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TO: HONORABLE MAYOR AND CITY COUNCIL FROM: ASSISTANT CITY MANAGER DATE: MAY 10, 2003 SUBJECT: BUDGET WORK SESSION FOR FY 03-04 & FY 04-05 RECOMMENDATION Review the draft budget document for FY 03-04 and FY 04-05 and provide staff with direction. BACKGROUND At the first Budget Policy Issues Workshop on April 14th, City Council decided to begin with a baseline operating budget of $10.7 million and select approximately $1 million from the list of budget policy issues in order to arrive at a total General fund expenditure in FY 03-04 of $11.7 million. Following the second Budget Policy issues workshop on April 29, 2003, staff felt that it would be helpful to prepare a "menu" of budget policy issues with their associated costs to assist the Council during budget deliberations. The "menu" consists of 41 budget policy issues listed on a worksheet (see attached). One additional "menu" item, City Logo Services, has been added to the list since the April 29th workshop. The spreadsheet includes both the City Manager’s recommendations (menu selections) and the consensus Department Head recommendations. Council members can match up each "Budget Policy Item" shown in the first column of the spreadsheet with the narratives presented in this staff report. The "additional revenues" column includes $80,000 in view restoration fee increases/service cuts and $27,000 in GIS revenues identified by staff. The goal is to select no more than "$1,000,000" of the budget items listed on the menu. The City Manager missed by $305. The Department Heads missed by more. The Department Heads felt that a portion of the City $8 million General Fund Reserve could be utilized for "one-time" projects, rather than utilizing "new" revenues for everything. Council has also been provided with the attached draft FY 03-04 & FY 04-05 Budget document (white binder), which incorporates staff’s recommendations. Of course, the City Council can direct staff to make any changes to the budget that it deems appropriate, which can be reflected in the final draft of the budget before it is adopted by the City Council in June 2003. Also attached to the staff report is a discussion of employee benefits requested by Council member Clark. DISCUSSION Listed below are the budget policy issue items and a brief description as to whether staff included them in the draft budget, if so, at what funding level and if not, why staff proposes to exclude them.
Included in Draft Budget: Yes Type of Expenditure: On-going Proposed Funding Level: $ 550,000 Previous Request: $1.1 million In discussions at the first budget session on April 14th, the City Council reviewed project costs and available City resources, and requested staff to recommend a revised program that was meaningful, but less costly than the initial $1.1 million proposed cost. Upon reviewing pavement conditions in the next target area, cost data, and pavement management principals, staff concluded that the City should maintain the current standards of the program, but reduce the cost in FY 03-04 by reducing the number of streets on which construction occurs during that period. Staff felt that this approach maintains consistency of standards throughout the City, which should be important to residents.
Included in Draft Budget: Yes Type of Expenditure: On-going Proposed Funding Level: $25,000 Previous Request: $300,000 After meeting in closed session with the City Council on April 29th, the City Attorney estimates that an additional $25,000 above the baseline budget will be required to pursue litigation as directed by the Council. This would bring the City Attorney’s total budget for FY 03-04 to $700,000.
Included in Draft Budget: Yes Type of Expenditure: On-going Proposed Funding Level: $ 25,000 Previous Request: $250,000 In addition to the baseline budget for the Emergency Preparedness program, the proposed level of funding would provide a contract court reporter to take minutes at the Emergency Preparedness Committee meeting and assistance from an emergency preparedness consultant to implement some of the Emergency Preparedness Task Force’s recommendations, such as producing a emergency preparedness handbook for residents, upgrading the City’s website to include an emergency preparedness page and hosting a summit of first responder agencies that serve the Peninsula.
Included in Draft Budget: Yes Type of Expenditure: On-going Proposed Funding Level: $77,500 Previous Request: $111,800 In the April 14th report, staff presented two possible amounts for the FY 03-04 merit pool: 1) 3.5% of payroll based on the increase in the Consumer Price Index over the previous year ($50,000); and 2) 5% of payroll to include additional funds to reward above average job performance ($70,500). In addition, staff recommended funding the Bonus and Tuition Reimbursement Programs at an amount equal to 1.5% of the annual payroll ($41,300). In evaluating these two employee compensation programs, the Department Heads feel that employees would place more value on the ability to receive a raise that matched their level of performance (rather than only the increase in the cost of living) over the possibility of receiving a bonus award to exemplary performance. Therefore, the Department Heads recommend that the City Council fund the merit pool at 5% ($70,500), but reduce the Bonus and Tuition Reimbursement programs from $41,3000 to $7,000, thereby resulting in a cost of $77,500 in FY 03-04.
