Report to Mayor and City Council
Tuesday, June 21, 2016
Special Orders of the Day
SUBJECT:
Title
CONSIDER ADOPTION OF RESOLUTION NO. 16-081, A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARSON ADOPTING THE FISCAL YEAR 2016-17 BUDGET IN THE GENERAL FUND AND SPECIAL REVENUE FUNDS
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I. SUMMARY
The proposed budget includes direction from City Council provided at workshops conducted on April 4th, May 16th, and June 13th. Staff has prepared a proposed resolution to adopt the budget (Exhibit A). Separate staff reports are included on this same agenda for the proposed 2016-17 Capital Improvement Program and the proposed revision to the Uniform Schedule of Fees. This report also includes recommendations for the Staff Reorganization of various departments.
II. RECOMMENDATION
Recommendation
ADOPT Resolution No. 16-081, A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARSON ADOPTING THE FISCAL YEAR 2016-17 BUDGET IN THE GENERAL FUND AND SPECIAL REVENUE FUNDS
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III. ALTERNATIVES
TAKE another action deemed appropriate by City Council.
IV. BACKGROUND
The City Council’s goal was to adopt a balanced budget on-time (by June 30th) for the coming fiscal year. We began the budget process this year with an estimated deficit of as much as $8.6 million, and the potential loss of Utility Users Tax (UUT). On June 7th, the voters approved Measure C and secured the UUT for another seven years. The City Council and Staff have worked together to correct the budget deficit, which now stands at an estimated $1.5 million.
The City has been faced with revenue losses and other factors outside our control, which have impacted the budget.
• Local recovery from the great recession has been slow. Property tax growth has not kept pace with surrounding cities.
• Carson’s largest single revenue source is sales tax; which swings with the economy, and is expected to decrease by $0.8 million for FY16-17.
• The price of natural gas has decreased by 35% and Carson leads the South Bay in solar installations; resulting in a decline of UUT from a high of $9 million to an estimated $7 million in the current fiscal year.
• When California dissolved redevelopment agencies, the City lost $30 million of annual property tax used to rehabilitate infrastructure.
• Due to other changes related to distribution of former redevelopment revenue, the City lost another $0.5 million share of property tax previously deposited into the General Fund.
• The City lost $250,000 in revenue from the Stub Hub, due to expiration of an agreement entered into in 2008. The agreement cannot be renewed.
• The City’s largest single expenditure is the Los Angeles County Sheriff contract. The overall cost of service is increasing by 7.6% for FY16-17, driven by rate increases and an increase to the surcharge for a contribution to the liability trust fund.
• The California Public Employees Retirement System (CalPERS) took steps to strengthen the system after suffering major investment losses during the great recession. Those steps have increased employer contributions. For FY16-17, the City’s contribution to the employee pension plan will increase by $0.4 million.
• The City’s workforce is aging, and more retirees are driving up the cost of retiree health insurance by another $0.3 million.
• Due to the City’s claims history, the cost of general liability insurance increased by $0.3 million.
• State requirements for water quality standards will continue to increase the City’s cost of compliance. The proposed FY16-17 budget includes an additional $0.2 million for these costs.
During the budget process, steps have been taken to mitigate the losses noted above.
• Fee increases are proposed, leading to an estimated $1.1 million of additional revenue.
• Twenty of the City’s 338 full-time employee positions will continue to be subject to a hiring freeze, saving $2.3 million.
• There are 38 vacant positions that are funded. Due to the timing of recruitments, some of these positions will not be filled prior to October 1st. The draft budget includes savings of $0.3 million for temporary vacancies.
• The City is using one year of interest earnings from its Section 115 Trust for future Retiree health insurance to offset $0.9 million of current costs.
• Nothing has been included in the upcoming budget for cost of living increases to employee wages.
• Overall, expenditures have been held flat and some cuts have been made. Examples include the proposed reduction of Cultural Arts Grant funding and City Council spending.
The belt has been tightened; but the City’s costs will continue to increase. To correct the deficit in the future, the City Council will need to consider new recurring revenues, service levels, and the method of service delivery. In the meantime, the City’s General Fund Reserve is sufficient to cover the estimated budget deficit.
A Summary of Funds and the proposed budget by General Fund Program and Special Revenue Fund are attached to this report (Exhibits B & C)
Recommendations from the Utility Users Tax Oversight Committee
The UUT Committee received information about the City’s draft budget on April 12th, May 10th, and June 14th. The Committee engaged in thoughtful discussion and Q&A with Staff. The Committee recommends adoption of the FY16-17 budget relying on reserves. However, they are recommending the following changes:
1. Suspend stipends for City Committee/Commission Members (additional savings of $90,270);
2. No General Fund money for Special Events; and
3. No General Fund money for Cultural Arts Grants (additional savings of $82,344).
The UUT Committee supports the following:
1. Proposed fee increases;
2. Use of the General Fund Reserve for the budget deficit of $1.5 million.
If the City Council were to adopt the UUT Committee recommendations, the budget deficit would be further reduced by $172,614. The Committee supported efficiency and savings gained by Staff Reorganization; yet did not make a recommendation, as they did not receive detailed information at their meeting.
