;( I!tor<; G.J .... \.k or rll~') All .... SRP nJ(wC'S!1.) R&D: oI~ ~.i~'.e<; r .. lo·.·I~e d~r 1[') CIl'<'(OTTlC1'S N<'l ur. r~u~ 1t);;5 of <.r;-II'Ifl""li' !Ve f",~"jno $"001< :'I )~r. !;:-I,,( Fi$e-lll) P\lsill\le ~Q D~wble C'~I; Q~!lgr!> in ':Urffnt 1I;< 10 mote hi6h ge1lrrll!Ou DOllhle CPI 14D.OCQ~, ft, ~~f'Il!l$i{)fl Yl .. 'd~ $2~K!yea: !-egiMi", 19U7; ~ ShoJppilll Cew:t compri!Oe:S 661-of reta.it Well. SRP .is <rJy »10 0(.....",. ':::.: ~i.II~l1oi!i~_5iJ~' • ( Rede-tePop, of "i..-.::~ry Shop rin! Centers ~ ("hafl~e 'r. '\Ii.,'o;.e'l.'k!d V.~ue ElpatlS!()(!. '>tlllford Wen ~f) c::qvei.ll!i~_,e- ('Urr'e11t 8udge. pf()[x,jon~ -C~I ... he.-$72JK l6,0,,") -T&C-$1~9K (-O,1'{) -Midtown-$1251( (.oJ 2"',1 -Charleston· S57K ·Alma pjaza-SjOK -Ed,te'l'ood Or-~7 K S'yr grov.1h l.OO\"e ('PI Nt, C"hang~ in anocation nile-<; $110,000 Ul $120,000 per year II,.rpro:a: _ I.$S of S IOOKJyear fllf Ih~ j'e3r3, la.tzely from SRP CIITll!I'lt Budget ftu~.!i2a.1 EXlr-.: .... of hi~ori.;.al trend (5 yr) O!{ per J"r.) '!'T"f"TI~ 4.;% ;1xw.: cpr (e )'1) No PY.}YC', ~t e,,~&.l"l'.dev u:i'<tir.r ~ie ($0, $0 "," .. --- rl"'lIn~' N"g~'1\'e s<: .. mria Trl.'nJ to deep Ji';wunt cauo;es 2 ,<l'"!trrs to cl;~ .... 'It!J DO retaIl Je"dormo:-l1t fc': I()s~ of t.200KIYCllr F1"a'"u ka..e, per [""pita .nr...::.olion $t.1 rmllion 111\ in one )'C*r {If $2,2 million l.ll j!'o Ol'l~ year 50 !I loss of maj,'! au 10 ~\es t-$~60I<) fiscally Neg3t,'o'C' ~ , De.:reasc io \'al!Joe"i, and ft"W properly sales lumo~'cr D-«:..-ease ir1 ·.'Ji~ (-2,O'l) F~;II l.nJ s.aleli Mitlimum uI-.,(,na sjle ur~llI<koo ($0) :-,l" d.-\'~I"i·!Tln1' J f,scl!;l1y Po~i!i~'e &,("'Iuno Redeve!L''llmetlt of c;,nle~ f('r ;nore 3!lJl:re-!;si \'l'! relail Sl50K-'year No ch.u1 ge in aliocallO'll rules $1 \O,(lOOr)'~ Nomal t\J,rno ... « ($0) .--.~-.-" ............. ~ M.riet t~ mch all iRIles sMt to dee;! dis COIUIt .re h\lrtinl sdes c-f !it!COftdIry ~!.el"$ Estimstes are _ roupdu< to timinJ ;~~i)t -'71'#1 l'I) f~·_.,.tf FlSUJly P~i'i"e ~o Ri~i ni res. \lilun ar.d [.()',\-, i."lt~ rat:el> spur :um(""'er~ ll\'allabilit, of )!,">r"H't'l, finaocio, ~I"$ land s.ale.l. Risrn& v:.j~ ACII"~ lumcver 3.0;; .ficr CPI Move to UrhM tA1le", bj' IW, ..... r\:.'!id reJr\'duprr.eflt of nlTTen\ $lte by 21)(Xl; $JOOK f,," de"elnpmn.i t» ei,G of dttadr: l,S2jQK) . -~-.""",, ... ~ A:l.~-:>r·.s office ba.'I ndll("ed asscs:scd vilhle CIO",!K)I'hC post-1m Ilks. :;ta1e Action. R oeoJevdopment City Utilities rd~ iii,. U!Jitil~>-' (\m'-en( Budset r.1ui~li~~ Sf! 2M (n-3) I~~ additional $1.7 ,mIl ion Inl1".lI.l1y, hqinniJ'l, [993-94 ClIl'l'e1)t lrend: $0 !rum Il~ arrkllj~ fill space left ~)' departures C<l~1 Bud~ Projection.