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HomeMy WebLinkAbout2018-19 Supplemental Budget CAR Meeting Date: 6/5/2018 FROM: Derek Johnson, City Manager Prepared By: Shelly Stanwyck, Parks and Recreation Director Brigitte Elke, Interim Finance Director Alex Ferreira, Budget Manager SUBJECT: REVIEW AND DISCUSSION OF PROPOSED 2018-19 SUPPLEMENTAL BUDGET RECOMMENDATION Receive and discuss the 2018-19 Budget Supplement including: a. Major City Goals/Other Important Objectives and Performance Measures progress report; and b. The 5-year General Fund Forecast; and c. The proposed changes to the 2018-19 Budget Supplement arising from the implementation of the Adopted Fiscal Health Response Plan (FHRP); and d. The proposed changes to the 2018-19 Capital Improvement Program; and e. The Enterprise Funds Overviews and implementation of the FHRP to the Parking, Sewer, Transit, and Water Enterprise Funds. DISCUSSION The Budget Supplement for 2018-19 implements the Council adopted Fiscal Health Response Plan and contains the following 12 sections.   The Budget Overview 2018-19 This section of the Budget Supplement is the narrative summary of the topics covered by the document. It provides highlights for the major sections of the Supplement. Below is a summary of the basic outline of the Budget Overview 2018-19. Budget Outline 1. City Manager Message 2. April 17, 2018 Adoption of Fiscal Health Response Plan 3. Highlights of Status on Major City Goals/Other Important Objectives and Performance Measures 4. Overall Economic Outlook 5. 5-Year Fiscal Forecast for General Fund Including Projected Revenues and Expenditures 6. Application of the adopted Fiscal Health Response Plan to the General Fund and Changes to the 2018-19 Budget 7. Status Report on Revenue Oversight Committee (REOC) Operating Programs and Capital Projects 8. Capital Improvement Projects 9. Enterprise Funds Forecasts and Reports Major City Goals and Other Important Objectives Every two years with the adoption of the City’s Financial Plan the most important, highest priority work programs are established, with resources to accomplish them, as Major City Goals and Other Important Objectives. The 2017-19 Major City Goals are focused on the following: Housing, Multi-Modal Transportation, Climate Action, and Fiscal Sustainability and Responsibility. At this phase of the Financial Plan, a majority of the Major City Goals and Other Important Objectives are tracking at about half way to completion. Section B of the 2018-19 Budget Supplement provides details for each Goal and Other Important Objective and includes the status of tasks assigned to each with notes on accomplishments, progress, as well as modifications to tasks. 5 Year General Fund Forecast As part of the 5-year Fiscal Forecast Discussion three policy changes are recommended regarding fund balances and reserves and long term financial planning. Council’s action of June 19th will consider adoption of these policies. The 5-year Fiscal Forecast is based on assumptions shown in Section D that the City will be able to maintain a balanced budget and meet its unfunded pension liabilities and appropriate approximately $20 million dollars towards payments of unfunded CalPERS pension liabilities. The forecast largely shows that the City will be able to make modest adjustments in expenditures based on revenue forecasts and that significant expansion of operating programs or capital investments would require operational tradeoffs. The bottom line is that, in order to fund the City’s unfunded pension obligations, fiscal restraint will be required for the foreseeable future. Application of Fiscal Health Response Plan This Financial Plan process is slightly different due to changes in the City’s 10-year Financial Forecast associated with changes to unfunded liabilities associated with the City’s pensions. As a result, since summer of 2017, the Council and public have studied this problem and identified a framework in which to address it over the next three years. On April 17, 2017, the City Council adopted a Fiscal Health Response plan to guide the 2018-19 Budget as well as the 2019-21 Financial Plan. Each City department has applied the polices and guiding principles of the Fiscal Health Response Plan to their operating program budgets for 2018-19. As a result, predominately reductions achieve a balanced budget for 2018-19. The options proposed are those with the least amount of service level impacts and are those that are achievable in 2018-19. The following summarizes the proposed operating budget reductions and other changes which implement the Fiscal Health Response Plan and are contained in the Budget Supplement. Capital Improvement Projects Several revisions to the 2018-19 CIP are proposed. They include appropriations for three new projects using grants or previously identified funds. In addition, there are recommended reductions to existing projects whose construction can be deferred in 2018-19. These reductions are recommended to fund a project ready to construct this summer, the Laurel Lane Complete Streets project. The project discussed below is done so for ease of public review with this agenda report, the same information in contained in the Budget Supplement in multiple locations