HomeMy WebLinkAbout0016_1_Operating Budget FY 2016-17 - SR
REPORT TO CITY COUNCIL
To: Honorable Mayor and Members of the City Council
From: Grant Yates, City Manager
Prepared by: Jason Simpson, Director of Administrative Services
Date: May 31, 2016
Subject: Adoption of the FY 2016-17 Annual Operating Budget
Recommendations:
That the City Council:
1. Adopt a resolution entitled:
RESOLUTION NO. 2016-
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LAKE
ELSINORE, CALIFORNIA, ADOPTING THE FY 2016-17 ANNUAL
OPERATING BUDGET AND ESTABLISHING THE CONTROLS ON
CHANGES IN THE APPROPRIATIONS
2. Adopt a resolution entitled:
RESOLUTION NO. 2016-
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LAKE
ELSINORE, CALIFORNIA, REVISING THE SCHEDULE OF
AUTHORIZED POSITIONS
3. Adopt a resolution entitled:
RESOLUTION NO. 2016-
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LAKE
ELSINORE, CALIFORNIA, ESTABLISHING THE APPROPRIATIONS
LIMIT FOR FY 2016-17 AND SELECTING THE POPULATION AND
INFLATION FACTOR ACCORDINGLY
Adoption of the FY 2016-17 Annual Operating Budget
May 31, 2016
Page 2
Background
Attached for your review is the Proposed FY 2016-17 Annual Operating Budget. The budget
includes revenue projections and expenditure requests for the General Fund, Special Revenue
Funds, Capital Project Funds and Agency Funds. Also presented with this report is the fiscal
year 2016-17 proposed authorized position schedule and the FY 2015-16 accomplishments,
major goals for FY 2016-17 and performance measures related to each department.
The budget subcommittee has met and reviewed and discussed the FY2016-17 Annual Operating
Budget On May 31, 2016, the City Council held a workshop to review and discuss the proposed
operating budgets and the City’s Capital Improvement Plan. Any recommended changes have
not yet been incorporated into this budget, but can be made my motion of the City Council (this
evening) when approving the Resolution to adopt the FY2016-17 Annual Operating Budget.
Discussion
Current Condition - State of California – May 2016 Revision Budget
In May 2016, the Governor presented his May Budget Revision to the proposed budget released
in January of this year. Significant details of the May Revision are as follows:
The Challenge of Fiscal Balance
The May Revision revenue forecast has been reduced by $1.9 billion, reflecting poor April
income tax receipts and more sluggish sales tax receipts than expected, while Proposition
2's required contributions have been reduced by a combined $1.6 billion. Even if the voters
pass an extension of taxes, the longer-term budget outlook would be barely balanced.
Until the voters decide in November whether temporary taxes should be extended, the
May Revision reflects the principle that no significant new ongoing spending commitments
should be made.
Investing in Education
Under the May Revision, the minimum guarantee of funding for K-14 schools is expected
to grow to $71.9 billion in 2016-17, an increase of $24.6 billion over the last five years (52
percent). For K-12 schools, funding levels will increase by over $3,600 per student in 2016-
17 compared to 2011-12 levels. This reinvestment provides the opportunity to correct
historical inequities in school district funding with continued implementation of the Local
Control Funding Formula. The May Revision provides $2.9 billion in new funding, bringing
the formula's implementation to nearly 96 percent complete.
The Budget also invests in the state's higher education system to maintain the quality and
affordability of one of California's greatest strengths. The Budget keeps tuition at 2011-12
levels and commits $25 million in new one-time funding for the California State University
to reduce the time it takes a student to successfully complete a degree.
Reducing Housing Costs
Approximately 1.5 million low-income California households pay more than half their
income in rent, straining their ability to pay for other essential household expenses. In
addition, the state has a disproportionately high share of the nation's homeless and
chronically homeless populations. The May Revision reflects $3.2 billion in state and
Adoption of the FY 2016-17 Annual Operating Budget
May 31, 2016
Page 3
federal funding and award authority for various affordable housing and homelessness
programs. This amount includes recently created programs that pay for affordable housing
in sustainable communities and housing for veterans.
Local land use permitting and review processes have lengthened the approval process
and increased production costs. The May Revision proposes additional legislation
requiring ministerial "by right" land use entitlements for multifamily infill housing
developments that include affordable housing. This would help constrain development
costs, improve the pace of housing production and encourage an increase in housing
supply.
The May Revision also endorses a $2 billion bond from a portion of future Proposition 63
mental health revenues, which would enable the Department of Housing and Community
Development to develop and administer homelessness and affordable housing programs
with a particular focus on chronic homelessness. The May Revision proposes first-year
funding of $267 million from the bond proceeds.
