HomeMy WebLinkAbout12-16-2014 B2 Financial Plan Process and Budget PoliciesCity of San Luis Obispo, Council Agenda Report, Meeting Date, Item Number
FROM: Katie Lichtig, City Manager
Wayne Padilla, Finance and IT Director
Prepared By: Michael Codron, Assistant City Manager
Joe Lamers, Budget Manager
SUBJECT: 2015-17 FINANCIAL PLAN PROCESS; AND CONSIDERATION OF
PROPOSED CHANGES TO THE CITY’S BUDGET POLICIES
RECOMMENDATION
1. Review and approve the 2015-17 Financial Plan Goal Setting Process and revision to the
date of the Council’s Strategic Budget Direction meeting to April 21, 2015.
2. Receive and file the Local Revenue Measure (Measure Y) Integration Report.
3. Review and approve proposed changes or direction regarding the City’s budget policies,
including:
A. Direction to develop a new policy to support the creation of an Infrastructure
Investment Capital Fund and return to the City Council for review in Spring 2015.
B. Changes to existing reserve policies for the Fleet and Information Technology
replacement funds.
C. Direction to develop a new budget policy relating to reporting the City’s unfunded
pension liabilities and to return to the City Council in Winter 2015 with further
analysis of whether additional funding should be allocated to unfunded pension
liabilities during the 2015-17 Financial Plan.
D. Direction to update the City’s purchasing and procurement policies to improve
operating efficiencies for City Council review in Winter 2015.
REPORT-IN-BRIEF
The City of San Luis Obispo utilizes a two-year financial planning process to create its budgets.
This process includes extensive public outreach to assist the City Council in establishing Major
City Goals. The benefits of this process are two-fold, it ensures that resources are provided in the
budget to accomplish the community’s highest priority, most important objectives, and it is a
method to help create a mutual understanding among residents, decision makers, and City staff
about what can be achieved by working together.
The process includes the Community Priorities Survey, the Community Forum, the Council
Goal-Setting Workshop, and several other steps to prepare the City Council for selecting goals,
and provide City staff with direction on work programs to support those goals. One of these steps
is the City Council’s Strategic Budget Direction meeting. Staff is recommending that the date of
this meeting be revised to April 21, 2015, to better accommodate the Mayor’s schedule.
12/16/2014
B2
B2-1
2015-17 Budget Process and Policies Page 2
The 2013-14 Measure Y Integration Report is included in this report as Attachment 8. The report
is a requirement of the Measure Y ordinance. Staff is recommending that the City Council
receive and file this report. This report, along with the 2014-15 Measure Y audit, will be
presented to the Revenue Enhancement Oversight Commission during their first meeting on
January 26, 2015.
Four areas of discussion are included in this report regarding City budget policies. Staff is
recommending the creation of an Infrastructure Investment Capital Fund, which would give the
City the ability to facilitate important new infrastructure projects in support of new housing and
the creation of head of household jobs. The fund would work in a similar fashion as the City’s
Open Space Acquisition Fund.
Second, revisions are proposed to the reserve policies for the Fleet and Information Technology
Replacement Funds to accomplish the intent of maintaining a reserve while also ensuring that the
City is not setting aside too much, which would limit its ability to accomplish fund objectives.
Third, staff is recommending a new policy that will require the City to show its costs for paying
unfunded pension liabilities in its Five-Year Fiscal Forecast. This new policy will improve
transparency and create a better understanding of how the City is proactively addressing this
component of its total PERS costs. While not yet perfected, PERS’ new methodology for
creating and reporting rates will make fulfilling this policy possible. Staff is also seeking
direction to return to the City Council in Winter 2015 with a completed analysis and
recommendation whether additional funding should be allocated to unfunded pension liabilities
during the 2015-17 Financial Plan period. Attachment 10 includes the analysis to date of this
issue.
Finally, staff continues to identify financial management efficiencies that enable its operations to
be responsive and nimble, where appropriate. Recent work in this area has highlighted the
potential for updates to the City’s purchasing policies and procedures. This report includes a
brief discussion of these issues and recommends that the Council provide staff with direction to
return with an updated policy in Winter 2015.
DISCUSSION
Two-Year Financial Plan Process
The following four features describe the City’s Financial Plan process: goal-oriented, policy-
driven, multi-year and technically rigorous. For over thirty years, the City has used a two-year
financial planning process to create its budgets. The benefits of budgeting based on a two-year
plan include:
1. Reinforcing the importance of long-range planning in managing the City's fiscal
affairs.
2. Concentrating on developing and budgeting for the accomplishment of significant
objectives.
3. Establishing realistic timeframes for achieving objectives.
B2-2
2015-17 Budget Process and Policies Page 3
4. Creating a pro-active budget that provides for stable operations and assures the
City's long-term fiscal health.
5. Promoting more orderly spending patterns.
6. Reducing the amount of time and resources allocated to preparing annual budgets.
The fundamental purpose of the City’s Financial Plan is to link what the City wants to
accomplish over a two-year period with the resources required to do so. Central to the effort is
providing support for the City’s core functions, including the day-to-day responsibilities carried
out by City employees to support residents’ quality of life. In addition, the process allows the
City Council to engage the community to identify Major City Goals to be accomplished.
2015-17 Goal-Setting Process
There are a variety of inputs to the City Council to enable them to establish Major City Goals.
These inputs are highlighted on the following chart:
*** Tentative revised date subject to Council approval (revised from April 14)
Many of these efforts have already started. For example, City Advisory Bodies have developed
goals, the Community Priorities Survey (Attachment 1) has been mailed out and posted on-line,
and the Council has participated in the November 13 “Setting the Stage” workshop. Notice has
also been sent to over 200 community groups and individuals inviting their input (Attachment 2).
The two principal elements of the City’s goal setting process still to come are the Community
Forum, to be held at 6:00 PM on Tuesday, January 13, 2015, at the Ludwick Community
B2-3
2015-17 Budget Process and Policies Page 4
Center, and the Council Goal-Setting Workshop to be held all day on Saturday, January 24,
2015 at the City/County Library Community Room.
Staff and facilitator Don Maruska plan to build on past successes in integrating Council goal-
setting into the budget process following an approach similar to the one used for many years,
including integration of proposed uses for the City’s local half-percent sales tax. The specifics
are outlined below.
1. Community Forum
The January 13 Community Forum is intended to solicit suggestions from Council, residents,
community groups, other groups of stakeholders and interested individuals on proposed City goals.
It is also intended to meet the requirements of the City’s half-percent local sales tax, by providing
an opportunity for the community to “review and discuss the use of the revenue generated by this
measure.” To ensure that adequate space is available for the forum, it will be held at the Ludwick
Community Center. The proposed agenda and procedures for the Community Forum are attached
(Attachment 3).
2. Council Homework Assignment (Due to Finance by January 22, 2013)
The Council’s “homework assignment” for the January 26
workshop is attached (Attachment 4). Based on all input
received, it is requested that Council members prepare and
submit up to seven candidate goals as Major City Goals by
9:00 a.m. on Tuesday, January 20, 2015. Council members
are also asked to indicate which of these goals should also be
Measure G priorities, and to prepare and submit suggestions
for changes in other programs and services that might help
fund their desired goals. Staff will then compile verbatim,
composite lists organized by common topics, without
identifying who submitted the particular statements for review
and consideration before the workshop. This list will be
distributed to all Council members and the community at the close of business on Wednesday,
January 21, 2015. While staff will retain individual submissions in the working files, it is
recommended that Council members refrain from releasing their personal lists so that each
Council member can review all of the submissions and discuss them at the Goal-Setting
Workshop before taking a position.
3. Council Goal-Setting Workshop
At the all-day January 24 workshop, the Council will review the consolidated goals presented by
Council members to ensure clarity, completeness and understanding; and then narrow the list to
finalist goals that are supported by at least three Council members. The discussion will note
which goals address local sales tax priorities.
While the Council proceeds with the discussion outlined above, the staff will prepare a final
listing that the Council can use in prioritizing goals. In years past, the Council has used a
ranking system of 5 through 0 for each candidate goal. Staff recommends continuing to use this
ranking system for 2013-15, summarized as follows:
Major City Goals
represent the most
important, highest priority
goals for the City to
accomplish over the next
two years, and as such,
resources should be
included in the 2015-17
Financial Plan.
B2-4
2015-17 Budget Process and Policies Page 5
5 Most important, highest priority for City to achieve over the next two years.
4 Very important goal to achieve.
3 Important goal to achieve.
2 Address if resources are available.
1 Defer to 2017-19 for consideration.
0 Not a priority goal.
Depending on the number of candidate goals, total points available to individual Council
members have ranged in the past from 50 to 75 based on 3 points per candidate goal. The exact
number of points used for ranking is typically figured out on the day of the workshop. Following
the ranking exercise, staff will summarize the results. Based on past experience, it is likely that
two priority “tiers” will emerge from this process:
1. Major City Goals. These represent the most important, highest priority goals for the City to
accomplish over the next two years, and as such, resources to accomplish them should be
included in the 2013-15 Financial Plan. The initial list of Major City Goals following the
ranking will include only those goals where a majority of Council Members rank the goal as
a 4 or 5. Subsequent discussion will allow the Council to refine the goal list, however, the list
should remain consistent with the “Criteria for Major City Goals” (Attachment 7).
2. Other Important Objectives. Goals in this category are important for the City to
accomplish, and resources should be made available in the 2013-15 Financial Plan if at all
possible.
The outline for the goal setting workshop is provided in Attachment 5; and suggested guidelines
for Council members during the goal-setting process are provided in Attachment 6. Included as
Attachment 7 are the suggested “Criteria for Major City Goals” which have been used by the
Council for many years. These criteria capture the relevant considerations to determine a Major
City Goal , but the Council could refine the criteria at this time if desired.
No follow-up meeting has been needed in the last several goal-setting sessions as the Council
concluded all necessary actions at the Saturday Goal-Setting Workshop. Continued consideration
of goals for 2015-17 will be scheduled for the next regular Council meeting following the
workshop only if needed.
The City Council is being presented with the elements of the financial planning process still to be
executed to affirm. As such staff’s recommendation is to approve the remaining elements of the
process and the revised schedule.
Essential Services Measure - Integration Report
Measure Y was approved by City voters in November 2006 to preserve essential services for the
community. Measure Y established a one-half percent local sales tax with an eight-year sunset
clause. The original measure would have expired on March 31, 2015, however voters approved
its extension for an additional eight years during the 2014 General Election when they passed
Measure G. The Measure Y Integration Report (Attachment 8) details how Measure Y revenue
was integrated into the budget during the most recently completed fiscal year, 2013-14, and
B2-5
2015-17 Budget Process and Policies Page 6
2013-15 Measure Y Priorities
• Preservation of Essential
Services (Public Safety,
Maintenance Services)
• Infrastructure Maintenance
• Neighborhood Wellness
• Open Space Preservation
• Transportation (Traffic
Congestion Relief)
illustrates how Measure Y expenditures supported Council goals. In the future, this report will be
adjusted to report on Measure G priorities, including the additional fiscal accountability
provisions contained in the new measure.
Measure Y includes provisions to ensure that consideration of this important revenue source is
integrated into the financial planning process. The City’s goal-setting process is designed to meet
two of these requirements, as follows.
1. Integration into the City's budget and goal-
setting process. The estimated revenue and
proposed use of funds generated by this measure
shall be an integral part of the City's budget and
goal-setting process, and significant
opportunities will be provided for meaningful
participation by citizens in determining priority
uses of these funds.
2. Annual citizen meeting. An invitation will be
extended each year to the entire community
asking Community members to participate in a
forum to review and discuss the use of
the revenue generated by this measure. City
staff will also be available to meet with any
group that requests a specific briefing with their
members to discuss and answer questions about
the revenues generated by the measure and their
uses.
It is important to know that Measure Y is a general purpose measure, and the proceeds are not
restricted to specific purposes. However, the language on the ballot measure approved by voters
in 2006 provides examples of the types of uses that would be funded. The language on the ballot
was:
“To protect and maintain essential services - such as neighborhood street paving and pothole
repair; traffic congestion relief; public safety, including restoring eliminated traffic patrol, Fire
Marshal and fire/paramedic training positions; flood protection; senior citizen
services/facilities; neighborhood code enforcement; open space preservation and other vital
general purpose services - shall the sales tax be increased by one-half cent for eight years only,
with citizen oversight and independent annual financial audits?”
In short, while the ballot language provided examples of the types of uses that could be funded -
based on community input received before placing the measure on the ballot - Measure Y is a
general purpose tax providing Council with flexibility to respond to new circumstances and
challenges. For 2013-14, total expenditures were $5,305,999 and an additional $4,364,265 in
funding was encumbered or assigned for future projects (many of which are now under
construction). These amounts and the specific operating and projects funded by Measure Y are
detailed in Attachment 8. These are still the unaudited results. The final information will be
B2-6
2015-17 Budget Process and Policies Page 7
included in the Certified Annual Financial Report, which will be published before the end of the
calendar year.
This year, the Community Forum will again give the community an opportunity to provide input
to the Council as to their views on future Essential Services Measure spending priorities. For
2015-17, the budget and goal-setting process will shift to a discussion of Measure G priorities.
This will help the Council connect Major City Goals and Measure G priorities. In addition, the
Citizens’ Revenue Enhancement Oversight Commission will be reviewing this and future reports
as part of their responsibilities for reviewing and reporting on local revenue measure
expenditures.
2013-15 FINANCIAL PLAN POLICIES
As noted in the discussion above, Council goal-setting is an important “first step” in the City’s
Financial Plan process. The second major feature in the City’s Financial Plan Process is reliance
upon clear polices. In looking at cities across the nation that have reputations for being
financially well-managed, and have maintained their fiscal health through good times and bad,
one finds that they have in common clearly articulated fiscal policies used in financial decision-
making. This best practice, as implemented by the City of San Luis Obispo, has been
acknowledged repeatedly by the bond rating agencies as an important factor in sustaining the
city’s excellent credit rating.
Formal statements of key budget and fiscal policies provide the foundation for assuring long-
term fiscal health by establishing a clear framework for effective and prudent financial decision-
making. The City’s Budget and Fiscal Policies are traditionally set forth in the Reference
section of the Financial Plan. The policies cover a broad range of fiscal issues, including:
• Financial Plan organization
• General Revenue Management
• User Fee Cost Recovery Goals
• Enterprise Fund Fees and Rates
• Revenue Distribution
• Investments
• Appropriations Limitation
• Fund Balances and Reserves
• Capital Improvement Management
• Capital Financing and Debt Management
• Human Resource Management
• Productivity
• Contracting for Services
At the outset of each financial planning cycle, the City reviews the policies in place to see if any
updating is necessary. At this point, a few policy changes are proposed. Changes are generally
intended to create consistency amongst City fiscal policies and create a system that is efficient
and effective to administer. In addition for 2015-17, a new policy is proposed to implement a
current Major City Goal and strategy in the Economic Development Strategic Plan. Also,
consideration of how to report and address unfunded pension liabilities is made.
B2-7
2015-17 Budget Process and Policies Page 8
As staff begins preparing the 2015-17 Financial Plan, other additions or revisions to the City’s
budget and fiscal policies may arise; if so, these will be presented for Council consideration at
that time.
Proposed Policy Changes
1. Infrastructure Investment Capital Fund Policy (New)
In early 2014, the City Council concluded a series of study sessions regarding infrastructure
financing alternatives. These study sessions were part of the implementation of the Economic
Development Strategic Plan, which identified the lack of infrastructure in certain areas of the
City as a barrier to the creation of new head-of-household jobs. Following the study sessions,
Council directed staff to develop a prioritized list of infrastructure projects, as follows.