as well. Park in the North Broad Street Neighborhood This topic is discussed in the Budget Overview and is recommended for incorporation into the City’s capital improvement program. It is discussed in this transmittal report in summary form as not all members of the public will choose to review the Budget Supplement. However, the Supplement covers this topic as well. a. Current Council Direction. In 2016, Council allocated $900,000 of General Fund to the Parkland Fund for the purposes of developing a Park in the North Broad Street Neighborhood. On June 1, 2017, Council provided direction to transfer $160,000 of that allocation from the from the Parkland Development Fund to a fund the Parks and Recreation Master Plan and Element update during the 2017-19 Financial Plan. Staff was directed to pursue a park site in this neighborhood that facilitates a Park and the Broad Street Bike Boulevard. The remaining $740,000 General Fund contribution designated in the Parkland Fund for the Park in this neighborhood was to be reevaluated at the 2019-21 Financial Plan if no active pursuit of property was underway. During 2017-18, staff from Public Works, Parks and Recreation and the City Attorney initially met with the Church of the Latter Day Saints to discuss the possible use of property it owns that is bounded by Foothill Boulevard and Ramona Drive for the multiple purpose of a Park and a Bike Path. The good news is, an agreement was reached for use of that property for Bike Path purposes with the Church. The disappointing news is no agreement could be reached for Park purposes. Although the circumstances surrounding a potential Park changed, consistent with the current Parks and Recreation Element, (which identifies the need for a Park in the North Broad Street Neighborhood), staff continued to evaluate how and where this could occur given the Ramona/Foothill Drives location was no longer feasible. Parks and Recreation staff facilitated a series of meetings with a group of residents of the North Broad Street Neighborhood. Staff reviewed all properties in the neighborhood that might be available and viable for park purposes. Using the Goldilocks analogy some were too steep, some were too constrained, some were under residential development, and some were just not right. Eventually staff and the residents were able to identify that property the City owns, at 533 Broad Street, Broad Street Community Gardens, could be just right for a Park in this neighborhood. b. Council Direction Sought with 2018-19 Supplement – a new CIP Project It is therefore proposed that Council provide direction to staff to establish a capital improvement project to begin the design and development of a Park in the North Broad Street neighborhood at the City owned property at 533 Broad with the $740,000 General Fund designation in the Parkland Fund to be appropriated for this purpose. Included in this direction, if supported by Council, would be a programmatic work effort by staff, to use the City’s public engagement process to engage the neighborhood about this Park, seek its input in the design, and have the Parks and Recreation Commission continue to serve in its capacity as the advisory body to the Council on this new park. Given staff in Parks and Recreation’s thoughtful reorganization, and focus on other work efforts, this project will not begin until spring 2019. Enterprise Funds For ease of review, the Budget Supplement includes the Fund Reviews for each of the Enterprise Funds: Parking, Sewer, Transit, and Water. Those four Fund Reviews include overviews of each Fund, the Funds’ responses and strategies to apply the Fiscal Health Response Plan, and any Capital Improvement Projects planned. Rate adoptions for the Water and Sewer Funds will be considered by Council on June 19th. ENVIRONMENTAL IMPACT There is no environmental impact associated with the adoption of the 2018-19 Budget Supplement. Notably, components of the Budget and savings proposed in it are focused on increased sustainability and the use of less consumable goods in an ongoing effort by the City to address long-term environmental concerns. Nothing in the Budget Supplement is intended to constitute a final approval of any particular project for purposes of the California Environmental Quality Act and no action herein shall be construed to relieve the City of otherwise applicable environmental review obligations prior to any particular project approval. FISCAL IMPACT Fiscal impact of the proposed 2018-19 Budget Supplement is a balanced budget that sets forth the series of budgetary changes over the next three years to align revenues and expenditures to address increased costs associated with unfunded pension liabilities. NEXT STEPS Following Council discussion and direction at a public hearing of June 5, 2018, staff will return on June 19, 2018 for consideration of the Water and Sewer Funds rate adoptions, the amendments to Fiscal Policies regarding a revenue stabilization fund, a capital projects reserve, and the allocations of funds to prepay or participate in a trust to address portions of the CalPERS unfunded liability; the adoption of the appropriations limit for 2018-19, the adoption of the 2018- 19 Budget. ATTACHMENT a - 2018-19 Budget Supplement