Report to Mayor and City Council
Tuesday, April 17, 2018
Discussion
SUBJECT:
Title
FISCAL YEAR 2018-19 BUDGET WORKSHOP #2 (CITY COUNCIL)
Body
I. SUMMARY
This is the 2nd of 3 planned budget workshops before considering adoption of the FY18-19 budget in June 2018. Due to the new Oil Industry Business License tax, the General Fund deficit has been reduced to $1.5 million or 1.7% of annual revenue. However, there are a number of items that have not yet been included in the budget, pending direction from City Council. The most notable of these items include restoration of Sheriff Contract service units, a further release of the hiring freeze, and City Events.
This report includes a first look at the 2018 Capital Improvement Plan. The highest priority projects have been matched with available restricted funding sources, for a balanced mix of roadway and park projects. There is no General Fund money in the draft budget for capital projects. Funding for capital projects continues to be insufficient, with many quantified projects remaining on the “Unfunded” list.
II. RECOMMENDATION
Recommendation
1. PROVIDE additional direction to staff regarding the draft FY18-19 budget.
2. DISCUSS and DETERMINE whether the City should add Rosa Parks Day to the list of City Holidays.
3. CONSIDER scheduling a dedicated budget workshop date in May. The 3rd budget workshop is currently scheduled for the regular City Council meeting on May 15th.
Body
III. ALTERNATIVES
TAKE another action deemed appropriate by City Council.
IV. BACKGROUND
On March 20, 2018, the City Council conducted its first budget workshop for Fiscal Year 2018-19 (FY18-19). Tonight is the 2nd of 3 planned budget workshops prior to the public hearing to consider adoption of the FY18-19 budget, currently scheduled for June 5, 2018.
The purpose of tonight’s workshop is for the City Council to receive, discuss and provide direction for the draft FY18-19 budget. The following documents have been attached to this report.
A. Draft 2018 Five-Year Financial Model (Model), including the draft FY18-19 budget for the General Fund, all Special Revenue funds, the Housing Authority and the Successor Agency.
B. Draft 2018 Five-Year Capital Improvement Plan (CIP) “Funded” Project List.
C. Draft 2018 Capital Improvement Plan “Unfunded” Project List.
D. 2018 Calendar of City Holidays.
E. FY17-18 List of City Events.
The Model (see Exhibit A) is a mid-term tool that uses the existing or proposed budget structure and predicts activity for the next 5 years, including the impacts on fund balances. The Model includes the proposed FY18-19 budget, which will continue to be updated until the public hearing in June. The current version of the draft General Fund budget has deficit activity of $1.5 million or 1.7% of estimated General Fund Revenue.
The Model indicates the General Fund balance will fall to $10.7 million by FY22-23 if no further changes are made to the draft budget structure. The General Fund balance may fall below the policy threshold of 20% of annual budgeted expenditures during FY20-21. Assumptions used in the Model are outlined towards the end of this report. As a reminder, the FY17-18 revenue estimate includes the non-recurring sale of land for $4.5 million.
The draft 2018 Five-Year Capital Improvement Plan (CIP) has been incorporated into the Model; and includes the use of restricted money totaling $23.5 million to fund capital improvement projects over the next five years (an average of $4.7 million per year). The highest priority projects were matched with available funding sources (see Exhibit B). The CIP is a living document; which is updated as new information becomes available, and priorities or funding sources change.
The City has quantified an additional $78.3 million of specific projects that do not have an identified funding source (see Exhibit C). Of that amount, $15.5 million are high priority. The following infrastructure needs have not been quantified into specific projects, and have not been included on the “Unfunded” list.
• The Pavement Management System recommendation to spend $8 million annually to maintain the overall condition of the City’s streets (or $9 million to gradually improve the overall condition).
• The full scope of sidewalk improvements recently estimated at $11.46 million.
• Recommended storm drain improvements of $8 million annually to comply with Los Angeles Regional Water Quality Board requirements.
• The full scope of ADA improvements and building improvements that are needed to ensure the safety of the public and staff.
Draft General Fund Budget
At the March 20th workshop, staff reported that the draft FY18-19 General Fund budget may be a deficit of roughly $3.7 million. This was an early estimate before draft department budgets were thoroughly vetted. The draft deficit of $3.7 million included the following noteworthy items.
