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Home My WebLink About0484.093, • < i l ;J I september 16, 1993 HONORABLE CITY COUNCIL Palo Alto, California Attention: Finance committee Members of the Council: peJtqroup4 Preliminary s~aff estimates for 1994-95 General Fund revenues and expenditures indicate that the Gene=-al Fund 'Will realize a net operating surplus of approximately $.3 million in 1994-95 (Attach .ent AJ ~ This assumes: no new program increases; one-time expenditures ackled in 199)-94 will aot be continued, a cost-of livinq incrQase for city employees at the Bay Area Consumer Price Index (Cprj; modest growth in ta~ revenues commensurate with the rate of growth the City realized in 1992-93; a full equity transfer from th~ Water Fund will not occur;" capital expenditures will be at the same level as 1993-94 ($3.74 million); and no new revenue shifts from the State or county. These assumptions are congruent with the assumptions made in the Economic Futures Study model that has been presented to Council. 'laments for Discussion Staff believes the key elements to consider in developing budg~t guidelines include the following: o Salaries and benefits o New or augmented services o capital expenditures o Water Fund equity transfer o Department fee levels and cost recovery o Ne~ revenues o Entrepreneurial ventures o Human services contracts o continued support for East Palo Alto o Organization review results o utility Rates - o AS 702 Reserve CMR:484:93 ~"'", ""'X" • . , :'" -/ L ____ " ____ C-__ . o A b~iet discussion of staff's prelimina~y recommendations for each of these elements follows. Council may wish to provide addition.a.l c1:irection prior to staff's finalizing the Inore detailed budqet quidelines for the November Finance committee meeting_ Salaries apd Bep.fit, In the 1992-94 Budget, the council's direction on salaries and benefits 'Was that, if revenues permitted, salaries and be.nefits would be estahlished with the goal of keeping the City a competi tive employer with surrounding jurisdictions, although there would be no guarantee that salaries would keep up with the Bay Area rate of inflatio~. Staff ~ecommends that this guidelin~ be retained for the 1994-95 Budget~ Hew or Aua-ented S'ryice, At this time, staff is unaware of any significant se~vice addition or service augmentation needs in any of the City departments. Should such proposals he made as the budget process progresses, however, staff would give consid~raticn to: o Whether the proposed service level is mandated by other government or requlatory agencies; o To what extent the proposed service is supported by new or increased revenues; o Whether additional staffing will be required to implement the new or sugmented service level. Capital Ezpenditur.A Staff has provided, in a related staff report (CMR:429:93) r historical information on the non-Enterprise Funds capital e......~nditure outlays, for infrastructure and non-infrastructure projects~ At this point in the budget, staff anticipates recom mendinq a Capital Improvement Program (eIP) for the General Fund which totals $3 ~5 to $440 million (including utility users tax funding). staff a160 intends to continue i~plementing the Parks Ten-Year Renovation Plan, initiated in the 1993-94 CIP. Water fUD4 Equity Transfer to the General YUn~ Due to the prolonged drought and its resulting decline in Water Fund revenues, water FUnd reserves have been lower than the minimum levels established by Council policy. Council, therefore, has C!fR:484:93 2 6 ... " / o 0. ch05en to reduce the equity transfer to the General Fund for the last two years. Staff estimates in the 1994-95 Budget the Water Fund Rate Stabilization Reserve will reach the minimum level. Staff's recommendation is to continue ~ith the plan approved by Council during the 1993-94 budget hearings, in which the Water Fund equity transfer would be -ramped-up tn the full transfer level in fiscal year 1995-96. lee Level, And Cost R.co~ statt rec~enQs continuinq to a9gressively pursue increased cost recovery in those are~s which are appropriate according to the 1987 User Fee/Cost Recovery Study, adopted by