~ S4.IM (92·J) S.3~ gro .... dl (incl~CprJ JiL5M (92·3) (2. 9 ~ lfC'W'Lh iIl\;r~CPI) NOrmlll hlrno:weJ' ('O<;I~ .. reo ('ItTef11Iy ~'.()rfv,d Fbc.a.ll)' Neg;olive li=<!:i.o Per CllpltJi .nocalion ·$4.5M 11\1".>&11,. Vaca[l,it"", 00 £1 CllmJ rlO , !;(."'CI'ndary 5hap ping c<'nter dM\J~. <:cnlinllllti0fl d f;!1.ancial uh;lac-l~s It' del,ooiopmen! fisc.tily NCSlli ... e &eurjo Planned nlte m<:n..ases dor.', come dJfC'..!gh IO-"eII! f!lfec.!st Lo~'1 of 1·2 majQl SRP finm R~I l'fl.:UT; 4 Redu.::tk.., of 5ch(Y11 Dl~~lld I .. ~<:<: t~t!1l ·$5 5M 5 FISCal'y Posihve ~..Q No clun8~ from ClltTent Univ. 1.md use poli,,), 1M! ~li rIlul.te1i R~r!;h Par\: rt"de"~'el('f'ITlI.'Tlt. Hyatl ~i!e:s rede .... ; Rede\ielO?" ~\ -of 2 d 5a;\.mdary ,hopping II~" SIOOK Fl!IC&.Ily Pooilive - Uti I ily pri~ .eo Ill': FoIlLAA'S Util FD1'DCUf l~cr.:8._......r nOlI. r~jd _ lL~re, EJ:JlIIr>doc.i~to cenulv rhones. c.ahl ~. rIeW techno SJOO~ {20~} Nonr ... l rumo"c' I,,~,~-.ool n'"lIulllmfU " ,;" -~~~--~- ~ .. '''' -~-~."-----"~"'~':< -. - ~ ""_ '-~~,'.'~ ~. t.OUI~ LltW'I (PljflUTI IIO!pn1]SlJo::) plOq IUU lQ?y,uiIS :.' UOI~01J()ud plQ.Jl 0) .LIn~H ~ "~!I!Wd !UV:JSI.:l o(;l~ulldli~ Ilul .hp!jOIJ l~1 po..--c UQ!P-Orou UU] .. p~~.) u.IOq l:;J:"\H' .. ..u ~ P""PF 'SWIXU 5"'-': I ~ Ko -"ow.; WtHJ S~~J:M.I! ~II'J'(H wOJJ ","w~l:i L J~"rxoolS W'IGS 01 ~;loO;S' ~r.~,\:;lJ :lWUS ll::m;Ol:oS al\!~N '<UIDS!.d "'!S it'tll In 1 ..... lH1ol .. ',O"P"'J j';'IU!i Oil 'f 1I~.(~i ~u-l ~~ ~h!ld'~N AlI_"ldJ lJ~> + ~ I'l$ _"!·Hoor P.fkinS 5!a1e ActklII ,lIerarc Cuh ~~ Iinces Cumont Blldget EmLoctiom Current n:gul:l!ions i$-rJ.9 1 Ml SO No incr .. .asc in coiltt.wns 6.0 parking monitor FTEs None. Cl.lrtent Budge! ProjectiCll'is Lc-vellng at 6.0'it y~ld~. I'.amint'! $1.1Ml';'I''';H $28.SM !iteady )""el, u(''-'''J\ from $3L'5!v! .ft.:r A87U2 PERS -credit L~1Tl<:d 1(; '!-c.~t F~;.('ally Ne-gl!.\i'O ... ~ $25QK re~'ellue 1"" Re'>UII!, ;1'1 m.--.re dismi ...... -d,ita(i(m' ·$IOOK No U'\l'n:'.a~ il'l cnll1'>;:holL;; R~udiom -SrooK Fn':II:l.ing hilI li::hfflute {O ~ ,rowth) Lose ceQ of 8 nOQ'putdn, fines Fiscany Negnlive ~ CUrre:1! yie!u~ ~r-ly Need to IJ_~ fC'!l(f'IIes to bal.~e MJe:! (l.e~rt-.::y -~200K • Fi'S<:"n) Po'):itlve ~!IiQ CUfT..,nt regulil!ioc>flS il bOllr) Rc~ult5 in im·rea.se re~'''nu .. $'10,000 tncrea~ w!\e<;tion ral.., ;nitiJJI)' • 1 .. ,.<::1 off !ru:r",uel> in ~ffir;g $IOOK Slate ~t.ys out .-.-~ --~--"-,~~:--~~- ~:2!N!l!m.~ --::'''':'''-~-'''i '7 "I .", --',..,.".,...."' __ ~. FiSll;:~,rly rositi ~'e s..