1. An early conservative estimate of $3.2 million of revenue for the new Oil Industry Business License tax.
2. Proceeds of $1.5 million for sale of surplus property.
3. An increase of the employee pension contribution to the California Public Employees Retirement System (CalPERS) in the amount of $903,941.
4. An assumption that more employees will retire, and the City’s cost of retiree health insurance will increase by $182,805. No withdrawal or contribution to the Section 115 Trust for retired employee health insurance has been included in the draft FY18-19 budget.
5. No salary or wage increase assumption.
6. An increase to the Sheriff contract of $560,217 or 3.0%, based upon information provided by the Los Angeles County Sheriff’s Department.
During the March 20th budget workshop, City Council provided initial direction to staff. The draft FY18-19 budget has been updated to include the following.
1. An allocation of $106,000 for the Public Safety Specialist position, which has previously been subject to the hiring freeze.
2. A fourth Parking Control Officer with a cost of $79,000 and the corresponding fine revenue of $350,000.
3. The $100,000 expenditure and corresponding $100,000 fee revenue for a hazardous materials inspection program.
4. An allocation of $100,000 for Oil Industry Business License tax audits. If a business is found to have underpaid its tax by 2% or more, the business will bear the cost of the audit.
5. Social Media consulting of $60,000.
6. A $12,000 upgrade of the Carson Report/Community Services Guide. Community Services staff is working with the City Attorney’s Office on recommendations related to an advertisement policy. Staff recommends an alternative approach to produce a high-quality document for online consumption, and reducing the number of printed copies to fit within the existing budget.
In addition to the direction received on March 20th, the following updates were made to the draft FY18-19 budget.
1. The early estimate of Oil Industry Business License tax has been increased from $3.2 million to $4.7 million.
2. A $160,000 allocation for a Landscape & Building Maintenance Superintendent has been included in the draft budget. The last employee to fill the position separated from the City in October 2013.
3. Due to the storm drain project at Carriage Crest Park, the location will be closed to the public for 2 years. Seasonal part-time staff and the operating budget for the park have been removed from the draft budget.
7. A funding transfer of $600,000 for Capital Asset Replacement has been included in the General Fund budget; to pay for vehicle replacement and security cameras at City Hall, the Community Center, the Corporate Yard, Veterans Park, Carson Park, Scott Park, and Dominguez Park. City Council had asked whether County Park District Measure A money could be used for the cameras. The FY17-18 budget included an appropriation for the Scott Park Pool rehabilitation project using the first year of voter-renewed Measure A revenue. Staff recently discovered the first year of revenue will be distributed in FY18-19; and therefore, no Measure A will be available for security cameras during FY18-19, as the first allocation of Measure A money will be used for the Scott Park Pool.
Employee Compensation
The City is currently in labor negotiations with the employee bargaining groups. At this time, no funding has been included in the draft budget for salary and wage increases. The City’s total costs related to employee compensation will grow by roughly 2.8% for assumed increases in retiree health insurance ($182,805) and actual increases to the employee pension contribution ($903,941).
For every 1% increase to salaries and wages, the additional fiscal impact is approximately $269,000, with $246,000 charged to the General Fund and $23,000 charged to restricted funds.
At the March 20th workshop, the Public Works Director requested a release of the hiring freeze for all Public Works positions; and orally indicated that the highest priority positions included 1 Heavy Equipment Operator, 2 Custodians, 2 Assistant Maintenance Workers, and 2 Assistant Groundsworkers. The cost of these 7 high priority positions is approximately $557,000; which has not yet been included in the draft budget. Staff is in process of reconciling the filled/vacant and funded/unfunded positions in Public Works. Once the reconciliation is complete, the recommendation will be updated with the next iteration of the draft budget on May 15th. The request to release the hiring freeze for Public Works is based upon the backlog of maintenance requests; and the expected increase of maintenance requests once the public has access to the City’s work order system.
Sheriff Contract
To help reduce the budget deficit in FY16-17, the Sheriff contract was reduced by 2 Detective units for savings of $535,000. For FY17-18, the Sheriff contract was further reduced by a Sergeant supervising the Park Enforcement Team for a savings of $226,000. Sheriff activity in Carson has been increasing due to more traffic collisions, more calls for service, an increase in outreach efforts to the homeless, and overall population growth.