Included in Draft Budget: No Type of Expenditure: On-going Proposed Funding Level: $0 Previous Request: $ 60,108 At the April 14th workshop, the Council asked for more information regarding what percentage of the fine the City receives from each traffic citation that is issued in order to determine if the additional cost of one (1) additional 40-hour per week traffic patrol unit would be off-set by the additional revenue collected. After some research, staff found that adding a third traffic unit could reasonably be expected to generate $35,000 to $37,500 per year in revenue for the City from the collection of additional traffic fines. Because the additional revenue would only partially offset the cost of expanding the program, staff felt that this item should not be included in the budget.
Included in Draft Budget: No Type of Expenditure: On-going Proposed Funding Level: $0 Previous Request: $ 135,000 Staff originally added this item in the April 20th staff report because it represents the continuation of an existing City program. Beginning in FY 02-03, the City Council included $135,000 in the Capital Improvements Projects budget to fund the installation of new traffic signals at certain in the City. Because no specific project has been identified for FY 03-04, staff felt that this item should not be included in next year’s budget. However, like the storm drain project discussed at the April 14th meeting, the City Council could approve a budget adjustment at any time during the fiscal year to fund a specific project using General fund reserves.
Included in Draft Budget: Yes Type of Expenditure: On-going Proposed Funding Level: $40,000 Previous Request: $87,450 The City has a history of providing grant funding to various non-profit agencies in the South Bay area; however, the program has grown substantially in the last few years. In FY 95-96, four grant recipients received a total of $15,450. By FY 02-03, the list had grown to fifteen recipients receiving grants totaling $46,540. For FY 03-04, a total of eighteen organizations have requested grant funding from the City, made up of fifteen previous recipients ($66,600), three new requests ($14,000) and a discretionary pool of $6,850, for a total program cost of $87,450. Because all of the grant applicants provide meritorious service or enrichment to the community, staff did not feel that it was appropriate to recommend specific funding levels for each organization. Instead, given the current state budget crisis and the threat of declining revenues, staff felt that it would be appropriate to reduce the total City Grant program by approximately 12% - the same amount that staff has proposed to reduce General fund expenditures – and leave it up to the Council to allocate the funds between the various groups seeking support. Subsequent to the April 29th workshop, Peninsula Seniors has informed staff that it currently has 962 members that are Rancho Palos Verdes residents. In FY 00-01, the Council based the grant to this organization on a rate of $10 per City resident. The Peninsula Seniors’ grant request for FY 03-04 is $10,000.
Included in Draft Budget: Yes Type of Expenditure: On-going Proposed Funding Level: $58,200 Previous Request: $66,700 A large portion of the Planning Department’s budget for Meetings and Conferences includes sending all seven Planning Commission members to the League of California Cities Annual Planners Institute Conference. The proposed reduction in this program is attributable to reducing the Planning Departments budget from $18,500 to $10,000, which would allow approximately half of the Planning Commission’s to attend this conference each year. Because Planning Commissioners are appointed to a four-year terms, this budget would allow each member to attend two conferences per term.
Included in Draft Budget: Yes Type of Expenditure: One-time Proposed Funding Level: $60,000 Previous Request: $60,000 The City’s Emergency Operations Center (EOC) is located in the Community Room at City Hall. The Civic Center complex is equipped with a propane-powered generator that was installed to supply temporary electrical power to the EOC so that it can continue to operate during when there is a loss in commercial electrical power. In the event the City’s EOC was destroyed during a disaster, the City’s Emergency Operations Plan (i.e. SEMS Multihazard Functional Plan) designates Hesse Park and the Ladera Linda Community Center as alternate EOC locations. However, neither of these facilities is equipped with an emergency power source and would be virtually useless as an EOC if the Civic Center were destroyed. Because the most likely threats facing the City are large-scale earthquakes and major brush fires, and power outages are common during these types of events, staff feels that it is important to make electrical modifications to both the Ladera Linda and Hesse Park buildings and to purchase a portable generator that could be used at either site. In reviewing the previous staff reports, staff realized that it might have placed too much emphasis on the fact that the backup power system would allow for the continued normal operation of City facilities during occasional power outages. However, this is only a secondary benefit of implementing this one-time expenditure. Another option that the Council might wish to consider to reduce the cost of this item would be to make the electrical modifications at only one of the alternate EOC locations.