~ [ROation re~jgni!es 8-IO)1lj tocu~ase. il< reserve 1evels $5001< ~ .. >t;''''i'$d*·J"4!lW~tt~t3 : i' -~.-~ -.. ~~~ -- .ffW(-rs (mID UtI]!Iies "II Equity CoJfT'Mi Booget P_fPj'Nl ions Pr<-s.ent ft:-v<!1s (arPmll:, 24 'il,) Sl01K 5rAM Trem! CPl bt-'>ed 1990-92 {present level of~. 61.:11\',) ($1112K) CUrreJlt Budgel Pmjtct-ions S~,6M + (,"1ltf'J;hltlahon o( rue c! 'l'.<:re;u.e in ... laries .&lid bo:c-rie fi Is and C'lP Saw -= SI06M ,",ddiliQn$ :Llfl:tollg.o: S5,6M,Iyeat j 1·11 .1'; :;,.,. ... ,,... <,,~"t Fi .... ·:Ln,. Neptl~'e $c~!!rilJ R~lioritl I.e J\lIlIy fr{lm !ltgl1er ~~'ell(le gel1tl"aling acli~'ili~ ·$200K Lo ..... er reiml-. rille from M edrc.re Tn-crea.<;e in NI<l deN No renol', [k.c!ining -..-I:hu.tio::m; d-!o::tmirlg devel~, Fiscany Neplil'!: - Same as ~'unen~ o.-:!IIi II" ~~rit.1 pmglil"" ·S225X Reil1:lHle Inn~li{)n F', .... ,ure to fJ..\I2uce lr"" ,fef SHCI~ 10 11 FlSUlII, PoI;ihve ScdIano RepriO'!:iliz;e 10 l1i~her revenuc lI<:li\lj(ie~ $IM Hig:1>er f!.w(':mJe \W;\'ea5e Reno\l.fgreen r~ ir.creasc (ncl 0--goes tQ deb!: SiC.) Develop. Kti'l. 51 StJK F1SC,lIy f'osilP .. e ~--2 Semc a..~ ('Ur.'Mlt Adclilicms at SP,·SIOMI},car. for $800K,Iy~r .. &:hti~1 re~'enu-e E~(,n~mic dO'w'rlII.)l"f) .~ ~ ~ ~.,.. 9f~~-;;i:! "tml:!~ - IipWW:;IF .. ~:,v~ l~ 0'\ .nU11IKQ (.'!-,.u;J"S ~ ... qlsocl ..c1J1PS1 ~ hns '(;)tlod oJU!:=-1 :1/\ [~J3:f. "JO~'i 6U~ ,M1l!S£' .. ,,_' 1.LI,,~,;;oj J:flo(1 P"'J!niQJ.:p"'[»!n...J.-.p • i,MJI ~!.\.l::l'S til!.¥< dn ~1 I. LlOP !,"~U;;i\"lI ~"l'rplilNJ. IUU,)I)!PfJI I\,":'ot, ll'l~ "pn.S OU\lu.;..>$ OOI\!I,:J;,.N 'c,j"PiiI::l $i'IIHS,!r1S llI'!!o"l )10095- ", S ,l;"lJ~U'8'JI 01 ~.l rh:>;l).!j ~ .(11) 01 '"14I!JU,II!J IOU ~'IU jc)1.S(H'\,I~LI"li ou-BW5S "'~!ld;l,1,£ "1l1!~1.:I ~l';:'~:101 'iaW-.s I=HI\:) M!I.3<'~OJd p:fpne jl»..Url.) ~17:TJ pl.l'pIl9 .(.1 ....... ".) FiO;>:;oIn" Fl'~;aH)' ClI'!Tent BuJge: Nt"glrjve Positive ~ and Benefitl ProiecrKms ~)jQ ~m!-r:i_Q ~ Annual Growth Ihle 3.:5 'I II1Crt"-iI~jr'l5 sC~ily 3.5 " E~pmditutel IJ"O'I" 0.5. w6 5~ s::=!er tf-.at; iWlation. Heallh Cart Costs 2.1'1 fDr i9"QJ-Q4; E1Cee.j CPL (PEMHCA) CPI ~ 3 ~ lht:TO'.:J.fl~r inflall<.>n; duubTe cpr f{eahh Care C'lV<':n.ge. N"'·I<1. N\}I",'" ('.-aT' total tle2lth ca~ Ch.mge-s (Col!",,!, who's t'~pendilurei at 93-94 ,:ove1(d, ele.) E.:l~d(!(\" "'iwel1log~ Ie. ... et Cafden: .. plart a.t b.igher lewl Ih4lI CUJTm! ~fils Retir<'e Health C"u (renl flIItC' Eadicr ovcl'31l Lowe.-that! furttJ.,o,r stu.;ly Deeded of historic or rdiremt"l'll retire~' .