For the FY18-19 budget, Captain Skeen recommends restoring supervision of the Park Enforcement Team with a Special Area Lieutenant at a cost of approximately $278,000. The Lieutenant would be available and able to assist with management of the station and public engagement. Adding a Lieutenant would help to reduce the disparity of management when comparing the Carson station with other Sheriff stations.
Based upon the increase of traffic collisions and other traffic enforcement needs, Captain Skeen further recommends the replacement of the 2 Detective positions with Traffic Enforcement units (one Motor unit at approximately $308,000 and one Regular unit at approximately $321,000). At a minimum, the Captain highly recommends one Motor unit at this time. Presumably, traffic enforcement fine revenue would increase with an additional unit. Contract cities receive roughly 80% of traffic fine revenue from the Superior Court. Our Sheriff contract currently includes 2 Motor units, and our annual traffic fine revenue is about $380,000. Therefore, one additional Traffic Enforcement Motor unit has the potential to generate another $190,000 of annual revenue, or approximately 62% of the cost of the unit.
Consideration of a Rosa Parks Holiday
Councilwoman Davis-Holmes requested that staff bring forward a proposal to add a day to the City’s holiday schedule in recognition of Rosa Parks, whose birthday was February 4th. The City traditionally recognizes February as African American History Month.
The States of California and Missouri commemorate Rosa Parks Day on her birthday; while the states of Ohio and Oregon commemorate the occasion on the anniversary of the day she was arrested (December 1st). Rosa Parks Day is an observance and not a public holiday in the United States. Traditionally, on this day, representatives of many organizations gather to commemorate the woman who fought for the rights of citizens and the end of racial discrimination.
There are at least 3 costs associated with adding a City-observed holiday.
1. Out-of-pocket costs for overtime and part-time employee compensation.
a. Public Works would need 20 part-time staff to cover critical facilities maintenance in-lieu of full-time staff at a cost of approximately $3,000 for 1 day.
b. The overtime and part-time cost for Community Center staffing is approximately $1,820 for 1 day.
c. Parks would remain open and staffed by part-time employees as usual, with no additional out-of-pocket cost.
2. Reduced productivity from full-time staff; which is not easily quantified. However, the daily cost of the City’s full-time staff is approximately $155,000.
3. Reduced service to the public; which cannot be quantified.
A calendar of City Holidays has been attached to this report (see Exhibit D).
Special Events
On March 20th the City Council was provided with the list of FY17-18 City Events see Exhibit E). The Mayor asked each Council Member to provide 5 suggestions for combining events or reducing event funding. Funding for City Events has not yet been included in the draft FY18-19 budget, pending direction from City Council.
The Carson Community Foundation has committed to funding a total of $45,250 for the following City events.
|
Youth Conference $5,000 |
Ms. Carson Pageant $5,000 |
Veterans Day Celebration $2,500 |
|
Cinco de Mayo $5,000 |
Juneteenth Celebration $7,375 |
Filipino Independence Day $7,375 |
|
Jazz Festival $7,500 |
Women’s Conference $5,000 |
Why I Like Carson Essay Contest $2,500 |
The Andeavor refinery has committed $25,000 to the Sheriff’s Foundation, to fund the Block Captain BBQ in August. Public Safety staff requests a City contribution of $10,000 for staff time, supplies and equipment rental; which has not yet been included in the draft budget.
The following additional information has been provided by staff for the essay contests.
• The “Why I Like Carson” essay contest began in 1996 with a purpose to foster community pride among Carson’s youth. Twenty-two schools participate and hundreds of essays are received each year. The participating schools use the program to meet one of two mandated state writing requirements. The essays are judged blind to ensure there is no favoritism. As the Foundation only committed $2,500 to the contest, staff requests the City provide a matching contribution of $2,500; to ensure the event is fully funded at $5,000.
• The “Why I Am a Rising Star” essay contest began a couple years ago. Students are asked to write about how they have overcome an adversity. Essays are judged by the Human Relations Commission.