Counteracting Poverty
The state has taken historic steps in recent years to assist the state's neediest residents.
The implementation of health care reform has increased coverage under Medi-Cal to an
additional 6 million Californians in just four years. The Local Control Funding Formula is
concentrating the greatest school funding to students with the greatest need. The state
guaranteed that 6.5 million workers are eligible for paid sick leave. The 2015 Budget Act
created California's first-ever earned income tax credit to help the poorest working families
and encourage more families to claim the existing federal credit.
The January Budget proposed the first state cost-of-living increase for Supplemental
Security Income/State Supplementary Payment (SSI/SSP) recipients since 2005. In April,
the Governor signed legislation that will raise the minimum wage for all workers to $15 per
hour as soon as 2023.
Accounting for the full implementation costs, the General Fund has incurred new
obligations in the effort to counteract the effects of poverty totaling more than $19 billion
(about $10.7 billion of which will be paid for through Proposition 98 funds).
Strengthening Infrastructure
The May Revision continues to reflect the Governor's transportation package that would
provide $36 billion over the next decade to improve the maintenance of highways and
roads, expand public transit and improve critical trade routes. The increased funding would
be coupled with Caltrans efficiencies, streamlined project delivery and accountability
measures. The budget also includes $737 million ($500 million General Fund) for critical
deferred maintenance at levees, state parks, universities, community colleges, prisons,
state hospitals and other state facilities.
Fighting Climate Change
The May Revision supports California's ambitious policies to advance clean energy with a
$3.1 billion cap-and-trade expenditure plan that will reduce greenhouse gas emissions
through programs that support clean transportation, promote transformational sustainable
communities, reduce short-lived climate pollutants and protect natural ecosystems. Over
Adoption of the FY 2016-17 Annual Operating Budget
May 31, 2016
Page 4
multiple years, the cap-and-trade program gives the state the chance to transform
communities - particularly those disadvantaged ones - into innovative, sustainable
economic centers.
Current Condition – General Fund
Despite current economic conditions, the City of Lake Elsinore’s financial condition still requires
the reinvestment of resources to meet operating expenditures without any reductions in City public
service levels and to provide core services to the community. Recent population information for
2016 released by the Census Bureau and incorporated into the population data released by the
California Department of Finance, estimates the City of Lake Elsinore’s population as of January
1, 2016, and is estimated at 61,006. This is an increase from the prior year population estimate
of 58,426.
General Fund Revenues
The projected General Fund revenues are $40.4 million for fiscal year 2016-17, which reflects a
$1,936,308, or 5.03%, increase from fiscal year 2015-16 revenue estimates. General Fund
revenues have increased primarily as a result of continued growth for the local economy. The
most significant revenue increases are identified below:
• $513,070 in Property Taxes
• $302,101 in Franchise Taxes
• $583,545 in Fees/Charges for Services
• $823,779 in Reimbursements for Fire Station costs (#97)
The increases were offset by revenue reductions in other categories primarily due to the change
in State required building fees, the State reducing certain revenues to local governments, by the
maturation of higher interest bearing investments that had been reinvested at lower, market
interest rates, as well as a reduction in staff recovery costs for financing district administration.
Some of the significant decreases are identified below:
• $306,560 in Sales Taxes
• $373,203 in Miscellaneous revenues
General Fund Expenditures
The proposed budget of $41.7 million reflects an increase in General Fund expenditures of
$2,472,010 or 6.31% from the fiscal year 2015-16 budget. The primary increases contributing to
this include: 1) increase in Police and Fire personnel cost increases passed through by the
County; 2) sharing cost increase of the Southwest Communities Animal Shelter; 3) negotiated
increases for employees and increases in CalPERS retirement rates; and 4) new programs which
are offset by revenues for City Attorney and the La Laguna campground operation.
The authorized Full Time Equivalent (FTE) positions are proposed to increase from the prior year
total of 84 authorized to 85 authorized positions due to a two (2) new Senior Engineer positions
in Engineering offset by elimination of unfilled positions in other departments. The City is
converting the Director of Administrative Services position to an Assistant City Manager position.
Additionally, no changes to the existing 46 part-time positions.
Adoption of the FY 2016-17 Annual Operating Budget
May 31, 2016
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The City has continued to focus on reorganizing department structures in an effort to streamline
processes and enhance efficiencies without reducing essential public services to the community.
The following is a summary of significant items by department in the proposed Preliminary Annual
Operating Budget for Fiscal Year 2016-17:
City Clerk: Increased due to 3% increase added to the base salary per MOU negotiations.
Administrative Services: Increased due to 3% increase added to the base salary per MOU
negotiations.