Develop a prioritized list of infrastructure projects for the City to invest in from an
Economic Development and Quality of Life perspective: The Economic Development
Strategic Plan calls on the City to consider revisiting fair-share percentages in its fee
programs, specifically for projects that include community-wide benefits. Based on input
from City staff and the public, outside consultants would assist City staff in preparing a
prioritized list of infrastructure projects that would provide the most benefit to the City
from an economic development and quality of life perspective. This effort is included in
the Economic Development Major City Goal work program and is funded in the second
year of the 2013-15 Financial Plan.
Staff carried out a portion of this work effort internally, and one of the outcomes was an
awareness that many factors complicate the usefulness and effectiveness of a single list of
priority projects. These factors include timing, the state of the larger economy, overall City
budget goals, and project benefits (e.g. job vs. housing vs. traffic congestion relief, etc.). As a
result, staff is proposing a different method for identifying the infrastructure projects in which
the City could or should invest.
Staff is recommending the creation of a budget and financial policy to support the establishment
of an Infrastructure Investment Capital Fund (IICF) as part of the 2015-17 Financial Plan. This
framework would allow the Council to evaluate the proposed investment in relation to current
Major City Goals, the economic environment, and various other factors at the time of the
decision, rather than having a static list of projects from which to choose. This concept is similar
to the current Open Space Acquisition Fund, which has always sought to expand the greenbelt by
being prepared when opportunities to acquire new open space arise. By setting up the IICF,
Council would have the ability to set aside funding for future infrastructure projects that
contribute to improved economic development and enhanced quality of life in the City of San
Luis Obispo. The use of these funds would be at the discretion of Council based on funding
guidelines approved by the City Council after an extensive public process.
Consistent with the Economic Development Strategic Plan, these funds would not be used as a
direct incentive to any developer, nor be used to subsidize a developer’s fair share payment
towards infrastructure. To ensure that this is the case, any infrastructure project that is to be
considered for possible support by the Council would have to meet certain minimum
requirements as specified in any approved funding guidelines. The funding guidelines would be
B2-8
2015-17 Budget Process and Policies Page 9
brought to the City Council for approval, and examples of these requirements may include the
following:
• The use of City funds shall not offset any cost that would be expected to be paid to meet
the fair share obligation of any developer.
• The use of City funds shall not offset a project specific cost identified through the
environmental review process or under existing regulations or policies.
• The use of City funds shall support a project that would not otherwise be feasible due to
economic, timing or other issues outside the control of the project proponents or the City.
• The project shall provide significant public benefit by contributing to economic
development and quality of life within the City.
Staff is recommending that the City Council provide direction to initiate the process to create a
new budget policy and a public process to establish the fund. New language for the City’s budget
policies would be proposed as part of the Strategic Budget Direction in April 2015, if not sooner.
If the new policy is adopted by the City Council, then staff would begin the process of
developing the criteria to be used in administering the fund. This policy and criteria will be
developed with the benefit of public outreach, including presentations to residents, businesses,
and the development community.
2. Fleet and Information Technology Replacement Fund Reserve Policies (Revision)
Attachment 9 includes the City’s Budget and Fiscal Policies for consideration. Staff is proposing
changes to the reserve policies for the Fleet and Information Technology Replacement Funds, as
follows.
B. Fleet Replacement. For the General Fund fleet, the City will establish and maintain a Fleet
Replacement Fund to provide for the timely replacement of vehicles and related equipment
with an individual replacement cost of $15,000 or more. The City will maintain a minimum
fund balance in the Fleet Replacement Fund of at least 20% of the original purchase cost of
the items accounted for in this fund. During the 2015-17 Financial Plan period, the City will
establish and maintain a minimum fund balance in the Fleet Replacement Fund equal to
$500,000 for the emergency replacement of vehicles that are damaged beyond repair, and are
either not covered under the City’s property insurance program or the vehicle has a high
replacement cost and insurance proceeds will be inadequate to provide for the vehicle’s
replacement (fire engine). Above this contingency level, the amount retained in this fund,
coupled with the annual contributions received by it from any source, shall be adequate to
fully fund the equipment replacements approved in the Financial Plan.
The annual contribution to this fund will generally be based on the annual use allowance,
which is determined based on the estimated life of the vehicle or equipment and its original
purchase cost. Interest earnings and the proceeds from the sales of surplus equipment as well
as any related damage and insurance recoveries will be credited to the Fleet Replacement
Fund.
C. Information Technology (IT) Replacement Fund. The City will establish an IT Replacement
Fund for the General Fund to provide for the timely replacement of information technology,
B2-9
2015-17 Budget Process and Policies Page 10
both hardware and software, with an individual replacement cost of $25,000 or more. The
City will begin building the fund balance with the long term objective of maintaining a
minimum fund balance in the IT Replacement Fund of at least 20% of the original purchase
costs of the items accounted for in this fund. During the 2015-17 Financial Plan period, the
City will establish and maintain a minimum fund balance in this fund equal to $400,000 for
the emergency replacement of equipment that is damaged beyond repair and not covered
under the City’s property insurance program.
Interest earnings and the proceeds from the sale of surplus equipment as well as any related
damage and insurance recoveries will be credited to the fund.
These proposed changes to the reserve level of the Fleet and I.T. Replacement funds provide for
a reasonable contingency reserve level that can be drawn down in the event of an unforeseen loss
without requiring a further draw from the General Fund or its reserves. These amounts are
reasonable in light of potential losses and are sized to allow the funding level to be achieved
during the Financial Plan period without creating a shortfall of resources needed for other
important tasks.
3. Unfunded Pension Liabilities
Included in the 2013-15 Major City Goal for Fiscal Health was the direction to staff to prepare a
cost/benefit analysis regarding the City’s ability to prepay its unfunded pension liabilities.
Attachment 10 is a white paper discussing what those liabilities are and includes a discussion
about the City’s unfunded liability for its post-retirement insurance program. This information
is presented in concept so that initial policy direction can be provided before Strategic Budget
direction in April.
This initial policy direction would be provided via a new policy that will require the City to show
its costs for paying unfunded pension liabilities in its Five-Year Fiscal Forecast. This new policy
will improve transparency and create a better understanding of how the City is proactively
addressing this component of its total PERS costs. The city’s ability is dependent on this
information being provided by PERS. While not yet perfected, PERS’ new methodology for
creating and reporting rates will make fulfilling this policy possible. If the City Council supports
the concept, the new policy will be developed and presented to the Council during Winter 2015.
4. Efficient Purchasing Policies and Procedures (New)
One of the City’s adopted Financial Plan objectives states that the City will link resources with
results by “proposing objectives for improving the delivery of program services” (2013-15
Financial Plan, Objective A5, Pg. H-4). Based on organization-wide feedback, it appears that
some of the existing policies and procedures that govern purchasing activities are hindering
staff’s ability to deliver services in an efficient and timely manner. With each required level of
purchasing authority comes additional time, resources and review before a purchase can be made
and related service delivered. In some circumstances, the additional levels of scrutiny do not
appear to create additional value in terms of ensuring proper conduct, compliance with
regulations, or other quality control benefits.
B2-10
2015-17 Budget Process and Policies Page 11
While checks and balances are important for prudent fiscal management, there are opportunities
to reevaluate purchasing authority levels or bidding procedures to keep pace with the current
market and streamline the delivery of program services. This systematic review of operations is
consistent with adopted Financial Plan budget policies governing productivity, and specifically
responds to guidance for “Analyzing system and procedures to identify and remove unnecessary
review requirements” (2013-15 Financial Plan, #A, Pg. H-26). Staff is recommending that the
City Council adopt an additional budget and fiscal policy in the Productivity section (Pg. H-26)
that specifically focuses on purchasing systems:
H. Maintaining City purchasing policies and procedures that are as efficient and effective as
possible.
If adopted, staff will bring forward an analysis of existing purchasing practices, including
comparison with other benchmark cities, and return to the Council in Winter 2015 with
recommendations for improvement.
CONCURRENCES
The City’s internal Budget Review Team and the Department Head Team concurs with the
recommendations included in this report.
FISCAL IMPACT
There is no fiscal impact associated with the conduct of the City’s two-year financial planning
process. The City budgets for all of the planned activities. Preparing budgets are one of the core
government functions that the City is responsible for carrying out.
ALTERNATIVES
1. Modify the proposed Goal Setting activities. The Council could direct staff to pursue a
different process for goal-setting this year. Staff does not recommend this alternative
because there is value in conducting a similar process that residents are familiar with. If
the Council is interested in making changes, staff recommends that they be incremental
adjustments to the activities planned. If major changes are desired, they should be
discussed and planned during the first year of the next financial plan.
2. Do not approve proposed budget policy changes. The City Council could decide not to
approve one or more of the proposed budget policy changes. In this case, direction should
be given to staff regarding the related issues and any other changes desired to the budget
policies.
ATTACHMENTS
1. Community Priorities Survey
2. Invitation to Community to Participate in Goal Setting
3. Outline for Community Forum
4. Homework for Council Goal-Setting
5. Outline for Goal-Setting Workshop
B2-11
2015-17 Budget Process and Policies Page 12
6. Guidelines for Council Members During Goal-Setting Process
7. Criteria for Major City Goals
8. Measure Y Integration Report
9. Budget and Fiscal Policies for 2015-17
10. Pension Unfunded Liabilities White Paper
t:\council agenda reports\2014\2014-12-16\15-17 financial plan process (codron-padilla-lamers)\car (process-policies).docx
B2-12
2013-15 Major City Goals
Homelessness
Neighborhood Wellness
Essential Services, Infrastructure,
and Fiscal Health
Bike & Pedestrian Paths
Economic Development
Assess & Renew the Downtown
Skate Park
The City Council wants to hear
from you about what is truly
important for the community.
COMMUNITY PRIORITIES SURVEY
What are the most important priorities facing the City of San Luis
Obispo? The City wants your input!
Every two years, the City establishes the top priorities to make San Luis Obispo an even better place to live, work and play.
The City Council then matches the resources necessary to achieve these priorities through adopting the budget in June. The
adopted budget sets the City’s course of action for the next two years and helps the City to continue to provide the
exceptional services and programs the community cherishes.
As the upcoming 2015-17 financial plan process unfolds, it is clear that the City
is in an improved economic condition compared to the same stage of the 2013-
15 plan. Revenues have continued to rebound. Development review activity is
at a high level. The City has also made progress in our work to contain
operating costs which in turn helps improve our overall fiscal health. Despite
these positive signs, there are significant uncertainties and challenges looming.
This is particularly true in relation to the on-going cost of retirement and
insurance programs, and the need to fund the deferred maintenance of
infrastructure. All of these factors are likely to lead to complex and competing
budget decisions. Regardless of the specific fiscal circumstances, it is critical
that we have an effective process for setting the most important, highest priority
things for the City to do in the next two years. That’s where you can help!
Share Your Thoughts on the City’s Priorities!
The City Council needs to know your thoughts on what the community’s priorities should be so that available resources can
be best allocated to achieve them. Now it’s time for you to share your ideas for 2015-17 priorities.
The City needs the help of the community in two important ways:
Complete the survey by visiting www.slocity.org/opencityhall or fill out the survey on the reverse side of this
bulletin and mail it to City Hall at 990 Palm Street, 93401 or drop it by any City office.
Attend the Community Forum on Tuesday, January 13, 2015 from 6:00 p.m. to 9:30 p.m. at the Ludwick
Community Center, 864 Santa Rosa Street. This forum is an opportunity to present your ideas to the Council and discuss
them with other community members.
If you have any questions about the City’s goal-setting and budget process,
please contact Joe Lamers, Budget Manager, at 781-7132 or jlamers@slocity.org.
City staff will compile the community feedback for the Council to review in advance of its goal-setting workshop on
Saturday, January 24, 2015 at 9:00 a.m. During this public workshop, the Council will deliberate to set the Major City
Goals and Other Important Objectives for the next two years.
This survey is your opportunity to tell the City:
What issues are important to the community?
What priorities should the City focus on during the next two years?
How might the City adjust other service needs to accomplish these
priorities?
The City of San Luis Obispo is committed to including disabled persons in all of our services, programs and activities.
Telecommunications Device for the Deaf (805) 781-7410.
Attachment 1
B2-13
Community Priorities for 2015-17
What should be the City’s most important, highest priority goals during 2015-17?
Email address (optional): ___________________ __
Providing your email will enable you to view your statement online and see statements from others. Your email address will
not be included with your statement and the City will not share it.
How might the City adjust other programs & services to accomplish these priorities?
CITY ADMINISTRATIVE OFFICER
CITY OF SAN LUIS OBISPO
990 PALM ST
SAN LUIS OBISPO CA 93401-9938
NO POSTAGE
NECESSARY
IF MAILED
IN THE
UNITED STATES
BUSINESS REPLY MAIL
FIRST-CLASS MAIL PERMIT NO. 369 SAN LUIS OBISPO, CA
POSTAGE WILL BE PAID BY ADDRESSEE
--------------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------------
Fold and tape for mailing
Attachment 1
B2-14
Open City Hall Survey
Attachment 1
B2-15
Key Dates
Written Suggestions
Please send comments by Friday, December 19.
Comments can be submitted online at:
www.slocity.org/opencityhall
Or via mail to:
Joe Lamers, Budget Manager
990 Palm Street
San Luis Obispo, CA 93401
Fax: 781-7401
Email: jlamers@slocity.org
2015-17 Financial Plan Meetings
Budget Foundation Meeting
Tuesday, December 16, 2014, 6:00 p.m.
Community Forum
Tuesday, January 13, 2015
6:00 p.m. to 9:00 p.m.
Ludwick Community Center
Goal-Setting Workshop
Saturday, January 24, 2015
9:00 a.m. to 4:00 p.m.
City-County Library
Mid-Year Budget Review
Tuesday, February 17, 2015, 6:00 p.m.
Strategic Budget Direction & Major
City Goal Programs Workshop
Tuesday, April 21, 2015, 6:00 p.m.
Budget Workshops
June 9 & 11, 2015, 5:00 p.m.
June 16, 2015, 6:00 p.m.
2015-17 Budget Adoption
Tuesday, June 23, 2015, 6:00 p.m.
Contact Information
Please submit your comments by Friday,
December 19, 2015.
Comments can be submitted online at the
City’s Open Government portal:
www.slocity.org/opencityhall. If you are
submitting comments on behalf of a community
group, business or organization, please include
your organization’s name within your response.
To submit comments by mail, please them to
to Joe Lamers, Budget Manager, at 990 Palm
Street, San Luis Obispo, CA, 93401; by fax at
781-7401; or by email at jlamers@slocity.org.
For more information on the goal-setting and
budget process, contact Joe at 781-7132.
For additional information on the City’s
Financial Plan and Goal-Setting process, visit
www.slocity.org.
The City of San Luis Obispo is committed
to including disabled persons in all of our
services, programs and activities.
Telecommunications device for the deaf: (805) 781-
7410.
2015-17 Financial Plan
What are the most
important priorities
facing the City of San
Luis Obispo?
The City Council wants
to hear from you about
what is truly important
for the community.
Of all the things that can
be done to make the City
an even better place to
live, work and play, which
are the most important?
Attachment 2
B2-16
What Are the Most Important Needs of the City Over the Next Two Years?
The City Wants Your Input
Every two years, the City establishes the top
priorities to make San Luis Obispo an even
better place to live, work and play. Then the
City Council matches the resources to achieve
these priorities through adopting the budget in
June. This sets the City’s course of action for
the next two years and helps the City to
continue to provide the exceptional services
and programs the community cherishes.
As the upcoming 2015-17 financial plan
process unfolds, it is clear that the City is in an
improved economic condition compared to the
same stage of the 2013-15 plan. Revenues have
continued to rebound. Development review
activity is at a high level. The City has also
made progress in our work to contain operating
costs which in turn helps improve our overall
fiscal health. Despite these positive signs, there
are significant uncertainties and challenges
looming. This is particularly true in relation to
the on-going cost of retirement and insurance
programs, and the need to fund the deferred
maintenance of infrastructure. All of these
factors are likely to lead to complex and
competing budget decisions.