Included in Draft Budget: Yes Type of Expenditure: On-going Proposed Funding Level: $27,000 Previous Request: $27,000 In March 2003, Council let a contract to prepare new color digital orthophotographic maps of the City using funds included in the FY 02-03 budget. Also included in the FY 02-03 budget is the purchase of a Geographic Information System (GIS) for approximately $200,000, which would incorporate these digital photographs into its database. Staff expects to present the contract for this purchase to City Council in the near future. Staff included this item in the FY 03-04 budget to provide on-going maintenance for the system, if the Council decides to move forward with it. Staff expects that new revenues derived from selling property radius maps to the public using the GIS system would offset the cost of the on-going maintenance.
Included in Draft Budget: Yes Type of Expenditure: One-time Proposed Funding Level: $30,000 Previous Request: $50,000 The proposed appropriation would provide for consultant services to assist staff and the Finance Advisory Committee (FAC) with the Infrastructure Needs and Financing Alternatives project. Staff feels that the tasks assigned to consultants could be scaled back from the initial proposal and shared by staff, so as not to exceed $30,000, but still provide the most critical help required to complete this project.
Included in Draft Budget: Yes Type of Expenditure: On-going Proposed Funding Level: $44,466 Previous Request: $44,466 Staff is proposing that the City continue its memberships in the same organizations as it did in FY 02-03.
Included in Draft Budget: No Type of Expenditure: One-time Proposed Funding Level: $0 Previous Request: $44,000 Staff feels that this one-time improvement to the City’s traffic signals could be deferred until an alternate funding source can be identified. If a traffic signal is completely off-line, the California Vehicle Code requires motorists to treat it as if it were a four-way stop. Therefore, the City would not incur any additional liability by deferring this item. However, the City would have to forego a $30,000 grant for this project, but could still apply for grant funding in the future.
Included in Draft Budget: Yes Type of Expenditure: On-going Proposed Funding Level: $9,000 Previous Request: $35,000 Rather than purchasing a network-wide document imaging solution, staff recommends purchasing and implementing a basic stand-alone system in the City Clerk’s Office at this time with an annual support cost of about $9,000. A basic system would include a scanner and imaging licenses to capture and manage electronic documents and to view electronically archived documents stored in the system. This would at least get the City started on implementing a document imaging system and the experience gained from this initial step could prove to be very useful learning experience if the City wishes to expand the system at a later date.
Included in Draft Budget: Yes Type of Expenditure: One-time Proposed Funding Level: $30,000 Previous Request: $30,000 Staff has observed power outages and fluctuations throughout City Hall over the last year causing disconnections and failure of computer equipment. The frequency rate of equipment disconnection or failure resulting from electrical spiking is about once per week. Therefore, staff feels that it is very important to install electrical filter devices in order to protect the significant investment the City has made in its computer network equipment.
Included in Draft Budget: Yes Type of Expenditure: One-time Proposed Funding Level: $30,000 Previous Request: $30,000 Due to the significant amount of time, effort and resources that have been dedicated to completing the City’s NCCP, staff feels that retaining a lobbyist is a critical last step to this process that should not be abandoned prematurely. Staff anticipates that the on-going lobbying efforts in Sacramento to secure funding for the City’s NCCP will be required to continue through December 2003.
Included in Draft Budget: No Type of Expenditure: One-time Proposed Funding Level: $0 Previous Request: $25,000 On further consideration, staff feels that the previous request may not be sufficient to fully address the extent of the repairs and improvements that are necessary to this access staircase. Therefore, this project should be postponed in order for staff to develop a proposal that will address the long-term maintenance issues associated with this neighborhood trail staircase.
Included in Draft Budget: Yes Type of Expenditure: On-going Proposed Funding Level: $25,000 Previous Request: $25,000 Since its inception in 1999, the Abalone Cove Sewer Maintenance District has received a City subsidy. Annual district costs are $50,000, and the City subsidy has been $30,000. This line item provides a $25,000 subsidy for FY 03-04. The reduction in subsidy will mean higher assessments for property owners. Staff recommends slowly reducing the subsidy over several fiscal years, rather than significantly increasing property owner’s assessments in a single year.
