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HomeMy WebLinkAbout101-Proposed FY 2010/11 Operating & Capital Budget Report.pdf SARATOGA CITY COUNCIL MEETING DATE: May 19, 2010 AGENDA ITEM: DEPARTMENT: Finance & Admin Services CITY MANAGER: Dave Anderson PREPARED BY: Mary Furey DIRECTOR: Mary Furey SUBJECT: Fiscal Year 2010/11 Proposed Operating & Capital Budget Public Hearing RECOMMENDED ACTION Conduct a public hearing on the proposed FY 2010/11 Operating & Capital Budget, and provide direction to staff for budget adoption on June 2, 2010. REPORT SUMMARY The FY 2010/11 Proposed Operating & Capital Budget is presented to Council for review and consideration. This staff report will provide Council with a short overview of the budget challenges and proposed strategies for balancing the operating and capital budgets. The City Manager’s transmittal letter in the proposed budget document provides an executive summary of the General Fund’s budget challenges the city is facing, the proposal to balance the FY 2010/11 Operating Budget, and Capital Budget Highlights, all within the context of Council Priorities. Summary financial overviews are provided in the proposed Operating & Capital Budget’s Financial Summaries section, and detailed program and project level budgets are provided in both the operating and capital budget sections. REPORT DISCUSSION: Budget Challenges - As a result of the financial market turmoil starting in September of 2008, and intensifying throughout 2009, housing and retail markets across the country declined at a rapid pace. Due to the financial strength in the Saratoga community, impacts were slower to hit, but they did arrive. The weakening economy affected both our neighboring cities and our own with declines in retail and restaurant sales, in job losses and housing foreclosures. Property values dropped considerably, which impacted Saratoga’s property tax revenues through decreases in taxable property values and through decreases in transfer taxes as people held onto their properties rather than sell at a market low. Like most other cities, Saratoga’s development and building fees dropped sharply due to the inability to obtain credit for construction work. Fortunately, housing prices in Saratoga were not as severely impacted as in other cities, and foreclosures were less likely to occur as residents have greater financial stability. However, it became clear that with the drop in property values, homeowners were holding off on home improvements and that new development projects would see a severe drop in activity for the near future. We also saw sharp drops in program enrollment for recreation activities and interest income, adding to the City’s overall revenue decline. General Fund Forecast – In the January 2010 Council Retreat, staff presented Council with a five-year forecast which illustrated revenue declines in the prior and current fiscal year. The forecast projected a flattening of revenues across the board for the next several years, while expenses were expected to continue to rise under a status quo perspective – meaning staffing levels and operating expenditures were projected out at current levels, without cutbacks or allowance for growth due to new demands. Forecasts provide an estimated projection under currently adopted fiscal conditions, to identify if changes are needed. The end result indicated that the City was in a difficult financial period, with estimated revenues not supporting estimated expenditures, and that changes were needed to both balance the current year and the upcoming budget. A mid-year budget adjustment was brought to Council in February to adjust the FY 2009/10 budget to correct revenues and expenditure budget levels. Budget Development - A subsequent Budget Study Session was held during the Spring to review proposed balancing options with the Council, which included budgeting additional revenues through interfund transfers and use of grant funds, and reductions in staffing and operational costs. Armed with the understanding from the five-year forecast projection that fiscal course correction would be required, the development of the FY 2010/11 budget began with acknowledging that most of the revenue declines were of a cyclical nature, not structural. This is fundamentally due to the City’s organization as a minimal services city. Operating without enhanced public safety and social services embedded in the City structure, Saratoga is in a better position than many of its neighboring cities. Therefore, it was understood that the use of short term and one-time balancing mechanisms would be appropriate in order to maintain the City’s service levels through this downturn. It was also understood that the economy is not expected to rebound quickly, therefore Council and staff expect the probability of being faced with budget development struggles again next year. Budget Strategies - To address the General Fund’s budgetary gap, prior year reductions were maintained, and additional cuts were made to items mostly relating to operations, such as office supplies, legal publications, bank, and credit card fees. External services such as noticing and financial services, records management and traffic consultant services were reduced. The City also eliminated most organizational and staff development training costs, with exceptions for required trainings, certifications and licenses. Some of the proposed budget reductions require changes in the way staff has operated in the past. Legal Public Notices published in the local newspaper are expensive, and while customary, will be eliminated if a published notification is not legally required by statute. The City’s website is being utilized and accessed more and more for public notification. Bank service fees were reduced by eliminating some of the services and renegotiating others. In past years, more than $40,000 in credit card fees were absorbed annually by the City. Fees will now be shifted back to the credit card user through the use of a “convenience fee”. The Saratogan Newsletter publication will also see a change. The cost to print the 4 page newsletter and mail it to the community 4 times a year cost the City about $25,000 annually. The newsletter will now be incorporated into the Recreation Guide in order to reduce publication costs to about $3,000 per year. Other savings to the General Fund came through shifting road maintenance expenses and unscheduled traffic signal repairs to the Capital Budget. These costs will be paid for under the Street Repair and Resurfacing Project as they can be attributed to maintaining and prolonging the life of City roadways. Expenses within the Internal Service Funds were ratcheted down which allowed for charge-backs to the General Fund to be reduced by $73,500. This includes extending Vehicle and Equipment Replacement schedules, reductions in vehicle usage costs, and