Regardless of the specific fiscal circumstances,
it is critical that we have an effective process
for setting the most important, highest priority
things for the City to do in the next two years.
That’s where you can help!
Share Your Thoughts on the City’s
Priorities!
You have the opportunity to tell the City:
What issues are important to the community?
What priorities should the City focus on during
the next two years?
How might the City adjust other service needs
to accomplish these priorities?
Major City Goals
The City Council needs to know your thoughts
on what the community’s priorities should be so
that available resources can be best allocated to
achieve them. Now it’s time for you to share
your ideas for 2015-17 priorities.
Major City Goals are identified as the most
important, highest priority goals for the City to
accomplish over the next two years.
Current Major City Goals
Homelessness
Neighborhood Wellness
Essential Services, Infrastructure & Fiscal Health
Bike & Pedestrian Paths
Economic Development
Assess & Renew the Downtown
Skate Park
Your Important Role in this Process
The City needs the help of the
community in two important ways:
Provide feedback.
Community input will be presented to all
Council members. It will be especially helpful
if your written comments address: what needs
you believe are the highest priority goals for the
community; why they are important; and any
creative ideas you have about how to achieve
them, such as alternative approaches or
opportunities for partnering with others.
Attend the Community Forum on
January 13, 2015 from 6:00 p.m. to 9:00
p.m. at the Ludwick Community
Center, 864 Santa Rosa Street.
This forum is an opportunity to present your
ideas to the Council and discuss them with
other community members.
City staff will compile the community feedback
for the Council to review in advance of its goal-
setting workshop on Saturday, January 24,
2015. During this public workshop, the Council
will deliberate to set the Major City Goals and
Other Important Council Objectives for the next
two years.
Attachment 2
B2-17
ATTACHMENT 3
Community Forum
6:00 PM to 9:00 PM, Tuesday, January 13, 2015
Ludwick Community Center
6:00 Welcome Mayor
6:05 Process, Current Goals, Local Sales Tax Priorities and Fiscal Outlook City Manager/
Finance & IT Director
6:30 Public Comment
1. Members of public who desire to speak complete public comment cards and indicate topic.
Where a group has several members present, we encourage them to select a spokesperson and
have others in their group indicate support for the same position with a show of hands.
2. We invite each speaker to address:
a. What do you recommend as a Major City Goal?
b. Why is it important to you and the City?
c. How do you suggest that it might be accomplished?
3. Facilitator calls upon a speaker and identifies general topic.
4. Department Head in the budget category for the topic steps up to write the idea on a flip chart
sheet and clarifies any linkages with existing programs or plans.
5. Staff posts the public comment in the relevant budget category.
6. All participants provided with half-page “post-its” to note any suggestions or concerns about
the ideas.
8:40 Closing remarks Mayor
8:45 Participants Vote on Top Priorities with Dots (no more than 1 green and orange dot per item)
9:00 Adjourn
Preparation
Prepare handouts on budget process; current goals & objectives and local revenue measure riorities;
and Community Priorities Survey results.
Set up the room with posting area for each of the budget categories.
Provide participants with half-page post-its.
After receiving public comments, provide the following adhesive dots per attendee: 6 orange for top
Local Sales Tax priorities and 6 green for overall goal priorities.
B2-18
Community Forum Procedures
Facilitator’s Role
As noted in the agenda details, the facilitator will help organize comments by general topic and
encourage groups to select a spokesperson and have others in the group indicate support for the
same position with a show of hands.
Documenting Testimony
Each speaker will be invited to address the “what, why, and how” of his/her suggested goal. The
Department Head responsible for the related budget function (i.e., Public Safety; Public Utilities;
Transportation; Leisure, Cultural and Social Services; Community Development; and General
Government) will write the idea on a flip chart sheet and clarify any linkages with existing
programs or plans. Staff will post the flip chart sheets with the public comments in the relevant
budget functional areas on the walls.
Additional Comments
Participants will also receive half-page “post-it” notes for audience members to offer written
comments such as resource suggestions or concerns to be posted next to goals.
Voting with Dots
To involve participants further and garner direct citizen feedback on all suggestions offered,
“voting with dots” will be used again. At the end of the comment period, each attendee will
receive adhesive dots to apply to the posted items: six green for overall goal priorities and six
orange dots for top local sales tax priorities will be provided to each participant. When using the
dots the same goal could receive both a green and orange dot. That decision is within the control
of community member participating in the process.
Participants will be advised to avoid assigning more than one green and one orange dot to any
one goal. However, because this is an informal way to gather input for the Council to be
considered for the coming two year-cycle there will be no monitors or ways to prohibit
participants from applying as many dots to any item as they wish. City staff will summarize the
results of the forum and distribute them to the Council on January 15, 2015, to assist the Council
in completing its “homework” and in preparation for the Goal-Setting Workshop.
Videotaping
It is also planned for the Community Forum to be videotaped so there will be a historical record
other than the flip charts and individual recollections. This will be done in a way that will be low
key (one camera, no lights) so the quality may not replicate a regular council meeting. Should the
Council object to this effort, concern should be expressed at the December 16th Council meeting.
B2-19
ATTACHMENT 4
Council Member Candidate Major City Goals
Please prepare up to 7 candidates for Major City Goals below and submit them to Finance by
9:00 a.m., Tuesday, January 20, 2015. Since the Council will identify connections between the
use of Measure G revenues and Major City Goals, please note which suggestions address
Measure G priorities. Finance will then compile a verbatim, composite list by topic without
identifying who submitted the particular statements. Please refrain from releasing your
personal list so that each Council member has flexibility to review all of the submissions and
discuss them at the Council Goal-Setting Workshop before staking a position.
Measure G? Yes/No
Measure G? Yes/No
Measure G? Yes/No
Measure G? Yes/No
Measure G? Yes/No
Measure G? Yes/No
Measure G? Yes/No
B2-20
ATTACHMENT 4
Suggestions for Changes in Other Programs and Services
Please provide ideas about possible changes in other programs and services to fund desired
goals. Please submit them to Finance by 9:00 a.m., Tuesday, January 20, 2013. Finance will
then compile a verbatim, composite list by topic without identifying who submitted the
particular statements. Please refrain from releasing your personal list so that each Council
member has flexibility to review all of the submissions and discuss them at the Council Goal-
Setting Workshop before staking a position.
B2-21
ATTACHMENT 5
Council Goal-Setting Workshop
8:30 AM to 4:30 PM
Saturday, January 24, 2015
City-County Library Community Room
8:30 - 9:00 a.m. Refreshments
9:00 - 9:05 a.m. Welcome and Introductions Mayor
9:05 - 9:10 a.m. Purpose, Process & Guidelines Facilitator
9:10 – Noon Review Goals by Category Council
Discuss Relationship of Goals to Current Activities
Formulate and Select Candidate Goals
Noon – 12:15 p.m. [Council may accept further comments from the
public that have not been previously presented]
12:15 – 1:15 Lunch Break [staff compiles candidate goals]
1:15 - 2:15 p.m. Discuss and Clarify the Goals Council
Each Member Prepares a Written Ballot Ranking the Goals
2:15 - 3:15 p.m. Break while staff tabulates the results Staff
3:15 - 4:00 p.m. Review and Identify Major City Goals Council
4:00 - 4:30 p.m. Discuss Next Steps Council/Staff
Preparation
Staff compiles and distributes composite list of candidate goals to Council members.
Staff prepares a template for Council ballot sheet.
Assign staff to enter goal statements into spreadsheet as Council formulates them.
B2-22
ATTACHMENT 6
Suggested Guidelines for Council Members
During the Goal-Setting Process
1. Encourage advisory boards, community groups and citizens to submit
written comments about desired goals.
2. Invite citizens to participate in Community Forum and to listen and learn
from their neighbors.
3. Receive comments from community and acknowledge their input without
prematurely expressing your point of view.
4. Assure the community that you are willing to listen openly to all
perspectives.
5. Focus your submission of suggested goals on a short list of key priorities to
target City resources (not to exceed seven candidate goals for
consideration).
6. Avoid publicizing your submission of suggested goals. Let staff compile
your submissions verbatim into a composite list of goals by category without
identification of who made each suggestion. This enables you to see the
whole picture.
7. Give yourself flexibility by not publicly staking positions in advance of the
January 24, 2015 Council Goal-Setting Workshop.
8. Use this process as a way to learn from citizens and Council colleagues
about what’s important.
9. Explore areas where the Council can come together for positive action.
10. Recognize that this is an important step, but only the first step, in the
planning and budgeting for the next two years.
B2-23
ATTACHMENT 7
Criteria for Major City Goals
1. Be legitimate to our genuine beliefs (real, supported).
2. Agreed upon by a Council majority.
3. Limited in number for comprehension, communication and focus.
4. Set forth in one document—the Financial Plan.
5. Be clear and understandable.
6. Established as a high priority and a real commitment.
7. Reflect major goals that cannot be achieved without Council support.
8. Can be translated into the performance goals and objectives of employees at
all levels of the organization.
9. Created within a supportive atmosphere where participants are not afraid to
state their suggestions for improving goals or objectives.
10. Reflect genuine consensus: while unanimous agreement is not required, they
should be accepted to the point where resistance to them is reduced or
eliminated.
B2-24
Measure Y Integration – 2013-14 Fiscal Year Attachment 8 - Page 1
MEASURE Y INTEGRATION REPORT - OVERVIEW
The purpose of this report is to provide the Council with information about the reporting, uses,
accountability, and priorities of Measure Y funds during the most recently completed fiscal year,
2013-14.
Background
Measure Y was approved by City voters in November 2006 to preserve essential services for the
community. Measure Y established a one-half percent local sales tax with an eight-year sunset
clause. The original measure would have expired on March 31, 2015, however voters approved
its extension for an additional eight years during the 2014 General Election when they passed
Measure G. This Measure Y Integration Report details how Measure Y revenue was integrated
into the budget during the most recently completed fiscal year, 2013-14, and illustrates how
Measure Y expenditures supported Council goals. In the future, this report will be adjusted to
report on Measure G priorities, including the additional fiscal accountability provisions
contained in the new measure.
Measure Y includes provisions to ensure that consideration of this important revenue source is
integrated into the financial planning process. The City’s goal-setting process is designed to meet
two of these requirements, as follows.
1. Integration into the City's budget and goal-setting process. The estimated revenue and
proposed use of funds generated by this measure shall be an integral part of the City's budget
and goal-setting process, and significant opportunities will be provided for meaningful
participation by citizens in determining priority uses of these funds.
2. Annual citizen meeting. An invitation will be extended each year to the entire community
asking Community members to participate in a forum to review and discuss the use of
the revenue generated by this measure. City staff will also be available to meet with any
group that requests a specific briefing with their members to discuss and answer questions
about the revenues generated by the measure and their uses.
It is important to know that Measure Y is a general purpose measure, and the proceeds are not
restricted to specific purposes. However, the language on the ballot measure approved by voters
in 2006 provides examples of the types of uses that would be funded. The language on the ballot
was:
“To protect and maintain essential services - such as neighborhood street paving and pothole
repair; traffic congestion relief; public safety, including restoring eliminated traffic patrol, Fire
Marshal and fire/paramedic training positions; flood protection; senior citizen
services/facilities; neighborhood code enforcement; open space preservation and other vital
general purpose services - shall the sales tax be increased by one-half cent for eight years only,
with citizen oversight and independent annual financial audits?”
B2-25
Measure Y Integration – 2013-14 Fiscal Year Attachment 8 - Page 2
2013-15 Measure Y Priorities
Preservation of Essential
Services (Public Safety,
Maintenance Services)
Infrastructure Maintenance
Neighborhood Wellness
Open Space Preservation
Transportation (Traffic
Congestion Relief)
In short, while the ballot language provided examples of the types of uses that could be funded -
based on community input received before placing the measure on the ballot - Measure Y is a
general purpose tax providing Council with flexibility to respond to new circumstances and
challenges.
DISCUSSION
How are Measure Y priorities determined?
Measure Y is a general purpose revenue source and the
City Council maintains discretion over decisions
regarding how these funds are allocated. Initially the City
did surveying and public education/outreach so staff
would know where to start, but priorities can change over
time, depending upon circumstances. The Measure Y
ballot language is always an important source of
information when determining Measure Y priorities. The
public goal setting process also plays an important role,
which is why the public has an opportunity to weigh in
on Measure Y priorities during the Community Forum.
Ultimately, the Council provided priority guidance on the
use of Measure Y funds when they adopted the 2013-15
Financial Plan, and again when the Supplement and
2014-15 Budget was adopted. The Council has made
great efforts in the past to connect Council goals with
Measure Y priorities, and it is anticipated that this will continue to be the case as Measure G
priorities are reviewed as part of the 2015-17 Financial Plan goal-setting process.
How are Measure Y Funds Used?
Measure Y funds have been used for both ongoing operations and capital projects to address the
priorities identified. The following table identifies that approximately $2.44 million of Measure
Y funds were incorporated into day-to-day operations during the 2013-14 fiscal year.
B2-26
Measure Y Integration – 2013-14 Fiscal Year Attachment 8 - Page 3
Operating Program Operating Program
Public Safety Sweeper Operator 54,264$
Traffic sergeant 163,547$ Stormwater management plan:81,344
Police patrol officer 175,883 Parks Maintenance Worker 73,102
Police Sergeant 200,199 CIP Project Management
Downtown Patrol 310,400 Field Engineering Inspector II/III 102,617
Fire Marshall 140,289 Transportation (Mobility and Safety)
Fire Training Officer 176,687 Building Code Enforcement Officer 91,940
Fire Administrative Assistant 81,000 Permit Technician (0.25)18,906
Streets & Sidewalks Student Neighborhood Assistance Pro53,079
Street Maintenance worker 71,368 Neighborhood Code Enforcement Sp137,905
Signal & Streetlight Tech 92,120 Traffic Engineer 92,520
Creek & Flood Protection Open Space Preservation
Storm Water Code Enforcement Officer91,945 Ranger Services 47,534
Collection Operator 184,580 Open Space Wildfire reduction 3,433
Total Measure Y funding allocated to operating programs 2,444,662$
Measure Y funding allocated to ongoing day-to-day operations in 2013-14
To the degree that these operating programs remain priorities, the amount of Measure Y funding
available for capital projects, or additional operating programs, is the difference between this
amount and the total amount of Measure Y funding available. If Measure Y is expected to
generate $7 million during the 2015-16 fiscal year, and $2.5 million is devoted to these ongoing
operating programs, $4.5 million would be available to accomplish other Measure Y priorities.
During the upcoming goal-setting process, Council will be asked to affirm if the ongoing
operating programs remain a priority use of local sales tax revenues, and to prioritize the use of
these funds.
Provided at the end of this report is a list of the Measure Y uses during 2013-14. This list is
included in the City’s Comprehensive Annual Financial Report (CAFR) and is currently being
audited by the City’s independent auditors. It provides information on the operating and capital
expenditures during 2013-14 as well as a reconciliation of all Measure Y revenues and uses since
2006-07.
SUMMARY
The City’s local sales tax measure is now expected to provide over $7 million in funding each
year to enable the City to provide important and valued services to the community; for both day-
to-day operating programs and one-time capital improvements. It is the Council’s obligation to
prioritize the use of this resource, just as it is their job to prioritize the use of all City resources.
For this reason it is important that as the Council sets goals for the 2015-17 Financial Plan, it
also considers the prioritized use of local sales tax revenue.