Included in Draft Budget: Yes Type of Expenditure: One-time Proposed Funding Level: $4,000 Previous Request: $20,000 Staff made some additional inquiries with the County of Los Angeles and determined that the previous estimate for the additional printing cost of placing an initiative on the ballot was incorrect. Staff has included this much-reduced amount in the draft budget.
Included in Draft Budget: Yes Type of Expenditure: On-going Proposed Funding Level: $20,000 Previous Request: $20,000 Although computer network support would still be provided if this item were excluded from the budget, some requests would be subject to a slower response times and some support services would be curtailed and/or discontinued entirely. Because the computer network has become the "life blood" of many City Hall services and functions, staff recommends including this item in the draft budget, rather than curtailing staff productivity and effectiveness.
Included in Draft Budget: No Type of Expenditure: One-time Proposed Funding Level: $0 Previous Request: $20,000 Because the expansion of the Point Vicente Interpretive Center is not expected to be completed until November 2004, staff recommends postponing this project until FY 04-05.
Included in Draft Budget: Yes Type of Expenditure: On-going Proposed Funding Level: $18,500 Previous Request: $18,500 The current maintenance schedule calls for the painting of the interior of Hesse Park. Because this facility is so heavily used for public meetings, private classes and special events, staff feels that it is important to keep the facility looking attractive and a positive reflection on the City.
Included in Draft Budget: No Type of Expenditure: One-time Proposed Funding Level: $0 Previous Request: $16,000 Although this project has merit because there are few mature trees at this park site, staff does not feel that it is a high priority project and, therefore, recommends that it be postponed and reconsidered at a later time.
Included in Draft Budget: No Type of Expenditure: On-going Proposed Funding Level: $0 Previous Request: $25,000 Because the Regional Water Quality District has been pleased with the City’s current efforts to reduce storm water pollutant run-off and the City is under no obligation to install additional inserts at this time, staff recommends postponing expansion of this program for the time being.
Included in Draft Budget: Yes Type of Expenditure: On-going Proposed Funding Level: $12,000 Previous Request: $12,000 Prior to February 2003, the City contracted with Earl Weinstein to provide reader board services for the City on Channel 3. With Mr. Weinstein’s passing earlier this year, Cox Communications has been providing a basic reader board on Channel 3 at no cost to the City. If the Council includes this item in the budget, the City would contract with Palos Verdes on the Net to provide reader board services for the City with the same or better quality and at the same price as previously provided by Mr. Weinstein.
Included in Draft Budget: Yes Type of Expenditure: On-going Proposed Funding Level: $10,000 Previous Request: $10,000 The City Council recently approved the activation of a cable television Educational Access Channel. The channel will be managed and operated primarily with volunteer workers who will be donating over $100,000 annually of their time. Equipment will be provided, maintained and ultimately replaced through donations or grants.
Included in Draft Budget: No Type of Expenditure: On-going Proposed Funding Level: $0 Previous Request: $10,000 The City has been a dues paying member of this advocacy group since its inception approximately four years ago. Recently, CPR challenges to storm water permits have been more aggressive than our City felt were appropriate. Therefore, staff recommends not continuing the City’s membership in this organization.
Included in Draft Budget: Yes Type of Expenditure: On-going Proposed Funding Level: $9,675 Previous Request: $9,675 Staff recommends including the City’s quarterly newsletter in the draft budget because it is probably the only dedicated City information source that reaches every household in the City.
Included in Draft Budget: Yes Type of Expenditure: On-going Proposed Funding Level: $7,800 Previous Request: $7,800 Due to the number of visits this feature receives on the City’s website (approximately 30 per day), staff feels that it is important to continue to offer this service to the community.
Included in Draft Budget: No Type of Expenditure: On-going Proposed Funding Level: $0 Previous Request: $6,250 Although this project has merit because the Community Room is used for a variety of City and community meetings, staff does not feel that it is a high priority project and, therefore, recommends that it be postponed and reconsidered at a later time.
Included in Draft Budget: No Type of Expenditure: On-going Proposed Funding Level: $0 Previous Request: $6,000 As the activities associated with the City’s Redevelopment Agency have tapered off in recent years, so has the need for a federal lobbyist. Although the lobbyist recently assisted the City in arranging meetings for the NCCP project, staff feels that there will be no further need of these services in the future and, therefore, recommends that the City discontinue this contract.