Community Development: Increased due to 1) continued hiring of economic development
consultant; and 2) implementation of new land-based application tracking and permitting systems
(Tyler Energov).
Public Safety: There will be a large increase in contract administration costs passed down from
the County of Riverside for Sheriff Service costs. The City, along with several other contract
cities, are in the process with studying the feasibility of creating a regional police force as a way
to address rising costs. The overall anticipated costs Staff’s Concerns and Risk Factors:
The KPMG consultants stressed in their recent report, as well as in their presentation to the Board
in April 2016, that they are recommending the Board of Supervisors approve a resolution that
defines “Baseline Services” and “General Overhead.” Currently, “Baseline” includes all the
services that Contract Cities do not pay for in the Rate (i.e. aviation, swat, etc.). They stated that
no two Counties in California calculate their contract rates the same way, but several have
adopted Resolutions to better define what goes into the rate. While they stated that Riverside’s
Rate Legend is “in line” with how other Counties calculate it, they did not offer any specific
changes to the Rate calculations, other than to adopt this defining resolution. The underlying
tenor and tone is that the County can recoup more costs through a change in this definition, which
is concern of Staff because the County may try to shift costs for services that the County is
required to be provide.
While the KPMG consultants advised City staff that of the review of PSEC costs was not a part of
their review, the Board of Supervisors also did not speak to it at the KPMG presentation. While
a review of PSEC may be part of the $18 million change order the County approved in April for
KPMG to implement measures, the status has not been confirmed. Furthermore, the County has
not spoken of any plans to charge new development for their fair share cost of the PSEC
communication system. Staff is concerned because it is estimating 8% to 10% annual increases
for at least the next five years of which 2% is attributable to the PSEC costs as the County has
chosen to pass along this cost to the contract cities through the operating rate without any
discussion of funding strategies. It is perplexing because recovery of an estimated $250 million
investment in a system passed through the operating agreement rate/budget without any input
from contract cities creates further financial challenges to the City’s resources.
The CEO/Finance Director’s recommendation to the Board will be to hold all Departments (except
for the Sheriff’s Office) flat over the coming 5-years, in order to correct the structural deficit. They
expect the Sheriff’s Office to grow at 4% next year (if labor is held status quo – no COLAs). There
doesn’t seem to be any acknowledgement of the rising CalPERS costs facing the County over
the next several years. If they do not hold department’s flat, they will exhaust their $220M+
reserve by FY18-19.
Adoption of the FY 2016-17 Annual Operating Budget
May 31, 2016
Page 6
Public Services: Increase due to reallocation of all personnel cost to the General Fund from
other Special Revenue Funds.
Community Services: Increase due to additional programming and transitioning to improve the
quality of services at the La Laguna campground facility.
“Gann” Appropriations Limit
In accordance with Government Section 7910, the City Council is required, on an annual basis,
to adopt by resolution the “Gann” Appropriations Limit. The Appropriations Limit creates a
restriction on the amount of revenue that can be appropriated in any fiscal year. The Limit is
adjusted each year based on the change in population and either the change in non-residential
assessed valuation or the change in California per capita income. The Limit for fiscal year 2016-
17 is based on population and nonresidential assessed valuation factors. As the change in
California per capita income is more readily available, it will be used as a factor rather than the
nonresidential assessed valuation change in order to calculate the limit for Fiscal Year 2016-17.
Using population and per capita personal income data provided by the State Department of
Finance, the City’s Appropriations Limit for FY 2016-17 has been computed to be $86,752,899.
Appropriations subject to the Limit in the proposed FY 2016-17 budget total $25,958,879, which
is $60,794,020 less than the computed limit. Additional appropriations to the budget are funded
by non-tax sources such as service charges, restricted revenues from other agencies, grants, or
beginning fund balances would be unaffected by the Appropriations Limit, however, any
supplemental appropriations funded through increased tax sources could not exceed the
$60,794,020 variance indicated above. Further, any overall actual receipts from tax sources
greater than $60,794,020 from the budget estimates will result in proceeds from taxes in excess
of the City’s Appropriations Limit, requiring refunds of the excess within the next two fiscal years,
or voter approval to increase the City’s Appropriations Limit.
Fiscal Impact
The Proposed Fiscal Year 2016-17 Annual Operating Budget provides a reinvestment of fund
balance resources, in addition to operating revenues, to fund operating expenditures by
$1,230,622 before the operating transfers. The designation for economic uncertainty is
$7,293,655, an amount equal to 17.5% of General Fund Operating Appropriations for fiscal year
2016-17.
Exhibits
A: Resolution No. 2016-___ Adopt the Operating Budget
B: Resolution No. 2016-___ Adopt the Schedule of Authorized Positions
C: Resolution No. 2016-___ Adopt the GANN Limit