B2-27
Measure Y Integration – 2013-14 Fiscal Year Attachment 8 - Page 4
CITY OF SAN LUIS OBISPO, CALIFORNIA
MEASURE Y FUNDING SUMMARY SCHEDULE
FOR THE FISCAL YEAR ENDED JUNE 30, 2014
Operating Programs Capital Improvement Plan
Budget Actual Budget Actual
Encumbered
/ Assigned
Preservation of Essential Services
Public Safety
Police Services
869,583
850,029
-
-
-
Police Vehicles
-
-
172,800
31,421
141,379
Public Safety Mobile Data Computers
-
-
184,500
-
184,500
Fire Prevention & Training
399,656
397,976
-
-
-
Extrication Equipment
-
-
60,400
60,115
-
Fire Engine/Truck Replacement: Debt
Service
-
-
128,920
128,920
-
Fire Station #2 Remodel
-
-
2,700
630
2,070
Quickest Route Software
-
-
20,600
18,630
1,970
Maintenance Services
Streets, Sidewalks and Traffic Signal
Operations
180,836
163,488
-
-
-
Creek & Flood Protection
529,059
412,133
316,400
285,379
31,021
Parks
76,581
73,102
620,000
50,375
569,625
Project Management & Inspection
108,030
102,617
-
-
-
Neighborhood Wellness
Enhanced Building & Zoning Code
Enforcement
113,441
110,846
-
-
-
"SNAP" Enhancement
53,079
53,079
-
-
-
Neighborhood Code Enforcement
Specialists
139,183
137,905
-
-
-
Traffic Congestion Relief
Traffic Safety Report Implementation
-
-
25,000
-
25,000
Traffic Operations Report Implementation
-
-
30,000
-
30,000
Traffic Engineer
92,520
92,520
-
-
-
Traffic Sign Maintenance
-
-
-
-
-
Bicycle Facility Improvements
-
-
100,000
18,936
81,064
Neighborhood Traffic Improvements
-
-
20,000
4,846
15,154
B2-28
Measure Y Integration – 2013-14 Fiscal Year Attachment 8 - Page 5
CITY OF SAN LUIS OBISPO, CALIFORNIA
MEASURE Y FUNDING SUMMARY SCHEDULE
FOR THE FISCAL YEAR ENDED JUNE 30, 2014
Operating Programs Capital Improvement Plan
Budget Actual Budget Actual
Encumbered
/ Assigned
Open Space Preservation
Open Space Acquisition
-
-
200,000
-
200,000
Ranger Services Staffing
59,300
47,534
-
-
-
Open Space Wildfire Reduction
5,000
3,433
-
-
-
Infrastructure Maintenance &
Improvements
Santa Rosa Skatepark
-
-
1,226,300
16,313
1,209,987
Street Reconstruction & Resurfacing
-
-
1,400,700
939,572
461,128
Central Irrigation Controller
Replacement
-
-
163,323
163,323
-
Facility Maintenance
-
-
54,000
26,029
27,971
Jack House Exterior Painting
-
-
25,000
-
25,000
Johnson Avenue Underpass Pump
-
-
190,000
-
190,000
Library Restroom Remodel
-
-
39,000
39,000
-
Marsh Street Bridge Replacement
-
-
19,300
19,300
-
Mission Plaza Railing Upgrade
-
-
30,000
-
30,000
Olympic Pool Replastering
-
-
25,000
5,525
19,475
Pedestrian and Bicycle Pathway
Maintenance
-
-
60,000
60,000
-
Sidewalk Repairs
-
-
25,000
25,000
-
Tree Maintenance Equipment
-
-
100,400
-
100,400
Sinsheimer Parking Lot Paving
-
-
80,000
166
79,834
Mission Plaza Master Plan
-
-
100,000
-
100,000
I.T. Replacement Fund
-
-
500,000
116,066
383,934
Facility Maintenance Reserve
-
-
500,000
293,479
206,521
Totals Current Projects
2,626,268
2,444,662
6,419,343
2,303,025
4,116,032
B2-29
Measure Y Integration – 2013-14 Fiscal Year Attachment 8 - Page 6
CITY OF SAN LUIS OBISPO, CALIFORNIA
MEASURE Y FUNDING SUMMARY SCHEDULE
FOR THE FISCAL YEAR ENDED JUNE 30, 2014
Operating Programs Capital Improvement Plan
Budget Actual Budget Actual
Encumbered
/ Assigned
Prior Year Encumbered/Assigned
Amounts
Transportation (Mobility and Safety)
Traffic Safety Report Implementation
-
- 12,611
12,608
-
Traffic Sign Maintenance
-
- 44,600
44,600
-
Open Space Preservation
Froom Ranch Improvement
-
- 10,934
8,247
2,687
Infrastructure Maintenance and
Improvements
Street Reconstruction & Resurfacing
-
- 114,516
114,516
-
Broad Street Creek Bank Reinforcement
-
- 18,318
2,689
15,629
Olympic Pool Heater Replacement
-
- 176,721
166,345
-
Playground Equipment Replacement
-
- 373,083
169,942
203,141
Maintenance Services
Streets, Sidewalks and Traffic Signal
Repairs
-
- 31,612
31,584
-
Creek & Flood Protection
-
- 35,000 -
-
Sinsheimer Stadium Bldg. Assessment
-
- 34,556
7,780
26,776
SUB-TOTAL PRIOR YEAR AMOUNTS
$851,951 $558,312 $248,233
Totals
2,626,268
2,444,662
7,271,294
2,861,337
4,364,265
B2-30
Measure Y Integration – 2013-14 Fiscal Year Attachment 8 - Page 7
Measure Y Revenues & Uses Summary
Revenues:
Carryover from 2006-07
1,000,000
Revenues for 2007-08
5,996,600
Revenues for 2008-09
5,641,400
Revenues for 2009-10
5,252,500
Revenues for 2010-11
5,616,300
Revenues for 2011-12
6,237,500
Revenues for 2012-13
6,493,800
Revenues for 2013-14
6,774,365
Total Revenues
43,012,465
Uses:
Operating programs 2007-08
(1,463,700)
Capital improvement plan 2007-08
(2,434,100)
Operating programs 2008-09
(2,418,300)
Capital improvement plan 2008-09
(3,684,400)
Operating programs 2009-10
(2,267,100)
Capital improvement plan 2009-10
(2,161,200)
Operating programs 2010-11
(2,430,200)
Capital improvement plan 2010-11
(3,443,000)
Operating programs 2011-12
(2,203,900)
Capital improvement plan 2011-12
(3,967,500)
Operating programs 2012-13
(2,225,125)
Capital improvement plan 2012-13
(2,320,712)
Operating programs 2013-14
(2,444,662)
Capital improvement plan 2013-14
(2,861,337)
Total Uses
(36,325,235)
Contingency Reserve 2014
(1,700,000)
Encumbered or assigned for carryover for future year expenditures (4,364,265)
Net available for future year appropriations
622,964
B2-31
BUDGET REFERENCE MATERIALS Attachment 9
BUDGET AND FISCAL POLICIES
FINANCIAL PLAN PURPOSE AND ORGANIZATION
A. Financial Plan Objectives. Through its Financial Plan, the City will link resources with results by:
1. Identifying community needs for essential services.
2. Organizing the programs required to provide these essential services.
3. Establishing program policies and goals, which define the nature and level of program services required.
4. Identifying activities performed in delivering program services.
5. Proposing objectives for improving the delivery of program services.
6. Identifying and appropriating the resources required to perform program activities and accomplish
program objectives.
7. Setting standards to measure and evaluate the:
a. Output of program activities.
b. Accomplishment of program objectives.
c. Expenditure of program appropriations.
B. Two-Year Budget. Following the City's favorable experience, the City will continue using a two-year
financial plan, emphasizing long-range planning and effective program management. The benefits identified
when the City's first two-year plan was prepared for 1983-85 continue to be realized:
1. Reinforcing the importance of long-range planning in managing the City's fiscal affairs.
2. Concentrating on developing and budgeting for the accomplishment of significant objectives.
3. Establishing realistic timeframes for achieving objectives.
4. Creating a pro-active budget that provides for stable operations and assures the City's long-term fiscal
health.
5. Promoting more orderly spending patterns.
6. Reducing the amount of time and resources allocated to preparing annual budgets.
C. Measurable Objectives. The two-year financial plan will establish measurable program objectives and
allow reasonable time to accomplish those objectives.
D. Second Year Budget. Before the beginning of the second year of the two-year cycle, the Council will
review progress during the first year and approve appropriations for the second fiscal year.
E. Operating Carryover. Operating program appropriations not spent during the first fiscal year may be
carried over for specific purposes into the second fiscal year with the approval of the City Manager.
F. Goal Status Reports. The status of major program objectives will be formally reported to the Council on an
ongoing, periodic basis.
B2-32
BUDGET REFERENCE MATERIALS Attachment 9
BUDGET AND FISCAL POLICIES
G. Mid-Year Budget Reviews. The Council will formally review the City’s fiscal condition, and amend
appropriations if necessary, six months after the beginning of each fiscal year.
H. Balanced Budget. The City will maintain a balanced budget over the two-year period of the Financial Plan.
This means that:
1. Operating revenues must fully cover operating expenditures, including debt service.
2. Ending fund balance (or working capital in the enterprise funds) must meet minimum policy levels. For
the general and enterprise funds, this level has been established at 20% of operating expenditures.
Under this policy, it is allowable for total expenditures to exceed revenues in a given year; however, in
this situation, beginning fund balance can only be used to fund capital improvement plan projects, or
other “one-time,” non-recurring expenditures.
FINANCIAL REPORTING AND BUDGET ADMINISTRATION
A. Annual Reporting. The City will prepare annual financial statements as follows:
1. In accordance with Charter requirements, the City will contract for an annual audit by a qualified
independent certified public accountant. The City will strive for an unqualified auditors’ opinion.
2. The City will use generally accepted accounting principles in preparing its annual financial statements,
and will strive to meet the requirements of the GFOA’s Award for Excellence in Financial Reporting
program.
3. The City will issue audited financial statements within 180 days after year-end.
B. Interim Reporting. The City will prepare and issue timely interim reports on the City’s fiscal status to the
Council and staff. This includes: on-line access to the City’s financial management system by City staff;
monthly reports to program managers; more formal quarterly reports to the Council and Department Heads;
mid-year budget reviews; and interim annual reports.
C. Budget Administration. As set forth in the City Charter, the Council may amend or supplement the budget
at any time after its adoption by majority vote of the Council members. The City Manager has the authority
to make administrative adjustments to the budget as long as those changes will not have a significant policy
impact nor affect budgeted year-end fund balances.
GENERAL REVENUE MANAGEMENT
A. Diversified and Stable Base. The City will seek to maintain a diversified and stable revenue base to protect
it from short-term fluctuations in any one revenue source.
B. Long-Range Focus. To emphasize and facilitate long-range financial planning, the City will maintain
current projections of revenues for the succeeding five years.
B2-33
BUDGET REFERENCE MATERIALS Attachment 9
BUDGET AND FISCAL POLICIES
C. Current Revenues for Current Uses. The City will make all current expenditures with current revenues,
avoiding procedures that balance current budgets by postponing needed expenditures, accruing future
revenues, or rolling over short-term debt.
D. Interfund Transfers and Loans. In order to achieve important public policy goals, the City has established
various special revenue, capital project, debt service and enterprise funds to account for revenues whose use
should be restricted to certain activities. Accordingly, each fund exists as a separate financing entity from
other funds, with its own revenue sources, expenditures and fund equity.
Any transfers between funds for operating purposes are clearly set forth in the Financial Plan, and can only
be made by the Director of Finance & Information Technology in accordance with the adopted budget.
These operating transfers, under which financial resources are transferred from one fund to another, are
distinctly different from interfund borrowings, which are usually made for temporary cash flow reasons, and
are not intended to result in a transfer of financial resources by the end of the fiscal year.
In summary, interfund transfers result in a change in fund equity; interfund borrowings do not, as the intent is
to repay the loan in the near term.
From time-to-time, interfund borrowings may be appropriate; however, these are subject to the following
criteria in ensuring that the fiduciary purpose of the fund is met:
1. The Director of Finance & Information Technology is authorized to approve temporary interfund
borrowings for cash flow purposes whenever the cash shortfall is expected to be resolved within 45 days.
The most common use of interfund borrowing under this circumstance is for grant programs like the
Community Development Block Grant, where costs are incurred before drawdowns are initiated and
received. However, receipt of funds is typically received shortly after the request for funds has been
made.
2. Any other interfund borrowings for cash flow or other purposes require case-by-case approval by the
Council.
3. Any transfers between funds where reimbursement is not expected within one fiscal year shall not be
recorded as interfund borrowings; they shall be recorded as interfund operating transfers that affect
equity by moving financial resources from one fund to another.
USER FEE COST RECOVERY GOALS
A. Ongoing Review
Fees will be reviewed and updated on an ongoing basis to ensure that they keep pace with changes in the
cost-of-living as well as changes in methods or levels of service delivery.
In implementing this goal, a comprehensive analysis of City costs and fees should be made at least every five
years. In the interim, fees will be adjusted by annual changes in the Consumer Price Index. Fees may be
adjusted during this interim period based on supplemental analysis whenever there have been significant
changes in the method, level or cost of service delivery.
B. User Fee Cost Recovery Levels
In setting user fees and cost recovery levels, the following factors will be considered:
B2-34
BUDGET REFERENCE MATERIALS Attachment 9
BUDGET AND FISCAL POLICIES
1. Community-Wide Versus Special Benefit. The level of user fee cost recovery should consider the
community-wide versus special service nature of the program or activity. The use of general-purpose
revenues is appropriate for community-wide services, while user fees are appropriate for services that are
of special benefit to easily identified individuals or groups.
2. Service Recipient Versus Service Driver. After considering community-wide versus special benefit of
the service, the concept of service recipient versus service driver should also be considered. For
example, it could be argued that the applicant is not the beneficiary of the City's development review
efforts: the community is the primary beneficiary. However, the applicant is the driver of development
review costs, and as such, cost recovery from the applicant is appropriate.
3. Effect of Pricing on the Demand for Services. The level of cost recovery and related pricing of services
can significantly affect the demand and subsequent level of services provided. At full cost recovery, this
has the specific advantage of ensuring that the City is providing services for which there is genuinely a
market that is not overly-stimulated by artificially low prices.
Conversely, high levels of cost recovery will negatively impact the delivery of services to lower income
groups. This negative feature is especially pronounced, and works against public policy, if the services
are specifically targeted to low income groups.
4. Feasibility of Collection and Recovery. Although it may be determined that a high level of cost recovery
may be appropriate for specific services, it may be impractical or too costly to establish a system to
identify and charge the user. Accordingly, the feasibility of assessing and collecting charges should also
be considered in developing user fees, especially if significant program costs are intended to be financed
from that source.
C. Factors Favoring Low Cost Recovery Levels
Very low cost recovery levels are appropriate under the following circumstances:
1. There is no intended relationship between the amount paid and the benefit received. Almost all "social
service" programs fall into this category as it is expected that one group will subsidize another.
2. Collecting fees is not cost-effective or will significantly impact the efficient delivery of the service.
3. There is no intent to limit the use of (or entitlement to) the service. Again, most "social service"
programs fit into this category as well as many public safety (police and fire) emergency response
services. Historically, access to neighborhood and community parks would also fit into this category.
4. The service is non-recurring, generally delivered on a "peak demand" or emergency basis, cannot
reasonably be planned for on an individual basis, and is not readily available from a private sector source.
Many public safety services also fall into this category.
5. Collecting fees would discourage compliance with regulatory requirements and adherence is primarily
self-identified, and as such, failure to comply would not be readily detected by the City. Many small-
scale licenses and permits might fall into this category.
B2-35
BUDGET REFERENCE MATERIALS Attachment 9
BUDGET AND FISCAL POLICIES
D. Factors Favoring High Cost Recovery Levels
The use of service charges as a major source of funding service levels is especially appropriate under the
following circumstances:
1. The service is similar to services provided through the private sector.
2. Other private or public sector alternatives could or do exist for the delivery of the service.
3. For equity or demand management purposes, it is intended that there be a direct relationship between the
amount paid and the level and cost of the service received.