underfunding budgeted expenditures as costs often come in under budget. Most funds have balances available to offset the budgeted shortfalls. Budgeted salary costs were reduced as a result of several voluntary actions by staff: six staff members are taking FTE reductions; the City Manager’s will decline his annual raise and cost-of-living increase; and management will forgo their auto allowances this fiscal year. Overtime was eliminated for all staff outside of the Public Works crew and the Code Compliance Officer. In addition, temporary staff hours were reduced, and there will be a mandatory 3 day furlough for full time staff. All told, these budget reductions will save more than $211,000 in the General Fund this fiscal year. Revenue increases will come from several grant funded capital projects that will provide approximately $140,000 in reimbursements back to the General Fund for staff time spent on grant project. Four Internal Service Funds will transfer $25,000 each back to the General Fund for added relief. These two funding mechanisms will contribute $240,000 toward the budget shortfall. Details of the General Fund’s budget balancing proposal are shown in the schedule below. Additional Revenues: Grant funded capital project reimbursement for staff time 140,000$ Internal Service Fund transfers to General Fund 100,000$ Total Additional Revenue:240,000$ Salary Reductions: Eliminate City Manager raise $ 11,700 Voluntary employee partial FTE reductions 83,100 Temporary Staff reductions 20,700 3 days furlough (27 hours) for full-time staff 60,500 Eliminate auto allowance for City Manager & Department Heads 27,360 Eliminate overtime (except Public Works & Code Enforcement) 8,000 $ 211,360 Operating Expenditure Reductions: Reduce Council’s meeting budget $ 3,000 Publish Saratogan in recreation activity guide 23,000 Reduce legal public notices 2,000 Eliminate employee recruitment expenses 7,650 Reduce organizational training 2,000 Reduce bank fees and financial services 16,200 Reduce fees to process credit card payments for city services 30,000 Finalize development deposits 25,000 Reduce records management services 15,000 Move unscheduled traffic signal repairs to capital budget 25,000 Move road shoulder maintenance to capital budget 20,000 Reduce Traffic Consultant expenses 40,000 Reduce meeting and training expenses 8,900 Reduce office supplies/miscellaneous materials 12,500 $ 230,250 $ 73,500 Total General Fund Expenditure Reductions:755,110$ FY 2010/11 GENERAL FUND - BUDGET BALANCING PROPOSALS Internal Service Fund Chargeback Reductions: Total Operating Expenditure Reductions Total Salary Reductions Summary Budget Information Through effective budgetary planning and practices, the General Fund budget will maintain public safety services, street and park maintenance, city landscaping and lighting, general and development engineering services, recreation classes and camps, facility maintenance, website and commission support, development and building services, city management, financial and administration services, and general internal support services at near the same service levels as the prior year. However, there will be impacts as a result of staffing reductions, particularly in the City Manager’s Office. The Proposed FY 2010/11 General Fund’s Total Sources and Uses activities are summarized in the schedule below, leaving a net balance of $4,576. The small, but positive, Net Operations balance is based on conservative revenue estimates which align with current year’s estimated receipts, and a very stringent expenditure budget based on maintaining services at current levels, without room for contingencies or surprises. Because of the fragility of these budget assumptions, excess undesignated funding remains in the General Fund’s Undesignated Fund Balance to provide flexibility if needed and approved by Council. General Fund Sources Operating Revenues 15,035,454$ Operating Transfers In 249,550 Development Reserve 210,000 Environmental Program Reserves 50,000 Capital Projects Reserve 453,017 Total General Fund Sources 15,998,021$ General Fund Uses Operating Expenditures 15,440,428 Operating Transfers Out 553,017 Total General Fund Uses 15,993,445$ Net Operations 4,576$ FY 2010/11 General Fund Operations The Capital Improvement Plan’s FY 2010/11 Budget maintained capital projects at established policy levels. The Street Program’s projects were funded through several sources. Prior year funding was held for several ministerial projects ($50,000 each for Sidewalk Repairs, Storm Drain Repairs, and Roadway Safety & Traffic Calming Projects). Another $1.2 million is ongoing direct funding comes from Gas Tax, Prop 142/TCR Allocations, and Road Impact Fees. Additional funding come from grants and General Fund transfers. The Parks & Trails Program receives direct funding for new projects from Park- in-Lieu funding, tree fines, grants, as well as General Fund and ABAG transfers. The Facility and Administrative Improvement Programs depend on General Fund transfers to provide funding for projects. A summary of the FY 2010/11 Capital Budget funding by Program is provided below: Expenditure Capital Improvement Plan Programs Budget Streets Program 6,605,289$ Parks & Trails Program 3,146,220 Facility Improvement Program 1,153,969 Administrative Improvement Program 219,773 Total FY 2010/11 Capital Project Budget 11,125,251$ FY 2010/11 Proposed Operating and Capital Budget Financial Summaries for the General and All Fund are in the Operating and Capital Budget document on pages B–1 through B–34, and will be reviewed in the Public Hearing. Additional Capital Budget summaries are location in the Capital Program sections. REPORT CONCLUSION The Proposed Operating Budget for Fiscal Year 2010/11 represents a continued focus on core city services, consistent with prior year operations and Council Priorities. The Capital Improvement Plan is now integrated into the budget document to present ongoing Street, Park & Trail, Facility, and Administrative project information, and identifying new and carry forward funding. Staff will present an overview of the Proposed FY 2010/11 Operating & Capital Budget as part of the Public Hearing. Any changes to the proposed budget as directed by Council and/or identified by staff as a clean-up item will be included for Council consideration in the resolution adopting the budget at the following Council meeting to be held June 2, 2010. CONSEQUENCES OF NOT FOLLOWING RECOMMENDED ACTION The City would postpone adopting an Operating and Capital Budget for FY 2010/11. ALTERNATIVE ACTION N/A FOLLOW UP ACTION Proposed budget amended with Council direction to be brought back to Council on June 2, 2010. ADVERTISING, NOTICING AND PUBLIC CONTACT Public Hearing notification published in the Saratoga Weekly on May 4, 2010 ATTACHMENTS FY 2010/11 Operating & Capital Summary Budget Document in electronic format.