the council. Using the last fee analysis done by staff in 1992-93 and incorpo rating 1992-93 actual fee revenues, cost recovery levels are esti1T!ated as folloW's for the larqest fee areas. (Note: these levels may have changed slightly since the 1992 study, :but the levels still show approximate cost recovery levels. Fire paramedic revenue has been adjusted below to show the impact of the recent fee increa~es and addition of the second paramedic unit) ~ Planning Division (includes Development Monitorinq) I~spection services (includes building permits; Fire: Hazardous Materials Para.:tl9-dics Animal Services spay and Neuter Clinic Arts and CUlt~re Re~reation Gol f Cours e. 1992-93 Revenue $ 414,000 $343,000 $810 /000 $195,000 $ 406,000 $1,745,000 $1,45.2,000 ~oximate Cost Recovery 6H 81\ 80\ 91\ * 98t 23\ 53\ .. 1993-94 Adopted Bndqet levels include neW' fees and 2nd paramedic unit. CMR:4B4:93 3 ... / o staff will also examine fee levels compared with surrounding communities, as well as fee levels for residents versus non-resi dents. ley Reyenue. Several nela' or auqmented revenue sources have been pursued in recent yeal.·s. In June 1992, council approved an increase to the real property 'transfer tax. Stat.f is currently preparing an informational report for Council on the ramifications of extendinq the utility user tax to interstate and international telephone calls. Unless council specifically directs staff to investigate other new revenue sourceS r staff will proceed with preparing the bud~et without assuming any other new revenues. Bast Palo Alto Support The City is currently tundinq Police assistance to East Palo Alto at a cost of $324,000 per yeara Last year, the City also ~qan funding grant writinq assistance from the Human Services Division~ Unless directed otherwise, staff ~ill assume a continuation of the current level of assistance to East Palo Alto. orqaDiEatioD Ravlew Results According to the workplan for Phase II of the Hughes H~is9 study approved by the Council, the cons~ltant will be returning periodi cally with the results of detailed analyses of departments and related recommendations~ Council may wish to provide guidance in terms of bow the recommendations are to be incorporated into the overall budget process, given that the internal process for preparing the b~dget ~ill start in September 1993 and be completed, for the most part, by March or April 1994. util.ity Rates Lonq-ranqe plans for the enterpr-ise funds include: accelerated infrastructure work in the Electric, Water, Gas, and Waste~ater Collection Funds; the implementation of Demand Side Management in the Electric Fund; participation in the SMaRT Station in the Refuse Fund; a rebate of approximately $29.5 million from the Electric Fund in 1993-94, to brinq the reserves to appropriate levels; and bond financing likely in 1995-96, to continue the Storm Drainage F1:!nd capital improvements. To fund the above proqrams, rate incl.:'eases are anticipated in future years. Whenev~r possible, rate increases are staggered to CMR:484:93 4 • ._---:- '-" ! ~. .;. .- o hold the total increase on any customer's bill to a minimup each y~ar. Below is a table outlining preliminary estimates ot rate increases; for the ne)(t t·""o years. Preliminary projections indicate rate increases tor 1994-95 for Gas (11.9\j, Sewer (12.2%) I Refus~ (15.0') and Storm Drainage (20.0t). Preliminary estimates for 1995-96 indicate increases of 9.9\ tor E\ectric and 5' for Refuse. ENTERPJ!I S E FUND PROJECTED PERCENTAGE RATE ADJUSTMENTS Actual projected FUnd 1992-93 199)-94 1994-95 1995-96 Electric 0.0 0.0 0.0 9.9 water 24.0 -1.0 ~.O 0.0 Gas 9.1 0.0 11. 