4. The use of the service is specifically discouraged. Police responses to disturbances or false alarms might
fall into this category.
5. The service is regulatory in nature and voluntary compliance is not expected to be the primary method of
detecting failure to meet regulatory requirements. Building permit, plan checks, and subdivision review
fees for large projects would fall into this category.
E. General Concepts Regarding the Use of Service Charges
The following general concepts will be used in developing and implementing service charges:
1. Revenues should not exceed the reasonable cost of providing the service.
2. Cost recovery goals should be based on the total cost of delivering the service, including direct costs,
departmental administration costs and organization-wide support costs such as accounting, personnel,
information technology, legal services, fleet maintenance and insurance.
3. The method of assessing and collecting fees should be as simple as possible in order to reduce the
administrative cost of collection.
4. Rate structures should be sensitive to the "market" for similar services as well as to smaller, infrequen t
users of the service.
5. A unified approach should be used in determining cost recovery levels for various programs based on the
factors discussed above.
F. Low Cost-Recovery Services
Based on the criteria discussed above, the following types of services should have very low cost recovery
goals. In selected circumstances, there may be specific activities within the broad scope of services provided
that should have user charges associated with them. However, the primary source of funding for the
operation as a whole should be general-purpose revenues, not user fees.
1. Delivering public safety emergency response services such as police patrol services and fire suppression.
2. Maintaining and developing public facilities that are provided on a uniform, community-wide basis such
as streets, parks and general-purpose buildings.
3. Providing social service programs and economic development activities.
B2-36
BUDGET REFERENCE MATERIALS Attachment 9
BUDGET AND FISCAL POLICIES
G. Recreation Programs
The following cost recovery policies apply to the City's recreation programs:
1. Cost recovery for activities directed to adults should be relatively high.
2. Cost recovery for activities directed to youth and seniors should be relatively low. In those
circumstances where services are similar to those provided in the private sector, cost recovery levels
should be higher.
Although ability to pay may not be a concern for all youth and senior participants, these are desired
program activities, and the cost of determining need may be greater than the cost of providing a uniform
service fee structure to all participants. Further, there is a community-wide benefit in encouraging high-
levels of participation in youth and senior recreation activities regardless of financial status.
3. Cost recovery goals for recreation activities are set as follows:
High-Range Cost Recovery Activities - (60% to 100%)
a. Adult athletics
b. Banner permit applications
c. Child care services (except Youth STAR)
d. Facility rentals (indoor and outdoor; excludes use of facilities for internal City uses)
e. Triathlon
f. Golf
Mid-Range Cost Recovery Activities - (30% to 60%)
g. Classes
h. Holiday in the Plaza
i. Major commercial film permit applications
Low-Range Cost Recovery Activities- (0 to 30%)
j. Aquatics
k. Batting cages
l. Community gardens
m. Junior Ranger camp
n. Minor commercial film permit applications
o. Skate park
p. Special events (except for Triathlon and Holiday in the Plaza)
q. Youth sports
r. Youth STAR
s. Teen services
t. Senior/boomer services
4. For cost recovery activities of less than 100%, there should be a differential in rates between residents
and non-residents. However, the Director of Parks and Recreation is authorized to reduce or eliminate
non-resident fee differentials when it can be demonstrated that:
B2-37
BUDGET REFERENCE MATERIALS Attachment 9
BUDGET AND FISCAL POLICIES
a. The fee is reducing attendance.
b. And there are no appreciable expenditure savings from the reduced attendance.
5. Charges will be assessed for use of rooms, pools, gymnasiums, ball fields, special-use areas, and
recreation equipment for activities not sponsored or co-sponsored by the City. Such charges will
generally conform to the fee guidelines described above. However, the Director of Parks and Recreation
is authorized to charge fees that are closer to full cost recovery for facilities that are heavily used at peak
times and include a majority of non-resident users.
6. A vendor charge of at least 10 percent of gross income will be assessed from individuals or organizations
using City facilities for moneymaking activities.
7. Director of Parks and Recreation is authorized to offer reduced fees such as introductory rates, family
discounts and coupon discounts on a pilot basis (not to exceed 18 months) to promote new recreation
programs or resurrect existing ones.
8. The Parks and Recreation Department will consider waiving fees only when the City Manager
determines in writing that an undue hardship exists.
H. Development Review Programs
The following cost recovery policies apply to the development review programs:
1. Services provided under this category include:
a. Planning (planned development permits, tentative tract and parcel maps, rezonings, general plan
amendments, variances, use permits).
b. Building and safety (building permits, structural plan checks, inspections).
c. Engineering (public improvement plan checks, inspections, subdivision requirements,
encroachments).
d. Fire plan check.
2. Cost recovery for these services should generally be very high. In most instances, the City's cost
recovery goal should be 100%.
3. However, in charging high cost recovery levels, the City needs to clearly establish and articulate
standards for its performance in reviewing developer applicati ons to ensure that there is “value for cost.”
I. Comparability With Other Communities
In setting user fees, the City will consider fees charged by other agencies in accordance with the following
criteria:
1. Surveying the comparability of the City's fees to other communities provides useful background
information in setting fees for several reasons:
B2-38
BUDGET REFERENCE MATERIALS Attachment 9
BUDGET AND FISCAL POLICIES
a. They reflect the "market" for these fees and can assist in assessing the reasonableness of San Luis
Obispo’s fees.
b. If prudently analyzed, they can serve as a benchmark for how cost-effectively San Luis Obispo
provides its services.
2. However, fee surveys should never be the sole or primary criteria in setting City fees as there are many
factors that affect how and why other communities have set their fees at their levels. For example:
a. What level of cost recovery is their fee intended to achieve compared with our cost recovery
objectives?
b. What costs have been considered in computing the fees?
c. When was the last time that their fees were comprehensively evaluated?
d. What level of service do they provide compared with our service or performance standards?
e. Is their rate structure significantly different than ours and what is it intended to achieve?
3. These can be very difficult questions to address in fairly evaluating fees among different communities.
As such, the comparability of our fees to other communities should be one factor among many that is
considered in setting City fees.
ENTERPRISE FUND FEES AND RATES
A. Water, Sewer and Parking. The City will set fees and rates at levels which fully cover the total direct and
indirect costs—including operations, capital outlay, and debt service—of the following enterprise programs:
water, sewer and parking.
B. Transit. Based on targets set under the Transportation Development Act, the City will strive to cover at least
twenty percent of transit operating costs with fare revenues.
C. Ongoing Rate Review. The City will review and adjust enterprise fees and rate structures as required to
ensure that they remain appropriate and equitable.
D. Franchise Fees. In accordance with long-standing practices, the City will treat the water and sewer funds in
the same manner as if they were privately owned and operated. This means assessing reasonable franchise
fees in fully recovering service costs.
At 3.5%, water and sewer franchise fees are based on the mid-point of the statewide standard for public
utilities like electricity and gas (2% of gross revenues from operations) and cable television (5% of gross
revenues).
As with other utilities, the purpose of the franchise fee is reasonable cost recovery for the use of the City’s
street right-of-way. The appropriateness of charging the water and sewer funds a reasonable franchise fee for
the use of City streets is further supported by the results of studies in Arizona, California, Ohio and Vermont
which concluded that the leading cause for street resurfacing and reconstruction is street cuts and trenching
for utilities.
B2-39
BUDGET REFERENCE MATERIALS Attachment 9
BUDGET AND FISCAL POLICIES
REVENUE DISTRIBUTION
The Council recognizes that generally accepted accounting principles for state and local governments discourage
the “earmarking” of General Fund revenues, and accordingly, the practice of designating General Fund revenues
for specific programs should be minimized in the City's management of its fiscal affairs. Approval of the
following revenue distribution policies does not prevent the Council from directing General Fund resources to
other functions and programs as necessary.
A. Property Taxes. With the passage of Proposition 13 on June 6, 1978, California cities no longer can set
their own property tax rates. In addition to limiting annual increases in market value, placing a ceiling on
voter-approved indebtedness, and redefining assessed valuations, Proposition 13 established a maximum
county-wide levy for general revenue purposes of 1% of market value. Under subsequent state legislation,
which adopted formulas for the distribution of this countywide levy, the City now receives a percentage of
total property tax revenues collected countywide as determined by the State and administered by the County
Auditor-Controller. The City receives 14.9% of each dollar collected in property tax after allocations to
school districts.
Accordingly, while property revenues are often thought of local revenue sources, in essence they are State
revenue sources, since the State controls their use and allocation.
With the adoption of a Charter revision in November 1996, which removed provisions that were in conflict
with Proposition 13 relating to the setting of property tax revenues between various funds, all property tax
revenues are now accounted for in the General Fund.
B. Gasoline Tax Subventions. All gasoline tax revenues (which are restricted by the State for street-related
purposes) will be used for maintenance activities. Since the City's total expenditures for gas tax eligible
programs and projects are much greater than this revenue source, operating transfers will be made from the
gas tax fund to the General Fund for this purpose. This approach significantly reduces the accounting efforts
required to meet State reporting requirements.
C. Transportation Development Act (TDA) Revenues. All TDA revenues will be allocated to alternative
transportation programs, including regional and municipal transit systems, bikeway improvements, and other
programs or projects designed to reduce automobile usage. Because TDA revenues will not be allocated for
street purposes, it is expected that alternative transportation programs (in conjunction with other state or
federal grants for this purpose) will be self-supporting from TDA revenues.
D. Parking Fines. All parking fine revenues will be allocated to the parking fund, except for those collected by
Police staff (who are funded by the General Fund) in implementing neighborhood wellness programs.
INVESTMENTS
A. Responsibility. Investments and cash management are the responsibility of the City Treasurer or designee. It
is the City’s policy to appoint the Director of Finance and Information Technology as the City’s Treasurer.
B2-40
BUDGET REFERENCE MATERIALS Attachment 9
BUDGET AND FISCAL POLICIES
B. Investment Objective. The City's primary investment objective is to achieve a reasonable rate of return
while minimizing the potential for capital losses arising from market changes or issuer default. Accordingly,
the following factors will be considered in priority order in determining individual investment placements:
1. Safety 2. Liquidity 3. Yield
C. Tax and Revenue Anticipation Notes: Not for Investment Purposes. There is an appropriate role for tax
and revenue anticipation notes (TRANS) in meeting legitimate short-term cash needs within the fiscal year.
However, many agencies issue TRANS as a routine business practice, not solely for cash flow purposes, but
to capitalize on the favorable difference between the interest cost of issuing TRANS as a tax-preferred
security and the interest yields on them if re-invested at full market rates.
As part of its cash flow management and investment strategy, the City will only issue TRANS or other forms
of short-term debt if necessary to meet demonstrated cash flow needs; TRANS or any other form of short-
term debt financing will not be issued for investment purposes.
As long as the City maintains its current policy of maintaining fund/working capital balances that are 20% of
operating expenditures, it is unlikely that the City would need to issue TRANS for cash flow purposes except
in very unusual circumstances.
D. Selecting Maturity Dates. The City will strive to keep all idle cash balances fully invested through daily
projections of cash flow requirements. To avoid forced liquidations and losses of investment earnings, cash
flow and future requirements will be the primary consideration when selecting maturities.
E. Diversification. As the market and the City's investment portfolio change, care will be taken to maintain a
healthy balance of investment types and maturities.
F. Authorized Investments. The City will invest only in those instruments authorized by the California
Government Code Section 53601.
The City will not invest in stock, will not speculate and will not deal in futures or options. The investment
market is highly volatile and continually offers new and creative opportunities for enhancing interest
earnings. Accordingly, the City will thoroughly investigate any new investment vehicles before committing
City funds to them.
G. Authorized Institutions. Current financial statements will be maintained for each institution in which cash
is invested. Investments will be limited to 20 percent of the total net worth of any institution and may be
reduced further or refused altogether if an institution's financial situation becomes unhealthy.
H. Consolidated Portfolio. In order to maximize yields from its overall portfolio, the City will consolidate cash
balances from all funds for investment purposes, and will allocate investment earnings to each fund in
accordance with generally accepted accounting principles.
I. Safekeeping. Ownership of the City's investment securities will be protected through third-party custodial
safekeeping.
J. Investment Management Plan. The City Treasurer will develop and maintain an Investment Management
Plan that addresses the City's administration of its portfolio, including investment strategies, practices and
procedures.
B2-41
BUDGET REFERENCE MATERIALS Attachment 9
BUDGET AND FISCAL POLICIES
K. Investment Oversight Committee. As set forth in the Investment Management Plan, this committee is
responsible for reviewing the City’s portfolio on an ongoing basis to determine compliance with the City’s
investment policies and for making recommendations to the City Treasurer (Director of Finance and
Information Technology) regarding investment management practices.
Members include the City Manager, Assistant City Manager, Director of Finance & Information
Technology/City Treasurer, Finance Operations Manager, the City’s independent auditor, one City Council
member, and one member of the public.
The member of the public shall be appointed by the City Council in accordance with the City’s process for
appointing advisory body members.
L. Reporting. The City Treasurer will develop and maintain a comprehensive, well-documented investment
reporting system, which will comply with Government Code Section 53607. This reporting system will
provide the Council and the Investment Oversight Committee with appropriate investment performance
information.
APPROPRIATIONS LIMITATION
A. The Council will annually adopt a resolution establishing the City's appropriations limit calculated in
accordance with Article XIII-B of the Constitution of the State of California, Section 7900 of the State of
California Government Code, and any other voter approved amendments or state legislation that affect the
City's appropriations limit.
B. The supporting documentation used in calculating the City's appropriations limit and projected appropriations
subject to the limit will be available for public and Council review at least 10 days before Council
consideration of a resolution to adopt an appropriations limit. The Council will generally consider this
resolution in connection with final approval of the budget.
C. The City will strive to develop revenue sources, both new and existing, which are considered non-tax
proceeds in calculating its appropriations subject to limitation.
D. The City will annually review user fees and charges and report to the Council the amount of program
subsidy, if any, that is being provided by the General or Enterprise Funds.
E. The City will actively support legislation or initiatives sponsored or approved by League of California Cities
which would modify Article XIII-B of the Constitution in a manner which would allow the City to retain
projected tax revenues resulting from growth in the local economy for use as determined by the Council.
F. The City will seek voter approval to amend its appropriation limit at such time that tax proceeds are in excess
of allowable limits.
FUND BALANCE AND RESERVES
A. Minimum Fund and Working Capital Balances. The City will maintain a minimum fund balance of at
least 20% of operating expenditures in the General Fund and a minimum working capital balance of 20% of
B2-42
BUDGET REFERENCE MATERIALS Attachment 9
BUDGET AND FISCAL POLICIES
operating expenditures in the water, sewer and parking enterprise funds. This is considered the minimum
level necessary to maintain the City's credit worthiness and to adequately provide for:
1. Economic uncertainties, local disasters, and other financial hardships or downturns in the local or
national economy.
2. Contingencies for unseen operating or capital needs.
3. Cash flow requirements.
B. Fleet Replacement. For the General Fund fleet, the City will establish and maintain a Fleet Replacement
Fund to provide for the timely replacement of vehicles and related equipment with an individual replacement
cost of $15,000 or more. The City will maintain a minimum fund balance in the Fleet Replacement Fund of
at least 20% of the original purchase cost of the items accounted for in this fund. During the 2015-17
Financial Plan period, the City will establish and maintain a minimum fund balance in the Fleet Replacement
Fund equal to $500,000 for the emergency replacement of vehicles that are damaged beyond repair, and are
either not covered under the City’s property insurance program or the vehicle has a high replacement cost and
insurance proceeds will be inadequate to provide for the vehicle’s replacement (fire engine). Above this
contingency level, the amount retained in this fund, coupled with the annual contributions received by it from
any source, shall be adequate to fully fund the equipment replacements approved in the Financial Plan.