In addition to the list provided on March 20th, the City Council may consider funding the following events:
• 50th Anniversary Winterfest $8,000;
• 50th Anniversary Volunteer Recognition (amount would be based on scope of event); and/or
• White Linen Event scheduled for July 21, 2018.
Sister City Soka, Japan
The City’s elected officials have been invited to Carson’s sister city Soka, Japan to celebrate its 60th anniversary. The City would pay for each Elected Official’s airline ticket; and the Elected Officials would pay for airline tickets for their guests. In addition, there is a request for the City to pay for 1 staff member to travel with the City Council. Soka, Japan will pay for accommodations, meals and entertainment once the Carson delegation arrives. Each airline ticket may cost $1,200-$1,400. The City Council may choose to use each Councilmember’s $5,000 discretionary budget allocation for the ticket purchases; or the City Council may budget separately for the expenditure. Based on responses from the elected officials, the City may need to pay for 7 tickets. If the City Council chooses to budget separately for this item, staff recommends an allocation of $10,000.
2019 Rose Parade
The City Council requested a summary of the costs related to the 2018 Rose Parade (see Exhibit F). The Carson Community Foundation raised dedicated donations of $230,000 for the event, and had total expenses of $295,812; with the remaining $65,812 of expenses paid from general unrestricted donations. The City collected dedicated revenues of $3,255 and had overtime and part-time employee compensation of $24,603, for a net cost of $21,348 to the General Fund.
The Carson Community Foundation paid the $5,500 entry fee for the 2019 Rose Parade and the application has been approved. A 2019 estimate of $16,250 for staff time and volunteer snacks has not yet been included in the draft budget.
Cultural Arts Contracts
The following organizations received FY17-18 Cultural Arts contracts totaling $85,550:
1. Sophisticated Dance $15,300;
2. Monteclaro Cultural & Community Medicine Foundation $13,900;
3. Mariachi Academy of Carson $12,500;
4. Rockin Blues Entertainment $11,600;
5. International Printing Museum $9,750;
6. CSUDH Art Gallery $7,500;
7. C2R Productions $7,500; and
8. Alexey Steele $7,500.
On March 20th, staff recommended the City Council consider moving forward with cooperative agreements for the exchange of services instead of cash contributions. The City could provide meeting space, advertisement, and registration services. The organizations provide cultural activities and education to the City’s residents. Both the International Printing Museum and C2R Productions travel to provide programs, and do not require meeting space or registration services. Both Alexey Steele and CSUDH have art galleries and do not require meeting space or registration services. Sophisticated Dance and the Mariachi Academy are currently provided with rent-free space in the Community Center based upon prior City Council action. The potential revenue for this space is $70,488 per year based upon 100% occupancy.
Staff continues to recommend no cash contributions for FY18-19; and is negotiating new terms with each organization.
Stroke Center
During the March 20th workshop, City Council requested more information for the Stroke Center.
Staff was able to confirm that Prologis made a one-time donation of $6,000 to the Carson Community Foundation, which was transferred to the City to pay for 3 months of non-resident attendance at the Stroke Center. Prologis has not committed to any further support for the Stroke Center. The draft FY18-19 budget for the Stroke Center is $225,531. Due to establishment of the non-resident participation fee, non-resident attendance decreased in November and December 2017, as illustrated below.
|
|
Jul-Oct 2017 |
Nov-Dec 2017 |
Jan-Mar 2018 |
|
Resident Clients |
31 |
22 |
26 |
|
Resident Caregivers |
13 |
10 |
11 |
|
Non-Resident Clients |
37 |
16 |
25 |
|
Non-Resident Caregivers |
18 |
11 |
14 |
Based upon current participation levels, the draft FY18-19 budget is approximately $4,400 per client.
Senior Assisted Living
During the March 20th workshop, City Council requested more information for the Senior Assisted Living program.
Staff verified that Medicare will not pay for the City’s Senior Assisted Living services. If a senior qualifies for Medi-Cal, then Los Angeles County will provide in-home services. The full capacity of the City’s program is 60 senior clients receiving services from 5 part-time Geriatric Aides. With the ongoing budget deficit, the City suspended adding any new seniors to the program. Currently, 40 senior clients are receiving services from 3 part-time Geriatric Aides. The draft FY18-19 budget is $236,765.