City Council Requests for Further Information
At the June 13th budget workshop, the City Council requested additional information.
• Citywide conference & travel expenditures for Staff were budgeted at $86,772 in the current year. The proposed budget includes only $46,115 for conference & travel expenditures, which is a 47% reduction.
• Fleet Maintenance program expenditures (01-80-840-085) appear to increase by $255,927 for FY16-17. Of this amount, $245,280 is directly related to consolidation of expenditures, and is not an expenditure increase. Fleet maintenance and fuel expenditures were previously spread throughout the General Fund’s 217 budget programs, making it difficult for Public Works Staff to manage costs. To improve control, expenditures will be consolidated into a single program within the Public Works department.
• The Fiat/Moneta street improvement project was previously budgeted at $216,200 in the Park Development Fund. It was believed the improvements would be eligible for Quimby fee funding, as Moneta Avenue is the frontage roadway and access point for Veteran’s Park. Staff will research the allowable uses of Quimby money; and determine whether the FY15-16 appropriation is valid. If it is not, Staff will return to City Council with an alternative proposal.
The entire City Council program budget is attached (see Exhibit D). City Council discussion led Staff to revise the prior object code descriptions to more accurately reflect the intended purpose of the accounts. The 6000 object code will be renamed as “City Council Discretion” and includes $10,000 per Councilmember for the following: Conference & Travel; Constituent Letters; Framing requests; Photo print requests; Individual memberships; and other discretionary spending.
All “City Council Discretion” expenditures will be coded to a Job Ledger Code assigned to each City Council Member to facilitate on-demand information reporting. Staff will provide periodic updates to the City Council.
The 6008 object code is presented as “Community Outreach” and will include a pooled budget of $11,000 for engraving of plaques, flowers from the entire City Council subject to SMP 3.19, and the costs of Red Ribbon week. If the City Council wishes to add individual floral requests to its “Discretion” budget, SMP 3.19 will need to be updated; as the procedure only allows for flowers to come from the entire City Council. The $12,000 budget to purchase plaques, certificate paper and folders, City pins and other promotional inventory is included in the Public Information Office program budget. These changes result in $23,585 of budgetary savings.
Special Events
The Special Events list has been modified based upon City Council direction (see Exhibit E). Full-Time Staff cost is not included in the total cost for each event. The City Council requested that events be separated into: City Events, City Sponsored, Parks & Recreation Events, and Committee Events. Information available was inconsistent, so an exact classification is not possible. The criteria for events on the List were: 1) the event received a FY15-16 funding allocation; or 2) the event has donation revenue on the City’s books. There are some events that are still held, but do not appear on the list; as receipts and disbursements are not recorded on the City’s books for these events. Staff recommends establishing a Special Events Fund where all events are properly approved and accounted for.
The UUT Committee unanimously supported Staff’s recommendation to include no General Fund money in the budget for Special Events. A recent survey from Fairbank, Maslin, Maullin, Metz & Associates found that 65% of those surveyed (349 registered voters in Carson) supported large or some cuts to special events.
The original proposed funding for 31 Special Events funding in FY15-16 was $332,247. The City Council defunded the following 7 events: Martin Luther King, Jr. Day, Cesar Chavez Day, Children’s Day, American Heritage/Unity Day, Tour De Carson, the Golf Enrichment Program, and Special Olympics. In addition, funding was reduced for many of the other events. The City Council made total cuts of $118,080 to arrive at the approved amount of $214,167 for 25 events in FY15-16.
For the coming fiscal year, Staff has identified $52,717 cash on hand (donation balances in the General Fund and the City Treasurer Trust), and $50,100 of donations expected during FY16-17. Expected resources total $102,817. There are 3 events with cash on hand, but did not receive a FY15-16 budgeted allocation.
Staff offers the following alternatives for FY16-17.
1. Subsidize Special Events at the FY15-16 amount of $214,167. A total of $322,339 would be available to spend on 28 events ($214,167 subsidy + $108,172 expected resources).
2. Subsidize Special Events at 50% of the FY15-16 amount. A total of $215,256 would be available to spend on 28 events ($107,084 subsidy + $108,172 expected resources).
3. Provide no subsidy for Special Events. The $108,172 of expected resources would be available to spend on 18 events. This is the option the proposed budget is based upon.