The annual contribution to this fund will generally be based on the annual use allowance, which is
determined based on the estimated life of the vehicle or equipment and its original purchase cost. Interest
earnings and the proceeds from the sales of surplus equipment as well as any related damage and insurance
recoveries will be credited to the Fleet Replacement Fund.
C. Information Technology (IT) Replacement Fund. The City will establish an IT Replacement Fund for the
General Fund to provide for the timely replacement of information technology, both hardware and software,
with an individual replacement cost of $25,000 or more. The City will begin building the fund balance with
the long term objective of maintaining a minimum fund balance in the IT Replacement Fund of at least 20%
of the original purchase costs of the items accounted for in this fund. During the 2015-17 Financial Plan
period, the City will establish and maintain a minimum fund balance in this fund equal to $400,000 for the
emergency replacement of equipment that is damaged beyond repair and not covered under the City’s
property insurance program.
Interest earnings and the proceeds from the sale of surplus equipment as well as any related damage and
insurance recoveries will be credited to the fund.
D. Major Facility Replacement Fund. The City will maintain a reserve within this fund for the purpose of
financing the cost of improvements having a cost of $25,000 or more to city-owned, general government
building and structures. The amount retained in this fund, coupled with annual contributions received by it
from any source, shall be adequate to fully fund the improvements included in the five-year Capital
Improvement Plan.
E. Water and Sewer Rate Stabilization Reserves. The City will maintain a reserve for the purposes of
offsetting unanticipated fluctuations in Water Fund or Sewer Fund revenues to provide financial stability,
including the stability of revenues and the rates and charges related to each Enterprise. The funding target
for the Rate Stabilization Reserve will be 10% of sales revenue in the Water Fund and 5% of sales revenue in
the Sewer Fund.
B2-43
BUDGET REFERENCE MATERIALS Attachment 9
BUDGET AND FISCAL POLICIES
Conditions for utilization and plan for replenishment of the reserve will be brought to Council for its
consideration during the preparation and approval of the Financial Plan or as may become necessary during
any fiscal year.
F. Future Capital Project Designations. The Council may designate specific fund balance levels for future
development of capital projects that it has determined to be in the best long-term interests of the City. For
example, replacement of critical information technology infrastructure or other projects.
G. Other Designations and Reserves. In addition to the designations noted above, fund balance levels will be
sufficient to meet funding requirements for projects approved in prior years which are carried forward into
the new year; debt service reserve requirements; reserves for encumbrances; and other reserves or
designations required by contractual obligations, state law, or generally accepted accounting principles.
CAPITAL IMPROVEMENT MANAGEMENT
A. CIP Projects: $25,000 or More. Construction projects and equipment purchases which cost $25,000 or
more will be included in the Capital Improvement Plan (CIP); minor capital outlays of less than $25,000 will
be included with the operating program budgets. Such projects are accounted for in the Capital Outlay Fund.
B. CIP Purpose. The purpose of the CIP is to systematically plan, schedule, and finance capital projects to
ensure cost-effectiveness as well as conformance with established policies. The CIP is a five-year plan
organized into the same functional groupings used for the operating programs. The CIP will reflect a balance
between capital replacement projects that repair, replace or enhance existing facilities, equipment or
infrastructure; and capital facility projects that significantly expand or add to the City's existing fixed assets.
C. Project Manager. Every CIP project will have a project manager who will prepare the project proposal,
ensure that required phases are completed on schedule, authorize all project expenditures, ensure that all
regulations and laws are observed, and periodically report project status.
D. CIP Review Committee. Headed by the City Manager or designee, this Committee will review project
proposals, determine project phasing, recommend project managers, review and evaluate the draft CIP budget
document, and report CIP project progress on an ongoing basis.
E. CIP Phases. The CIP will emphasize project planning, with projects progressing through at least two and up
to ten of the following phases:
1. Designate. Appropriates funds based on projects designated for funding by the Council through adoption
of the Financial Plan.
2. Study. Concept design, site selection, feasibility analysis, schematic design, environmental
determination, property appraisals, scheduling, grant application, grant approval, specification
preparation for equipment purchases.
3. Environmental Review. EIR preparation, other environmental studies.
4. Real Property Acquisitions. Property acquisition for projects, if necessary.
5. Site Preparation. Demolition, hazardous materials abatements, other pre-construction work.
B2-44
BUDGET REFERENCE MATERIALS Attachment 9
BUDGET AND FISCAL POLICIES
6. Design. Final design, plan and specification preparation and construction cost estimation.
7. Construction. Construction contracts.
8. Construction Management. Contract project management and inspection, soils and material tests, other
support services during construction.
9. Equipment Acquisitions. Vehicles, heavy machinery, computers, office furnishings, other equipment
items acquired and installed independently from construction contracts.
10. Debt Service. Installment payments of principal and interest for completed projects funded through debt
financings. Expenditures for this project phase are included in the Debt Service section of the Financial
Plan.
Generally, it will become more difficult for a project to move from one phase to the next. As such, more
projects will be studied than will be designed, and more projects will be designed than will be constructed or
purchased during the term of the CIP.
F. CIP Appropriation. The City’s annual CIP appropriation for study, design, acquisition and/or construction
is based on the projects designated by the Council through adoption of the Financial Plan. Adoption of the
Financial Plan CIP appropriation does not automatically authorize funding for specific project phases. This
authorization generally occurs only after the preceding project phase has been completed and approved by
the Council and costs for the succeeding phases have been fully developed.
Accordingly, project appropriations are generally made when contracts are awarded. If project costs at the
time of bid award are less than the budgeted amount, the balance will be unappropriated and returned to fund
balance or allocated to another project. If project costs at the time of bid award are greater than budget
amounts, five basic options are available:
1. Eliminate the project.
2. Defer the project for consideration to the next Financial Plan period.
3. Rescope or change the phasing of the project to meet the existing budget.
4. Transfer funding from another specified, lower priority project.
5. Appropriate additional resources as necessary from fund balance.
G. CIP Budget Carryover. Appropriations for CIP projects lapse three years after budget adoption. Projects
which lapse from lack of project account appropriations may be resubmitted for inclusion in a subsequent
CIP. Project accounts, which have been appropriated, will not lapse until completion of the project phase.
H. Program Objectives. Project phases will be listed as objectives in the program narratives of the programs,
which manage the projects.
I. Public Art. CIP projects will be evaluated during the budget process and prior to each phase for
conformance with the City's public art policy, which generally requires that 1% of eligible project
construction costs be set aside for public art. Excluded from this requirement are underground projects,
utility infrastructure projects, funding from outside agencies, and costs other than construction such as study,
environmental review, design, site preparation, land acquisition and equipment purchases.
B2-45
BUDGET REFERENCE MATERIALS Attachment 9
BUDGET AND FISCAL POLICIES
It is generally preferred that public art be incorporated directly into the project, but this is not practical or
desirable for all projects; in this case, an in-lieu contribution to public art will be made. To ensure that funds
are adequately budgeted for this purpose regardless of whether public art will be directly incorporated into
the project, funds for public art will be identified separately in the CIP.
In 2013-15,the City will continue to fund public at the same level required by the private sector: 0.5%.
J. General Plan Consistency Review. The Planning Commission will review the Preliminary CIP for
consistency with the General Plan and provide is findings to the Council prior to adoption.
CAPITAL FINANCING AND DEBT MANAGEMENT
A. Capital Financing
1. The City will consider the use of debt financing only for one-time capital improvement projects and only
under the following circumstances:
a. When the project’s useful life will exceed the term of the financing.
b. When project revenues or specific resources will be sufficient to service the long-term debt.
2. Debt financing will not be considered appropriate for any recurring purpose such as current operating
and maintenance expenditures. The issuance of short-term instruments such as revenue, tax or bond
anticipation notes is excluded from this limitation. (See Investment Policy)
3. Capital improvements will be financed primarily through user fees, service charges, assessments, special
taxes or developer agreements when benefits can be specifically attributed to users of the facility.
Accordingly, development impact fees should be created and implemented at levels sufficient to ensure
that new development pays its fair share of the cost of constructing necessary community facilities.
4. Transportation impact fees are a major funding source in financing transportation system improvements.
However, revenues from these fees are subject to significant fluctuation based on the rate of new
development. Accordingly, the following guidelines will be followed in designing and building projects
funded with transportation impact fees:
a. The availability of transportation impact fees in funding a specific project will be analyzed on a case-
by-case basis as plans and specification or contract awards are submitted for City Manager or
Council approval.
b. If adequate funds are not available at that time, the Council will make one of two determinations:
Defer the project until funds are available.
Based on the high-priority of the project, advance funds from the General Fund, which will be
reimbursed as soon as funds become available. Repayment of General Fund advances will be the
first use of transportation impact fee funds when they become available.
B2-46
BUDGET REFERENCE MATERIALS Attachment 9
BUDGET AND FISCAL POLICIES
5. The City will use the following criteria to evaluate pay-as-you-go versus long-term financing in funding
capital improvements:
a. Factors Favoring
Pay-As-You-Go Financing
1. Current revenues and adequate fund balances are available or project phasing can be accomplished.
2. Existing debt levels adversely affect the City's credit rating.
3. Market conditions are unstable or present difficulties in marketing.
b. Factors Favoring Long Term Financing
1. Revenues available for debt service are deemed sufficient and reliable so that long-term financings
can be marketed with investment grade credit ratings.
2. The project securing the financing is of the type, which will support an investment grade credit
rating.
3. Market conditions present favorable interest rates and demand for City financings.
4. A project is mandated by state or federal requirements, and resources are insufficient or unavailable.
5. The project is immediately required to meet or relieve capacity needs and current resources are
insufficient or unavailable.
6. The life of the project or asset to be financed is 10 years or longer.
7. Vehicle leasing when market conditions and operational circumstances present favorable
opportunities.
B. Debt Management
1. The City will not obligate the General Fund to secure long-term financings except when marketability
can be significantly enhanced.
2. An internal feasibility analysis will be prepared for each long-term financing which analyzes the impact
on current and future budgets for debt service and operations. This analysis will also address the
reliability of revenues to support debt service.
3. The City will generally conduct financings on a competitive basis. However, negotiated financings may
be used due to market volatility or the use of an unusual or complex financing or security structure.
4. The City will seek an investment grade rating (Baa/BBB or greater) on any direct debt and will seek
credit enhancements such as letters of credit or insurance when necessary for marketing purposes,
availability and cost-effectiveness.
B2-47
BUDGET REFERENCE MATERIALS Attachment 9
BUDGET AND FISCAL POLICIES
5. The City will monitor all forms of debt annually coincident with the City's Financial Plan preparation and
review process and report concerns and remedies, if needed, to the Council.
6. The City will diligently monitor its compliance with bond covenants and ensure its adherence to federal
arbitrage regulations.
7. The City will maintain good, ongoing communications with bond rating agencies about its financial
condition. The City will follow a policy of full disclosure on every financial report and bond prospectus
(Official Statement).
C. Debt Capacity
1. General Purpose Debt Capacity. The City will carefully monitor its levels of general-purpose debt.
Because our general purpose debt capacity is limited, it is important that we only use general purpose
debt financing for high-priority projects where we cannot reasonably use other financing methods for two
key reasons:
a. Funds borrowed for a project today are not available to fund other projects tomorrow.
b. Funds committed for debt repayment today are not available to fund operations in the future.
In evaluating debt capacity, general-purpose annual debt service payments should generally not exceed
10% of General Fund revenues; and in no case should they exceed 15%. Further, direct debt will not
exceed 2% of assessed valuation; and no more than 60% of capital improvement outlays will be funded
from long-term financings.
2. Enterprise Fund Debt Capacity. The City will set enterprise fund rates at levels needed to fully cover
debt service requirements as well as operations, maintenance, administration and capital improvement
costs. The ability to afford new debt for enterprise operations will be evaluated as an integral part of the
City’s rate review and setting process.
D. Independent Disclosure Counsel
The following criteria will be used on a case-by-case basis in determining whether the City should retain the
services of an independent disclosure counsel in conjunction with specific project financings:
1. The City will generally not retain the services of an independent disclosure counsel when all of the
following circumstances are present:
a. The revenue source for repayment is under the management or control of the City, such as general
obligation bonds, revenue bonds, lease-revenue bonds or certificates of participation.
b. The bonds will be rated or insured.
2. The City will consider retaining the services of an independent disclosure counsel when one or more of
following circumstances are present:
a. The financing will be negotiated, and the underwriter has not separately engaged an underwriter’s
counsel for disclosure purposes.
B2-48
BUDGET REFERENCE MATERIALS Attachment 9
BUDGET AND FISCAL POLICIES
b. The revenue source for repayment is not under the management or control of the City, such as land-
based assessment districts, tax allocation bonds or conduit financings.
c. The bonds will not be rated or insured.
d. The City’s financial advisor, bond counsel or underwriter recommends that the City retain an
independent disclosure counsel based on the circumstances of the financing.
E. Land-Based Financings
1. Public Purpose. There will be a clearly articulated public purpose in forming an assessment or special
tax district in financing public infrastructure improvements. This should include a finding by the Council
as to why this form of financing is preferred over other funding options such as impact fees,
reimbursement agreements or direct developer responsibility for the improvements.
2. Eligible Improvements. Except as otherwise determined by the Council when proceedings for district
formation are commenced, preference in financing public improvements through a special tax district
shall be given for those public improvements that help achieve clearly identified community facility and
infrastructure goals in accordance with adopted facility and infrastructure plans as set forth in key policy
documents such as the General Plan, Specific Plan, Facility or Infrastructure Master Plans, or Capital
Improvement Plan.
Such improvements include study, design, construction and/or acquisition of:
a. Public safety facilities.
b. Water supply, distribution and treatment systems.
c. Waste collection and treatment systems.
d. Major transportation system improvements, such as freeway interchanges; bridges; intersection
improvements; construction of new or widened arterial or collector streets (including related
landscaping and lighting); sidewalks and other pedestrian paths; transit facilities; and bike paths.
e. Storm drainage, creek protection and flood protection improvements.
f. Parks, trails, community centers and other recreational facilities.
g. Open space.
h. Cultural and social service facilities.
i. Other governmental facilities and improvements such as offices, information technology systems and
telecommunication systems.
School facilities will not be financed except under appropriate joint community facilities agreements or
joint exercise of powers agreements between the City and school districts.
3. Active Role. Even though land-based financings may be a limited obligation of the City, we will play an
active role in managing the district. This means that the City will select and retain the financing team,
including the financial advisor, bond counsel, trustee, appraiser, disclosure counsel, assessment engineer
and underwriter. Any costs incurred by the City in retaining these services will generally be the
responsibility of the property owners or developer, and will be advanced via a deposit when an
application is filed; or will be paid on a contingency fee basis from the proceeds from the bonds.
B2-49
BUDGET REFERENCE MATERIALS Attachment 9
BUDGET AND FISCAL POLICIES
4. Credit Quality. When a developer requests a district, the City will carefully evaluate the applicant’s
financial plan and ability to carry the project, including the payment of assessments and special taxes
during build-out. This may include detailed background, credit and lender checks, and the preparation of
independent appraisal reports and market absorption studies. For districts where one property owner
accounts for more than 25% of the annual debt service obligation, a letter of credit further securing the
financing may be required.
5. Reserve Fund. A reserve fund should be established in the lesser amount of: the maximum annual debt
service; 125% of the annual average debt service; or 10% of the bond proceeds.
6. Value-to-Debt Ratios. The minimum value-to-debt ratio should generally be 4:1. This means the value
of the property in the district, with the public improvements, should be at least four times the amount of
the assessment or special tax debt. In special circumstances, after conferring and receiving the
concurrence of the City’s financial advisor and bond counsel that a lower valu e-to-debt ratio is
financially prudent under the circumstances, the City may consider allowing a value-to-debt ratio of 3:1.