£or. rummt ra~ ;a.. ... .:l proje.;lloa. of , Mime HI~hcr W&r1 <:U=:>"1t r.r.le~ population "$J;OK PERS Rates 25 _ 22 ~ Safet) r1l<:rea."lC ill unfunde4 habrfl1}' Current tale<! IVi i;; Gt>neroJ 2"% @ 55 for non-ufety 14 t .. -9 ~...,,.,.-.--. ",,,,-,.-~-,,.,..~ ~--'.,/, ,......." ....... t_ .. 'H?" r #" ........ _"'-;;;-"~~'.';7-·Tt "W-.7 m Wod,en C~ti01\ f'i.r~ Stallar. C~ida!ioo fl'obCfJ AuiNn« j~1IM hlo t\!:o Cummt BudKe!: ~ Cuneot trend N~,~ O\'e~lme ()~1~', :1(\ nd CG5t In currer,: t>ud£r:t Cu.n=( lewJ SIOOK,'YC"ar E!lI;:d1~ Nee ative - Slgni ficlf11 I~ N.me Full tune ..,:o"d unit ...... ilh .sllfting iocre<L"<' Mme ~ring~r.! ~rnnr,e time'S ~~uiled $250K 11:\'~res..~ conurulmr!'t SIOOK 15 FiSlCt.n, Ppsili"e - Political will CO clw!ge .)'stem .and docrea.1l" cost II"'1r 1etne"l'ltAiion $150K Sk .. dy ~...,\e M"re oI,et',ci« in ... ull/O(( 'f're.W~ .:()!d Sj{)~ J,,,,," ~ --------~---.-~----~ Ratr ~ Infi .Iion I.labillty Claims ·\CCEL M~n,~r;hip, No:! Ct>50l &:bool Distric1 Lea.o.e EI umino Par!:: Lea_<;!!, Replatory Requiret1"llmt."i (ADA, TOM. ~.) TOM ADA ~fuman ,St,rvico Contracts Cumnt Budge! f>_f'Ojes:tions ,. $922;( -0- $4,49JK + CPj Multiple family bousil18 ..... lue Current Budget ProJec1i~ $1251Gt"TIeT1Il Fund emplo)'ee -S2.S0Kiyear .s I .iJ56 -+ ('PI "'"'--" .,.: Fi~-al1y Ni!8 ahYc 5.':en,rio 6~ Lar .. , un'-',-'.',"rOO fo~~ S2M $600 K + I) ~l!r in dalms , .. dd rJYm:~ C",weu~e t.'l{)QK:')t'-ar Current !~<;e Fi::;..;&n,. Neg:!lhve &..ell!rig ,. SJOOf~nt' .. al r~nd empfo_~~ S'iOOKiyo::li.r S'lli to W"{ .. "'lYe CPI 17 ." ---;", Fj~><:ally ?D,~iti ... e SceMrio ,. s."" ~ sl~)' slate -0- Ren~goh.te 1ea9: terms on rt'ntah ·SSOOK)year- M rxltf) park la..o;e Fisc..lly Positive -~ S25 i Gmera! Fund emplo)'~ $250K/,)'N:" C,Df ~-~ Eltpeaditures ,row III CPl. ~ , l~lJn::> .w ;!OW'S ~.uvs :OAIII500d ,(1I1R1>1:I sr "'$ :";'LI'8l.1:1I U!'iI'W ~PG !SpUl:W~p UOI'Z!I';J :~np(Ul:>~jlJl '~O'_lll!lnli::lJ IlIjLJ.;lUJUOj!"U3 O~'IT.>~ :;'~ljd:JN "111?!;1.:i )lotoS ):fesn pUll ·.:lI"""J(l l:!>"1",~JO; Jr.>,{-Ol lu~.JJn.) niOfjJO!ilQ ~Jpng luaur,.) (;'~IJ!{!-in 01 ~~\lIP) UO!I1'U LIJ JO ;,ll'}! • CITY OF PALO ALTO K E ~ 0 R A H D 0 M April 12, 199') TO: Palo Alto cit.y Council SUBJECT, city of Palo Alto Economic Future study The City of Palo Alto Economic Future Study (CMR!226:93) which was distributed in the April 8 Council packet and which is on the Finance committee agenda for April 13 was not complete. Please insert the attached Exhibit 3, Steady State Scenario: Ten Year Forecast, directly behind the signature page of the report. Respectfully submitted, ~~ City Hanager \ - "I ~ ~I -I ~i ,,'1 ~; " ......... ,...""~ .,. "',.,..,. ..... i~:::~~-=-: ~rl :~ :J ~" " ! 1 --~