Based upon current participation levels, the draft FY18-19 budget is approximately $5,919 per client.
Five-Year Model Assumptions
For most revenues and expenditures in the Model, staff has used the California Department of Finance forecast of Los Angeles-area CPI increases.
Staff has assumed that both property tax revenue and the cost of the Sheriff Contract will grow by 3.0% annually.
According to the Investment Report from the City Treasurer as of February 28, 2018, the yield to maturity for the City’s investment portfolio is 1.615%. Using this as a starting point, and applying the forecast of short and mid-term treasury yields from the White House Office of Management and Budget, staff has assumed the following investment yields in the Model.
No additional Community Benefits payments from the Andeavor refinery have been included in the Model, as the next payments are tied to completion of milestones outlined in the Agreement. Due to litigation between an environmental group and Andeavor, the timing of those milestones is unknown at this time.
Additional sales tax revenue has been included in the Model beginning in FY20-21 based upon an expectation that the fashion outlet mall at the 157-acre development will be open for business.
FY18-19 CIP Funding
Estimated restricted FY18-19 revenue is sufficient to fund the following capital projects.
Traffic Signals
The following traffic signal projects have been identified and included in the CIP.
Outstanding Items
Public Works staff is currently working on a more refined estimate for permanent outdoor decorative lighting for the Community Center.
Community Services staff is currently working on a report outlining the pros/cons and cost of contracting out for youth sports officials.
The draft budget includes funding for 100 Summer Youth. The City Council had inquired about increasing the draft budget to fund 200 Summer Youth. Staff does not recommend the increased funding level, as the City does not have sufficient facilities or supervision to place 200 participants. Staff is inquiring with the Workforce Investment Board to determine if the additional youth can be placed at local businesses.
Staff is in process of scheduling a meeting with Spectrum to find out more about the City’s options for providing Wi-Fi in the City’s parks.
Model Results for Special Revenue Funds
The Model includes the draft FY18-19 and five-year outlook for all Special Revenue (restricted) funds of the City, including the Housing Authority and Successor Agency. The following is a summary of the noteworthy results.
• The current award of the Family Support Grant ends December 2019. The draft FY18-19 budget includes $50,256 of employee compensation paid with this grant.
• Community Development Block Grant (CDBG) revenue of $1.1 million has been included in the Model. It should be noted federally funded programs are at risk, and the City’s CDBG entitlement pays for improvements in the community as well as more than $280,000 of employee compensation. The Model includes $250,000 of annual CDBG funding for ADA improvements and sidewalk improvements. If that level of project funding is adopted, the CDBG program may not be able to afford Commercial Rehab projects after FY19-20.
• An annual General Fund transfer of $600,000 has been included to fund capital asset replacement. Notable expenditures include vehicle replacements and security cameras.
• There may be $2.8 million of available bond proceeds remaining. Staff will review qualifying projects and make recommendations with the next iteration of the budget.
Next Steps
The 3rd and final budget workshop is scheduled for May 15th. Staff expects to present a more refined Model, an updated draft budget, the draft 2018 Capital Improvement Plan, and potential recommendations from the Measure C Citizens Oversight Committee. Staff is concerned that the next workshop, scheduled for a regular City Council meeting, will not provide the City Council with sufficient time to discuss all the information and provide direction to staff. Therefore, staff recommends the City Council consider scheduling a dedicated date in mid-to-late May to conduct the final budget workshop.
V. FISCAL IMPACT
None associated with this staff report. The draft FY18-19 General Fund budget currently stands at a deficit of approximately $1.5 million or 1.7% of annual General Fund revenue. The following summarizes the potential draft budget for the General Fund if items discussed in this report are added.
Does not include 50th Anniversary Volunteer Recognition, which has not yet been quantified
VI. EXHIBITS
A. Draft 2018 Five-Year Financial Model (pages 14-64)
B. Draft 2018 Capital Improvement Plan “Funded” List (page 65)
C. Draft 2018 Capital Improvement Plan “Unfunded” List (pages 66-70)
D. 2018 Calendar of City Holidays (page 71)
E. FY17-18 City Events (page 72)
F. Summary of 2018 Rose Parade Costs (page 73)
Prepared by: Kathryn Downs, Director of Finance