9 0.0 sewer 9.9 9.9 12.2 C.O Refuse .lO~O 30.0 15.0 5.0 storm Drain 0.0 0.0 20.0 N/A - :If the drought does not recur,. the current inverted .rater rate structure will continue to transition towards normal water pricinq, that is, a rate structure including les6 steeply inverted prices. In addition, staff plans to conduct a financial review of the Water FQnd and its operations this fiscal year. The purpose of this study will be to determine what steps, if any, can be taken to lower vater rates in F'i 1994-95 to regain competitiveness with surrounding areas. The RefUse Fund rate increases will be needed to fund the increased cost of hauling refuse. to the Sunnyvale SMaRT stat.ion and fer continuinq expansion of recycling programs. Additionally, the City Council has direeted staff to analyze potential alternatiVe rate schedules in 1994-95 which could utilize greater progressiveness than the current ,ate schedule. The Storm Drainage Fund rate increase will provide for debt service on a projected additional bond issue needed to continue the capital improvement and infrastructure replacement program. AD 702 Reserve $6. ~ million has been set aside from rebate"" AB 702 funds, including $4.77 million for the General Fund. Those funds will CMR:484:93 5 o - continue to be sat aside separately until Council establishes a policy on the disposition of those funds. In CMR:154:93, MaTch 4, 1993, staff reported to council that an unknown amount of liability existed for post-employment health bene~its. That is, the city incurs future liability every year for health care costs that will not be paid out unti 1 the employees retire. The city currently ~e=crd5 the expense as the benefits are paid when the e~ployee retires. It is prudent, however, to r~cord the liability as the employee works. There is, therefore, a large amount of unfunded liability to be recorded when, as is expected, rules for governmental accounting change to reflect rules tor private companies. council has given direction that staff develop i!I recommendation for the use of the AB 702 credit, in accordance with the following criteria: 1) funds would not be used to ~und or augment ongoing progra'!as; 2) funds would be appl ied to existinq post-employ ment/employee obligations; 3) the application would have the most positive overell budget impact over a five-to ten-year time frame; and 4) staff would discuss applications with interested employee groups prior to returninq with a recommendation. Staff ~ill return to the Finance Committee with a recommendation on how to utilize the AB 702 .anies. COJu21asion staff requests FinancE. Committee discussion on these and a1lY other issues of interest to the Committee. Staft will incorpor~te the committee's discussion and return in late ~ovember with 1994-95 budqet guidelines. Approved guidelines will then be brought to the .full Council, in December 1.993 or early January 1994. and vill be used by staff in p~eparing the one-year 19~4-95 budget. Respect:1'ully submitted t ,~, -~"'- I a'nt STEELE Budqet Manager --A'r; U:'l' , L[} ~LY HAiuUSON Director of Finance ~~~~M.lI". E FLEMI;;;;"-r- ei Manaqer C!!R, 484: 93 6 • • " Alla.;hlDCQll A .. GENERAL FUND SUMMARY, p .. Umlnary 1994-95 (S 000',,1 Adopted &tirnatcd % Change Budget Bu~get Adopted 1993-9.! 1994·05 Budl'S! Rev-. Sales ..... 14,917 14,227 -4.6% Property ..... 6,%5 7,846 12.6% Utility ....... tax S.7~8 5,988 4.4% TraJISiaIt Oro 'P"""Y T"" 2,997 3,153 5.2% 0dIC< ...... lines, """ ponaItie! 4,423 4,370 ~1.2% SWrtataJ: T .... SJS,040 $35,534 1.611J. Scrnoe _Ii; pennib 7,484 7,109 3,(t% loiN Scrnoe AgItu,,,,,,, (Sc.nfonf) 3,956 4,07~ 3.1% In"""" earnings 2.134 2,189 2.{i% O!be.-~ 2,846 2,931 3,0% TotalRnenues $51,460 SS1.,491 2.0-;' n.. ClJ><ntia& T ...... r .... l. 17.481 18,500 5.8% TOTAL SOURCE OF FUNDS $68~1 $70,991 3.0-/" ~ s.r;., .t """-iU 47,078 48,700 3.4% Coouact Services 5.441 5,:71 ~5,O% Supplies "-Mal<riaIs 2,398 2,398 0.0% G.:oer.iI Expease 8,473 8,620 1.7% ~, Leases, &: Equipment 1,148 1,148 0.0% Allocated CIwj;es (Net) (425) (425) 0.0% Contingencies 387 387 0.0% Tot.oI Expeaditu .... SM,.5OO $6S~999 2.3"/0 PIllS 01' ... 6"1 T ..... r .... OUI 4,668 4,668 0.0"/. TOTAL USE OF FUNDS $690.168 $70,667 2.2"/9 NET OPERATING SURPLUSI(DEtlCln ($217) $314 GENERAL FUND SUMMARY, Preliminary 1994-95 ($ 000',) lMI'ACT ON RESERVES iIudFt SIabiJimIiO<1 Re$en>c AS 7Ql Re$en>c IU:sorYc lOr St=UlSidowaIIcI IU:sorYcforE ... " ........ Rcscrvefor~ ...... Stores 1n.'OIlIory .t Noles Roccivable AdYaDoes to! (p.ybooks from) Otbor Fuods TOTAL TO (FROM) RESERVES Adopt..J Bydget ~ (227) (271) 44 (117) , - Esti."'l'l.ated Budge! llJ94-95 324 162 161 324 '.