Included in Draft Budget: Yes Type of Expenditure: On-going Proposed Funding Level: $5,000 Previous Request: $5,000 This item was inadvertently omitted from the previous budget policy reports and menus. It would continue the use of a consultant to maintain the integrity of the City’s logo on all items in which appears, such as official documents, business cards, stationery, lapel pins, etc.
Included in Draft Budget: Yes Type of Expenditure: On-going Proposed Funding Level: $4,800 Previous Request: $4,800 This item would provide consultant services to convert website files to xml format to enable complete search capability of all data on the City’s website. Currently, the search feature is limited to the Municipal Code only. Due to the relatively low cost of this item and the potential for making the City’s website much more user-friendly, staff recommends that this item be included in the draft budget.
Included in Draft Budget: Yes Type of Expenditure: One-time Proposed Funding Level: $1,500 Previous Request: $1,500 Due to the relatively low cost of this item and the need to improve security to the building at City Hall in which maintenance supplies are stored, staff recommends including this project in the draft budget.
Included in Draft Budget: No Type of Expenditure: On-going Proposed Funding Level: $0 Previous Request: $250,000 At the April 14th workshop, City Council directed staff to exclude this menu item from the FY 03-04 budget, pending the results from the initial investigation of the condition of the City’s sanitary sewer system. Funding for the first phase of this multi-year investigation is included in the adopted FY 02-03 budget and the project has been recently initiated. There is a possibility that the results from this first phase of the investigation may be available for Council consideration by the mid-year budget review.
Included in Draft Budget: No Type of Expenditure: On-going Proposed Funding Level: $0 Previous Request: $100,000 The City Council directed staff to exclude this menu item from the FY 03-04 budget. Because the use of these funds are unspecified at this time, Council felt that it could consider using a portion of the General fund reserve to fund any projects of this type that present themselves during the coming year.
Included in Draft Budget: No Type of Expenditure: On-going Proposed Funding Level: $0 Previous Request: $100,000 On April 14th, City Council directed staff to defer any contribution to the Building Replacement Fund in FY 03-04.
Included in Draft Budget: Yes Type of Expenditure: On-going Proposed Funding Level: $80,000 Previous Request: $80,000 At the April 14th workshop, the City Council directed staff to maintain the funding for the View Restoration contract staffing support at its current level ($280,000), but to also take steps to make the overall program more self sufficient through a combination of discentives for non-compliance, new fees and revised review criteria for City Tree permit requests, resulting in approximately $80,000 in new revenue or cost savings, as shown on the attached menu selections chart.
Included in Draft Budget: No Type of Expenditure: On-going Proposed Funding Level: $0 Previous Request: $60,000 Because the available grant funding is no longer sufficient to cover the entire cost of this program, the City Council indicated that the number of deputies should be reduced from three to two.
Included in Draft Budget: Yes Type of Expenditure: On-going Proposed Funding Level: $12,164 Previous Request: $12,164 Due to the relatively low cost of this program, which is aimed at reducing juvenile crime, the City Council directed staff to include this item in the FY 03-04 budget. Respectfully submitted: Carolynn Petru Assistant City Manager Reviewed, Les Evans City Manager Attachments: City Staff Menu Selections Chart Employee Benefits Summary BUDGET POLICY MENU SELECTIONS
EMPLOYEE BENEFITS SUMMARY April 29, 2003 On April 15th, Council member Clark asked for more information about the cost associated with the other benefits the City provides to its employees and Council members. The table below summarizes the costs of these various benefits in FY 02-03:
Staff anticipates that aggregate insurance costs will increase by 7% in FY 03-04 and by 15% in FY 04-05. Therefore, the estimated insurance costs for FY 03-04 and FY 04-05 is $364,881 and $419,613, respectively. Regarding retirement benefits, the City has not made an "employer" contribution in over ten years because of CalPERS’ strong earnings on its investments in the 1990’s. However, due to declining returns in recent years, CalPERS had notified the City that we would be required to resume making an employer contribution beginning in FY 03-04. This would be in addition to the 7% "employee" contribution that the City already makes on behalf of its employees. As a result, the City’s total PERS contribution would increase to 9.455% in FY 03-04 and 15% in FY 04-05. Therefore, the City’s PERS contribution is estimated to increase from $175,000 in FY 02-03 to $256,892 in FY 03-04 and $427,800 in FY 04-05, which represents a 47% and 67% increase is actual cost, respectively. The expected increases in insurance and retirement benefit costs have already been incorporated into the baseline budget. |