The Council should make special findings in this case.
7. Appraisal Methodology. Determination of value of property in the district shall be based upon the full
cash value as shown on the ad valorem assessment roll or upon an appraisal by an independent Member
Appraisal Institute (MAI). The definitions, standards and assumptions to be used for appraisals shall be
determined by the City on a case-by-case basis, with input from City consultants and district applicants,
and by reference to relevant materials and information promulgated by the State of California, including
the Appraisal Standards for Land-Secured Financings prepared by the California Debt and Investment
Advisory Commission.
8. Capitalized Interest During Construction. Decisions to capitalize interest will be made on case-by-case
basis, with the intent that if allowed, it should improve the credit quality of the bonds and reduce
borrowing costs, benefiting both current and future property owners.
9. Maximum Burden. Annual assessments (or special taxes in the case of Mello-Roos or similar districts)
should generally not exceed 1% of the sales price of the property; and total property taxes, special
assessments and special taxes payments collected on the tax roll should generally not exceed 2%.
10. Benefit Apportionment. Assessments and special taxes will be apportioned according to a formula that
is clear, understandable, equitable and reasonably related to the benefit received by—or burden attributed
to—each parcel with respect to its financed improvement. Any annual escalation factor should generally
not exceed 2%.
11. Special Tax District Administration. In the case of Mello-Roos or similar special tax districts, the total
maximum annual tax should not exceed 110% of annual debt service. The rate and method of
apportionment should include a back-up tax in the event of significant changes from the initial
development plan, and should include procedures for prepayments.
12. Foreclosure Covenants. In managing administrative costs, the City will establish minimum delinquency
amounts per owner, and for the district as a whole, on a case-by-case basis before initiating foreclosure
proceedings.
B2-50
BUDGET REFERENCE MATERIALS Attachment 9
BUDGET AND FISCAL POLICIES
13. Disclosure to Bondholders. In general, each property owner who accounts for more than 10% of the
annual debt service or bonded indebtedness must provide ongoing disclosure information annually as
described under SEC Rule 15(c)-12.
14. Disclosure to Prospective Purchasers. Full disclosure about outstanding balances and annual payments
should be made by the seller to prospective buyers at the time that the buyer bids on the property. It
should not be deferred to after the buyer has made the decision to purchase. When appropriate,
applicants or property owners may be required to provide the City with a disclosure plan.
F. Conduit Financings
1. The City will consider requests for conduit financing on a case-by-case basis using the following criteria:
a. The City’s bond counsel will review the terms of the financing, and render an opinion that there will
be no liability to the City in issuing the bonds on behalf of the applicant.
b. There is a clearly articulated public purpose in providing the conduit financing.
c. The applicant is capable of achieving this public purpose.
2. This means that the review of requests for conduit financing will generally be a two-step process:
a. First asking the Council if they are interested in considering the request, and establishing the ground
rules for evaluating it.
b. And then returning with the results of this evaluation, and recommending approval of appropriate
financing documents if warranted.
This two-step approach ensures that the issues are clear for both the City and applicant, and that key
policy questions are answered.
3. The workscope necessary to address these issues will vary from request to request, and will have to be
determined on a case-by-case basis. Additionally, the City should generally be fully reimbursed for our
costs in evaluating the request; however, this should also be determined on a case-by-case basis.
B. Refinancings
1. General Guidelines. Periodic reviews of all outstanding debt will be undertaken to determine
refinancing opportunities. Refinancings will be considered (within federal tax law constraints) under the
following conditions:
a. There is a net economic benefit.
b. It is needed to modernize covenants that are adversely affecting the City’s financial position or
operations.
c. The City wants to reduce the principal outstanding in order to achieve future debt service savings,
and it has available working capital to do so from other sources.
2. Standards for Economic Savings. In general, refinancings for economic savings will be undertaken
whenever net present value savings of at least five percent (5%) of the refunded debt can be achieved.
B2-51
BUDGET REFERENCE MATERIALS Attachment 9
BUDGET AND FISCAL POLICIES
a. Refinancings that produce net present value savings of less than five percent will be considered on a
case-by-case basis, provided that the present value savings are at least three percent (3%) of the
refunded debt.
b. Refinancings with savings of less than three percent (3%), or with negative savings, will not be
considered unless there is a compelling public policy objective.
HUMAN RESOURCE MANAGEMENT
A. Regular Staffing
1. The budget will fully appropriate the resources needed for authorized regular staffing and will limit
programs to the regular staffing authorized.
2. Regular employees will be the core work force and the preferred means of staffing ongoing, year-round
program activities that should be performed by full-time City employees rather than independent
contractors. The City will strive to provide competitive compensation and benefit schedules for its
authorized regular work force. Each regular employee will:
a. Fill an authorized regular position.
b. Be assigned to an appropriate bargaining unit.
c. Receive salary and benefits consistent with labor agreements or other compensation plans.
3. To manage the growth of the regular work force and overall staffing costs, the City will follow these
procedures:
a. The Council will authorize all regular positions.
b. The Human Resources Department will coordinate and approve the hiring of all regular and
temporary employees.
c. All requests for additional regular positions will include evaluations of:
The necessity, term and expected results of the proposed activity.
Staffing and materials costs including salary, benefits, equipment, uniforms, clerical support and
facilities.
The ability of private industry to provide the proposed service.
Additional revenues or cost savings, which may be realized.
4. Periodically, and before any request for additional regular positions, programs will be evaluated to
determine if they can be accomplished with fewer regular employees. (See Productivity Review Policy)
5. Staffing and contract service cost ceilings will limit total expenditures for regular employees, temporary
employees, and independent contractors hired to provide operating and maintenance services.
B. Temporary Staffing
B2-52
BUDGET REFERENCE MATERIALS Attachment 9
BUDGET AND FISCAL POLICIES
1. The hiring of temporary employees will not be used as an incremental method for expanding the City's
regular work force.
2. Temporary employees include all employees other than regular employees, elected officials and
volunteers. Temporary employees will generally augment regular City staffing as extra-help employees,
seasonal employees, contract employees, interns and work-study assistants.
3. The City Manager and Department Heads will encourage the use of temporary rather than regular
employees to meet peak workload requirements, fill interim vacancies, and accomplish tasks where less
than full-time, year-round staffing is required.
Under this guideline, temporary employee hours will generally not exceed 50% of a regular, full-time
position (1,000 hours annually). There may be limited circumstances where the use of temporary
employees on an ongoing basis in excess of this target may be appropriate due to unique programming or
staffing requirements. However, any such exceptions must be approved by the City Manager based on
the review and recommendation of the Human Resources Director.
4. Contract employees are defined as temporary employees with written contracts approved by the City
Manager who may receive approved benefits depending on hourly requirements and the length of their
contract. Contract employees will generally be used for medium-term (generally between six months and
two years) projects, programs or activities requiring specialized or augmented levels of staffing for a
specific period.
The services of contract employees will be discontinued upon completion of the assigned project, program or
activity. Accordingly, contract employees will not be used for services that are anticipated to be delivered on
an ongoing basis.
C. Overtime Management
1. Overtime should be used only when necessary and when other alternatives are not feasible or cost
effective.
2. All overtime must be pre-authorized by a department head or delegate unless it is assumed pre-approved
by its nature. For example, overtime that results when an employee is assigned to standby and/or must
respond to an emergency or complete an emergency response.
3. Departmental operating budgets should reflect anticipated annual overtime costs and departments will
regularly monitor overtime use and expenditures.
4. When considering the addition of regular or temporary staffing, the use of overtime as an alternative will
be considered. The department will take into account:
a. The duration that additional staff resources may be needed.
b. The cost of overtime versus the cost of additional staff.
c. The skills and abilities of current staff.
d. Training costs associated with hiring additional staff.
B2-53
BUDGET REFERENCE MATERIALS Attachment 9
BUDGET AND FISCAL POLICIES
e. The impact of overtime on existing staff.
D. Independent Contractors
Independent contractors are not City employees. They may be used in two situations:
1. Short-term, peak workload assignments to be accomplished using personnel contracted through an
outside temporary employment agency (OEA). In this situation, it is anticipated that City staff will
closely monitor the work of OEA employees and minimal training will be required. However, they will
always be considered the employees of the OEA and not the City. All placements through an OEA will
be coordinated through the Human Resources Department and subject to the approval of the Human
Resources Director.
2. Construction of public works projects and delivery of operating, maintenance or specialized professional
services not routinely performed by City employees. Such services will be provided without close
supervision by City staff, and the required methods, skills and equipment will generally be determined
and provided by the contractor. Contract awards will be guided by the City's purchasing policies and
procedures. (See Contracting for Services Policy)
PRODUCTIVITY
Ensuring the “delivery of service with value for cost” is one of the key concepts embodied in the City's Mission
Statement (San Luis Obispo Style— Quality With Vision). To this end, the City will constantly monitor and
review our methods of operation to ensure that services continue to be delivered in the most cost-effective
manner possible.
This review process encompasses a wide range of productivity issues, including:
A. Analyzing systems and procedures to identify and remove unnecessary review requirements.
B. Evaluating the ability of new technologies and related capital investments to improve productivity.
C. Developing the skills and abilities of all City employees.
D. Developing and implementing appropriate methods of recognizing and rewarding exceptional employee
performance.
E. Evaluating the ability of the private sector to perform the same level of service at a lower cost.
F. Periodic formal reviews of operations on a systematic, ongoing basis.
G. Maintaining a decentralized approach in managing the City's support service functions. Although some level
of centralization is necessary for review and control purposes, decentralization supports productivity by:
1. Encouraging accountability by delegating responsibility to the lowest possible level.
2. Stimulating creativity, innovation and individual initiative.
3. Reducing the administrative costs of operation by eliminating unnecessary review procedures.
B2-54
BUDGET REFERENCE MATERIALS Attachment 9
BUDGET AND FISCAL POLICIES
4. Improving the organization's ability to respond to changing needs, and identify and implement cost-
saving programs.
5. Assigning responsibility for effective operations and citizen responsiveness to the department.
H. Maintaining City purchasing policies and procedures that are as efficient and effective as possible.
CONTRACTING FOR SERVICES
A. General Policy Guidelines
1. Contracting with the private sector for the delivery of services provides the City with a significant
opportunity for cost containment and productivity enhancements. As such, the City is committed to
using private sector resources in delivering municipal services as a key element in our continuing efforts
to provide cost-effective programs.
2. Private sector contracting approaches under this policy include construction projects, professional
services, outside employment agencies and ongoing operating and maintenance services.
3. In evaluating the costs of private sector contracts compared with in-house performance of the service,
indirect, direct, and contract administration costs of the City will be identified and considered.
4. Whenever private sector providers are available and can meet established service levels, they will be
seriously considered as viable service delivery alternatives using the evaluation criteria outlined below.
5. For programs and activities currently provided by City employees, conversions to contract services will
generally be made through attrition, reassignment or absorption by the contractor.
B. Evaluation Criteria
Within the general policy guidelines stated above, the cost-effectiveness of contract services in meeting
established service levels will be determined on a case-by-case basis using the following criteria:
1. Is a sufficient private sector market available to competitively deliver this service and assure a reasonable
range of alternative service providers?
2. Can the contract be effectively and efficiently administered?
3. What are the consequences if the contractor fails to perform, and can the contract reasonably be written
to compensate the City for any such damages?
4. Can a private sector contractor better respond to expansions, contractions or special requirements of the
service?
5. Can the work scope be sufficiently defined to ensure that competing proposals can be fairly and fully
evaluated, as well as the contractor's performance after bid award?
6. Does the use of contract services provide us with an opportunity to redefine service level s?
7. Will the contract limit our ability to deliver emergency or other high priority services?
B2-55
BUDGET REFERENCE MATERIALS Attachment 9
BUDGET AND FISCAL POLICIES
8. Overall, can the City successfully delegate the performance of the service but still retain accountability
and responsibility for its delivery?
B2-56
City of San Luis Obispo, Council Agenda Report, Meeting Date, Item Number
FROM: Wayne Padilla, Director of Finance & Information Technology
SUBJECT: WHITE PAPER DISCUSSION O F THE ELEMENTS OF A POLICY TO
PREPAY THE CITY’S UNFUNDED OBLIGATIONS
DATE: DECEMBER 4, 2014
REPORT IN BRIEF
Included in the 2013-15 Major City Goal for Fiscal Health was the direction to staff to prepare a
cost/benefit analysis regarding the City’s ability to prepay its unfunded pension liabilities. This
report discusses what those liabilities are and includes a discussion about the City’s unfunded
liability for its post-retirement insurance program. After review of other agencies’ plans to
prepay their retirement obligation and discussion with the City’s actuary at the California Public
Employees Retirement System, staff is recommending further analysis of whether additional
resources beyond those which are already built into the City’s PERS rates should be applied as
prepayments against these liabilities. If the council concurs, this analysis will be presented to the
City Council in sufficient time so whatever the policy determination, it can be incorporated into
the Strategic Budget Direction presented to the City Council in April 2015.
DISCUSSION
Background
A component of the work program supporting Council’s Major City Goal of Fiscal Health in the
2013-15 Financial Plan directed staff to prepare a cost/benefit analysis regarding the City’s
ability to make payments on the CalPERS Tier 1 safety side fund, other pension obligations, or
to offset ongoing CalPERS employer rate increases, and to present the analysis with
recommendations to the City Council. A report providing this analysis was presented to the City
Council on April 15, 2014. At that time the Council approved staff’s recommendation to utilize
excess General Fund reserve amounts to prepay the retrospective deposit obligation in the
amount of $2.065 million that was owed to the CJPIA for the liability insurance program because
the immediate savings were larger than that which would have been obtained if the amount had
been used to prepay a portion of the Safety Side Fund liability. Council also authorized a
prepayment in the amount of $935,000 to be applied against the Safety Side Fund liability owed
to CalPERS.
At that time a commitment was made to return to the City Council with a recommendation for
how the City’s unfunded liabilities can be paid down over time. This report provides
information regarding the steps taken by other public agencies as they addressed their own
unfunded retirement liabilities and discusses the advantages of making prepayments against the
City’s unfunded liabilities. Also discussed is a strategy for a sustainable method of making
future prepayments that can be developed into a formal policy for future adoption by the City
Council.
The Retirement Benefit Program
The City provides retirement benefits for full-time employees through the California Public
Employees Retirement System (CalPERS). Employees who serve as sworn public safety
B2-57
PERS Unfunded Liabilities (City of San Luis Obispo White Paper) Page 2
officers (police officers and fire fighters) are members of the Safety Plan which has three benefit
tiers:
1. The first provides a 3% at age 50 benefit
2. The second tier for police provides a 2% at age 50 benefit, while the second tier for fire
personnel provides a 3% at age 55 benefit
3. The third tier program for both police and fire personnel provides a 2.7% at age 57 benefit
Employees who work in other capacities such as planners and clerical staff are members of the
Miscellaneous Plan, which also has three benefit tiers.
1. The first tier provides a 2.7% at age 55 benefit
2. The second tier provides a 2% at age 60 benefit
3. The third tier provides a 2% at age 62 benefit
CalPERS establishes the annual employer contribution rate that is charged against the City’s
payroll costs for eligible employees. The safety pool contribution rate is comprised of these
components:
1. Normal Cost, which is the amount needed to fund benefits earned by active employees in the
upcoming year
2. Unfunded Rate which is the amount charged to pay down the pool’s unfunded liability
3. Amortization of Side Fund which is the amount required to amortize the safety side fund
liability over 22 years
In addition to the employer contribution rate, CalPERS sets the member contribution rate which
is paid by each employee through a payroll deduction. The amounts of each rate applicable to
2014-15 are shown below:
Police Fire
Tier 1 Tier 2 Tier 3 Tier 1 Tier 2 Tier 3
Normal Cost 20.128% 15.973% 12.25% 20.128% 17.128% 12.25%
Unfunded Rated 9.428% 5.49% 9.428% 5.937%
Amortization of Side Fund 15.645% 15.645%
Employee Contribution 9.0% 9% 12.25% 9% 9% 12.25%
Miscellaneous Plan
Normal Cost 10.615%
Unfunded Rate 15.640%
Employee Contribution 8.000%
B2-58
PERS Unfunded Liabilities (City of San Luis Obispo White Paper) Page 3
Starting in 2015-16, CalPERS has changed the funding requirements for the Safety Pool Plan so
that all pool members will pay a fixed amount towards the unfunded liability instead of an
employer rate multiplied by the actual safety payroll processed by the City. The effective rates
and fixed amount to be paid for 2015-16 are shown in the table below.