If the City Council wishes to provide a General Fund subsidy for events, the City Council can determine the allocation of the subsidy at a later date. In addition, the City has cash on hand for Senior Events ($21,848) and Cesar Chavez/Cinco de Mayo/Hispanic Heritage Events ($15,446). The City Council can determine how the cash on hand should be allocated to those particular events at a later date.
SMP 10.4 titled “Acceptance of Cash Donations or Other Gifts Made to or for the City” was issued in 1974. Staff will return to City Council with a proposal to update the policy to be consistent with government accounting principles related to donations.
Staff Reorganization
The City has been considering reorganization options since 2012. The Council has directed staff to complete the reorganization as part of this budget. The process has involved numerous meetings with the Council Subcommittee, department directors, bargaining unit representatives and affected employees.
The goals of the reorganization have been to increase efficiencies, manage the loss of $30 million dollars annually in redevelopment agency revenues and address the general fund subsidy of our housing programs related to the Community Development Block Grant Program. By interviewing affected employee in these programs, management was able to determine where their particular skills might better serve the organization.
The City currently has 266 full-time employees and has reached minimum staffing levels. The Council Subcommittee discussed adding additional full-time staff to address park maintenance issues. The City Manager and the Public Works Director are currently addressing this issue and will return to the Council with a recommendation in the near future.
Public Works. The Director of Public Works recommends the elimination of three (3) vacant positions: Water Quality Administrator, an Equipment Mechanic II position and a Typist Clerk II. It is recommended a vacant Senior Civil Engineer position be downgraded to Associate Civil Engineer and a Senior Construction Inspector position be downgraded to Construction Inspector. It is also recommended that three positions be reallocated including a Senior Engineering Technician to an Associate Civil Engineer, an Equipment Mechanic II to a Sr. Equipment Mechanic, and an Administrative Analyst to Principal Administrative Analyst. A Senior Clerk position would be reclassified to an Account Clerk.
It is recommended three new positions be approved including an Associate Civil Engineer, a part-time Equipment Service Worker and a Student Intern III.
Human Resources. The changes in the Human Resources Department include reallocating a vacant Senior Clerk position to a Human Resources Specialist and reallocating one vacant Senior Human Resources Specialist position to a Human Resources Specialist position.
Community Development. The Director of Community Development recommends reorganization changes which include elimination of two (2) positions including the classification of Business Development Manager and one Senior Clerk position. It is proposed that a position be reallocated from Redevelopment Project Analyst to Redevelopment Project Manager and the duties required of the position be expanded. Funds for an eliminated position of Senior Clerk will be used to fund the Planning Technician I position.
Over the next year the Director of Community Development will continue to review staffing needs and additional recommendations will be provided during next year’s budget review process.
City Clerk. On June 9, 2016, the City Council approved funding for a Records Management Coordinator and part-time clerical support.
City Manager. The City Manager proposes to reallocate a Principal Administrative Analyst classification to a new classification of Assistant to the City Manager. The job description and salary recommendation for this proposed position has not yet been developed.
This reallocation is being recommended to provide a career path and maintain continuity within the City Manager’s office.
Community Services. Two Account Clerk positions will be reclassified to Senior Account Clerk II, which is not reflected in the attachment. This was a recommendation approved by the Council Committee prior to Mr. Farfsing starting as the City Manager.
Capital Asset Purchases
Early in the budget process, Departments were asked to provide recommendations for capital asset purchases. Not surprisingly, due to the budget deficit, requests were very modest. The following high-priority recommended purchases are included in the draft budget.
• Fuel Efficient PB Loader Truck ($350,000), funded with $150,000 of Air Quality revenue and $200,000 of anticipated Public Works expenditure savings from FY15-16.
• Three fuel-efficient automobiles ($57,975) for the new parking enforcement officers, funded from the Air Quality Fund.
• Emergency Operations Center communications back-up system $30,000, funded from the General Fund.
• Corporate Yard Generator ($50,000) to provide emergency back-up power, funded from the Capital Asset Replacement Fund.
V. FISCAL IMPACT
If the City Council adopts the proposed resolution, the FY16-17 budget will reduce the General Fund balance by $1,484,495, to an estimated $22,915,419. Any General Fund subsidy for Special Events will further reduce the estimated General Fund balance.
VI. EXHIBITS
A - Resolution No. 16-081, A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARSON ADOPTING THE FISCAL YEAR 2016-17 BUDGET IN THE GENERAL FUND AND SPECIAL REVENUE FUNDS (pages 9-11)
B - Summary of Funds (page 12)
C - Proposed Budget by General Fund Program and Special Revenue Fund (pages 13-43)
D - City Council Budget Program (page 44)
E - List of Special Events (page 45)
F - Staff Reorganization Summary (pages 46)
Prepared by: Kathryn Downs, Director of Finance