Police Fire
Tier 1 Tier 2 Tier 3 Tier 1 Tier 2 Tier 3
Normal Cost 20.23% 15.373% 12.250% 20.23% 17.293% 12.250%
Amortization of
Unfunded*
Employee Contribution 9.00% 9.000% 12.250% 9.00% 9.000% 12.250%
*The unfunded component of the annual employer charge for the Tier 1 program has been
replaced by a fixed dollar amount payment. This amount is $2,948,165; Tier 2 and 3 programs
do not have an unfunded rate component.
Miscellaneous Plan
Normal Cost 10.656%
Unfunded Rate 17.644%
Employee Contribution 7.930%
Each October, CalPERS provides an actuarial valuation report for each benefit plan that updates
certain values to reflect changes in plan activity since the previous valuation. These changes
include but are not limited to:
The difference between the expected 7.5% rate of return and the actual amount
realized
Changes in the number of plan members who retire each year
Changes in the number of new plan members
Changes in the annual payroll provided to existing members of the plan
The actuarial valuations also provide new information on the variables associated with
maintaining the plan, such as the amount of the unfunded liability and the annual Employer
Contribution rate described above, which represents the amount for every dollar of safety payroll
that the City is required to pay from the start of the following fiscal year. The information used
for this report is taken from the latest valuation report that was issued for the year ending June
30, 2013.
Interest Yields and Discount Factors
The City places its idle cash in several different investments. For short term cash needs, the City
uses the state Local Agency Investment Fund which pays an annual return of approximately
.25%. For monies invested for longer terms, the interest rate varies from approximately .50% to
1.9%. For the quarter ending September 30, 2014 the yield on the City’s portfolio was .82% As
B2-59
PERS Unfunded Liabilities (City of San Luis Obispo White Paper) Page 4
discussed in the next section of this report, CalPERS assumes that all investments and liabilities
will return 7.5% each year. When this does not occur and other changes in variables do not
mitigate the shortfall, the unfunded liability amounts increase.
The currently adopted CalPERS actuarial assumptions rely on an investment return of at least
7.5% on all of the amounts it invests as well as on all of the amounts that are owed to it (i.e.
unfunded liabilities such as the safety side fund amount). This is known as the discount factor. If
the actual rate of return is less than this amount and all other factors remain the same (i.e.
number of annual retirements, mortality, compensation adjustments, etc.), later annual valuations
will reflect a greater unfunded liability. This means that while the city may prepay all or a
portion of the safety side fund liability, at any time that CalPERS does not earn the required rate
of return on the monies that the city has paid, an additional liability may be created in the safety
pool benefit program that would not reappear as a separate safety side fund obligation. This
generally results in increases to contribution rates for the safety pool and the City’s safety pool
liability would be increased based on its proportional share of all pool liabilities. As discussed
later, the City benefits from the effects of pooling when market losses are realized by CalPERS.
What are the City’s Unfunded Liabilities?
Retirement Programs
As previously discussed, the City maintains its retirement benefit program with the California
Public Employees Retirement System (CalPERS). These programs provide retirement benefits
for both sworn public safety and non-sworn staff members. These retirement benefit programs
are known as the safety and miscellaneous plans, respectively.
Prior to July 2007, the City maintained a standalone public safety retirement plan through
CalPERS. Beginning with the June 30, 2003 actuarial valuation CalPERS created risk pools in
order to combine individual plans having less than 100 members with the benefits of risk sharing
resulting from the pooling of resources. When the City joined the safety pool in 2007, CalPERS
created the safety side fund to account for the difference between the funded status of the City’s
standalone safety plan and that of the safety pool. At the time that the City joined the safety
pool, its standalone safety plan had an unfunded liability known as the safety side fund liability
which totals $24.6 million according to the latest CalPERS actuarial report as of June 30, 2013.
The safety plan’s share of the safety pool’s unfunded liability which is an additional amount
owed to CalPERS as of June 30, 2013 is $29.2 million. The total unfunded liability at June 30,
2013 for the safety plan is $53.8 million based on the market value of plan assets. This amount is
comprised of 3 components, each with their own amortization period which is outlined as
follows:
The safety side fund ($24.6 million) which has a 21 year amortization period;
The pre-2013 pool amount ($15.3 million) which has a 22 year amortization period;
The plan’s share of asset gains and losses ($14.1 million) which has a 30 year
amortization period.
The miscellaneous plan, which is not part of a pool, also has an unfunded liability of $61.8
million as of June 30, 2013 based on the market value of plan assets. Employees who participate
in the miscellaneous plan represent programs that are funded from the General and Enterprise
Funds. Accordingly, any changes in funding rates impact all of these programs.
B2-60
PERS Unfunded Liabilities (City of San Luis Obispo White Paper) Page 5
It is very important to note that overall, the current funding level is set to retire all components of
the liability within a 30 year period.
Other Post-Employment Benefits (OPEB)
In addition to the liabilities that exist for the retirement program, the City also maintains a retiree
health benefit program in accordance with the requirements of the CalPERS Health Benefit
Program. This program provides retirees who qualify with a $119.00 monthly benefit toward the
cost of their health insurance premiums. (There is a group of 6 retirees for whom the City
contributes more to the cost of their health insurance premiums until they reach age 65 or pass
away.) The City has been a member of this program since 1993 and entered into an agreement
with the California Employers’ Benefit Trust (CERBT) to pre-fund the City’s OPEB liability
during the 2008-2009 fiscal year. Under the current funding plan, the City is on track to retire the
unfunded liability in 23 years.
An actuarial valuation was completed on April 15, 2014 for the year ending June 30, 2013 which
reported that the unfunded liability as of June 30, 2013 was $4.4 million based on the actuarial
value of assets. The annual contribution toward the cost of this benefit program is currently
$588,000. This amount is made up of the City’s share of cost to prefund the unfunded liability
($297,000) and premium contributions made by retirees who purchase their health insurance
under the City’s health insurance program.
A recent change has been made to the Actuarial Standards of Practice rules that will require the
calculation of an implied subsidy starting in two years. An implied subsidy is an actuarially
determined liability that results from allowing retirees to both purchase their insurance and
obtain the post-retirement benefit at the same rates as active employees. Because the cost of
health care increases with age, and because retirees are older than the population of active
employees, the true cost of providing health care benefits to retirees is generally higher than the
amount reflected in the health insurance premium cost. This reporting change will result in an
increase in the amount of the unfunded liability prepayment portion of the Annual Required
Contribution (ARC) to reflect the cost associated with the higher liability starting in 2016-17.
The estimated increase in cost for that year is $383,000. (the General Fund provides 79% of the
funding for this program based on the distribution of employees among the various programs
operated by the City).
In the latest valuation report that was completed as of June 30, 2013, the actuary calculated the
implied subsidy using the actuarial value of assets to be $5.0 million. As a result, the combined
total of the OPEB unfunded liability is $9.4 million as of June 30, 2013.
B2-61
PERS Unfunded Liabilities (City of San Luis Obispo White Paper) Page 6
The Effects of GASB Changes on Pension and OPEB Reporting
While the City has been reporting its unfunded liabilities in its Comprehensive Annual Financial
Report each year in accordance with the current requirements of Governmental Accounting
Standards Board pronouncement #27, starting with the financial statements that will be prepared
for the Fiscal Year ending June 30, 2015 all cities must report their unfunded pension liability on
their Statement of Net Position in accordance with GASB pronouncement #68. This change in
reporting means that for the first time, the unfunded pension liability must be measured using the
fair market value of assets and reported on the agency-wide balance sheet. Additional
documentation regarding the City’s participation in the retirement program will also be provided
in accordance with the pronouncement.
The change in reporting requirement is intended to create a more prominent presentation of the
unfunded liability, but is not intended to change the manner in which the City continues to
operate or fund its operations. After the change in presentation method is made, the City will
continue to reflect a high level of solvency.
The actuary that prepared the City’s most recent OPEB valuation report has indicated that a new
Governmental Accounting Standards Board (GASB) pronouncement may soon be issued that
will require public agencies to report the value of the unfunded liability (including the implied
subsidy portion) in the same manner that the pension plan unfunded liability will be reported at
the end of the current fiscal year under GASB 68. The starting date for the new reporting on the
OPEB unfunded liability has not been determined.
Further Discussion of the OPEB Unfunded Liabilities
The current funding strategy for the OPEB program reflects the payoff of the unfunded liability
within 23 years based on current assumptions. With the change in reporting and the addition of
the implied subsidy liability, the Annual Required Contribution (ARC) will increase as discussed
above. Staff is researching what the effects of not fully funding the ARC will be on the City’s
credit rating to find out if it makes financial sense to continue paying only the annual amount
needed to prepay the portion of the unfunded liability that does not reflect the implied subsidy.
What Have Other Public Agencies Done to Pay Down Their Pension Liabilities?
A check of other agencies has revealed the following actions that each has taken. It is notable
that most of these agencies have not identified a specific period by which they intend to have
their unfunded liabilities paid down. Most are making at least one prepayment in an effort to
begin paying down their liability with whatever resources they have available at the time. Only
one has completely retired the unfunded liability.
Huntington Beach - $278 million unfunded liability
At the time the city was preparing its 2013-14 budget, the Council adopted staff’s
recommendation to make a prepayment to CalPERS based on a finding that excess revenues
existed at the end of each fiscal year. According to the Finance Director, the City has settled on
paying $1.0 million per year from their excess revenues against their safety plan unfunded
liability with the intent that the City will reduce the amortization period by 5 years. This will
reduce the amortization period from 30 years to 25 years. The city has adopted the theory that it
should pay for promises already made to its employees before entering into new ones.
B2-62
PERS Unfunded Liabilities (City of San Luis Obispo White Paper) Page 7
Santa Maria - $5.6 million Fire Safety Side Fund liability
The City elected to utilize an inter-fund loan from its solid waste enterprise fund in order to pay
down the unfunded liability in full. The enterprise fund is being repaid from retirement plan cost
savings over 10 years with interest set at 3%.
Newport Beach – $257.9 million unfunded liability
The city is making $250,000 quarterly prepayments this year to prepay the safety program’s
unfunded liability ($163.2 million). This is the limit of what they can afford to spend and there
does not appear to be a specific target set for the reduction of the amortization period. Staff is
considering a proposal that would utilize future savings in PERS costs that are realized at the end
of each year (estimated to be from $250,000 - $500,000) as a source of future prepayments.
Menlo Fire District – $38 million unfunded liability
The District plans to use savings from its unspent payroll budget to make prepayments starting in
March 2015. There is no formal plan to reduce the amortization period by a specified period.
Irvine - $91.1 million unfunded liability
The city adopted a plan that is funded largely from a $61 million reserve that exists in its Asset
Management Plan Fund (AMPF) and also uses $1.0 million annually from other fund excess
reserves. The plan to fund the prepayments includes a one-time upfront prepayment of $3.0
million from excess reserves, followed by annual installments of $5.0 million each from the
AMPF and an additional $1.0 million that will come from other excess reserve monies. Savings
generated from the prepayments will be used to repay the AMPF so that the fund reserve does
not fall below $43.9 million over the 10 year period.
Laguna Beach - $53 million unfunded liability ($24 million miscellaneous; $29 million safety
pool)
The city approved a $1.0 million prepayment against its unfunded liability from 2014-15 excess
reserves. In the future, up to $1.4 million is to be programmed for annual prepayments starting
no later than 2015-16 without impacting current city services.
Costa Mesa - $228 million unfunded liability ($144 million safety; $84 million miscellaneous)
The city approved a $6 million prepayment at the end of 2013-14 toward its fire side fund
liability and the use of the annual savings that result to make further prepayments against that
obligation. In addition, they approved making early payments of the required annual contribution
for the miscellaneous plan to take advantage of the discount available and also approved the
future prepayments of up to $500,000 annually toward the unfunded liability
San Luis Obispo – $115.6 million unfunded liability
The City Council approved a $935,000 prepayment on the Safety Side Fund liability during the
Mid-Year Budget Update session and a second $300,000 prepayment was made as part of the
2014-15 Supplemental Budget plan. Both prepayments came from excess reserves in the
General Fund. The City elected to continue paying the original employer rates rather than take
advantage of the rate savings that the prepayments generated (approximately .5%) in order to
generate additional prepayments during the rest of the fiscal year.
B2-63
PERS Unfunded Liabilities (City of San Luis Obispo White Paper) Page 8
Summary
To summarize the actions taken by these agencies, with the exception of Santa Maria, all have
chosen to use savings and/or excess reserves to provide the resources necessary to make the
prepayments that have been called for by their prepayment plans. Inter-fund loans are not always
an appropriate means of financing long-term obligations since they restrict the available
enterprise fund resources for the duration of the loan and possibly lower enterprise fund reserve
levels below those needed to support the start of construction on several significant capital
projects.
It was also noted that several cities including Irvine stated that they will review their policy and
the effect of all prepayment assumptions each year to determine whether any changes are needed
to the prepayment plan.
Prepay ment Strategy Considerations
It is important to note that with the recent changes in retirement funding that have been put into
place by CalPERS, the City is expected to pay off the unfunded liability within 30 years based on
current actuarial assumptions. In the past, the retirement system used rolling amortization
schedules to determine when the unfunded liabilities would be paid off. This meant that the
payoff dates were continually being moved into the future. One consideration that should be
taken into account when determining whether a policy for the repayment of these liabilities
should be created is whether there is a significant advantage to making additional payments to
retire the debt early. Therefore, one objective of a policy to prepay unfunded liabilities could be
the balancing of resources between those needed to meet current needs with the desire to retire
existing unfunded debt.
As seen with the other cities’ efforts to address their unfunded liabilities, most have not set a firm
funding objective other than to begin making prepayments to reduce their liabilities. Irvine has
targeted a 98% funding objective by the year 2023 and Huntington Beach has sought to reduce
their unfunded liability amortization period from 30 years to 25 years.
According to the City’s CalPERS actuary, Barbara Ware, one of the variables to consider when
establishing a policy for prepaying a retirement liability is the period of time when employees
will begin drawing their benefits because this provides assurance that the benefits are fully
funded. The actuary that prepared the OPEB valuation report also indicated that the timeframe
in which most plan participants will be retired should be considered as part of a prepayment
strategy for the same reason. CalPERS and the OPEB valuation consultant both have the ability
to provide the City with statistics showing when a majority of the members from these plans are
likely to retire.
Both the CalPERS and OPEB actuaries are also able to provide amortization tables that provide
the City with the ability to determine the timing and amount of each prepayment that would be
required to retire the unfunded liability of these plans over a specified period. Further analysis
will be completed using amortization tables as part of the analysis that will return to the City
Council in the coming months.
As stated above, all of the agencies that were contacted about their retirement prepayment plans
intended to use excess reserves, excess revenues or excess savings that were identified at the end
of a fiscal year to make their prepayments. The new policy should also identify where the
resources that will be used for making the prepayments will come from.
B2-64
PERS Unfunded Liabilities (City of San Luis Obispo White Paper) Page 9
IN COUNCIL READING FILE
Report to Council from April 15, 2014 outlining retirement repayment options
B2-65
Page intentionally left
blank.
B2-66