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HomeMy WebLinkAbout09/30/2008, B1 - SHORT-TERM ACTIONS TO REBALANCE 2008-09 BUDGET \1 Couna L M.inDw 9-30-08 j aGEnaa nepoat ,�,N.m4s y / 13CITY OF SAN LUIS OBI SPO FROM: Ken Hampian, City Administrative Officerwe Bill Statler, Director of Finance& Information Technology SUBJECT: SHORT-TERM ACTIONS TO REBALANCE 2008-09 BUDGET CAO RECOMMENDATION 1. Review and discuss the results of a comprehensive assessment of the City's fiscal situation in light of adverse events that have occurred since adoption of the 2008-09 Budget in June 2008. 2. Approve the short term budget actions outlined in this report in closing the budget gap for 2008-09. REPORT-IN-BRIEF The purpose of this report is to recommend implementation of short-term budget actions that respond to adverse fiscal events since the City's 2008-09 Budget was adopted in June 2008. Longer-term solutions will be developed as part of the upcoming 2009-11 Financial Plan process. This report focuses on three key short-term issues: 1. Identifying the fiscal challenges facing the City in 2008-09 due to recent trends in key revenues such as: sales, property and transient occupancy (TOT) taxes; the results of the recent binding arbitration decision with the Police Officers Association (POA); and State budget takeaways. This includes an analysis of interim General Fund financial results for 2007-08. 2. Considering recommended short-term budget-balancing actions in closing the "gap" for 2008-09, which includes capital project and program/service budget reductions, and other short term budget actions, including use of reserves. 3. Providing a preliminary assessment of our general fiscal outlook for 2009-11, including economic trends and the ongoing cost of the binding arbitration award. The outlook will be better defined in the five-year fiscal forecast that will be presented to the Council on December 16, 2008 (although we can now estimate at least a $3 million cost/revenue challenge as a result of ongoing binding arbitration costs and a reduced baseline for projecting future sales,property and TOT taxes). Short-Tenn Budget Actions Page 2 Summary of Findings and Recommendations 1. Revised Ending Fund Balance at June 30, 2008. Accounting for interim fiscal results for 2008-09, current trends in key revenues, added costs due to the binding arbitration decision and the impact of State budget cuts to cities (which appear to be very modest based on the tentative budget agreement recently reached with the Governor and Legislature), the General Fund balance will be $4.8 million lower at the end of 2008-09 than projected in the 2008-09 Financial Plan Supplement. This is due to two key factors: downturns in key revenues and the added cost of the binding arbitration decision. 2. Weak Performance in 2007-08 from Top Three Revenues. The City's top three General Fund revenue sources are sales,property and transient occupancy(TOT) taxes, accounting for 60% of total General Fund revenues. While both sales tax and TOT were lower than estimated, the key downward driver in the City's revenue results last fiscal year was property tax, which was less than projected by almost $500,000. Along with its impact on lower ending reserves for 2007-08, this means our property tax estimates for 2008-09 are overstated by a similar amount. This results in an estimated two-year shortfall of almost $1 million from this source alone. 3. Cost of Binding Arbitration Decision. The cost of the arbitration award to the POA from its effective date of January 2006 through the end of the current fiscal year is $5.4 million. Additionally, the Police Staff Officers' Association (SLOPSOA), which represents most sworn and non-sworn supervisors and managers in the Police Department, has a re-opener in its contract to address salary compaction issues caused by the binding arbitration decision. Negotiations are still underway with this group and an agreement has not yet been finalized. However, based on the status of negotiations to-date, we estimate there will be a retroactive cost of$60,000 and an annual ongoing cost of$343,000. Based on this, the total cost impact of the binding arbitration agreement from January 2006 through the end of the current fiscal year is projected to be $5.8 million. This is partially offset by funds previously set aside for compensation adjustments. 4. State Budget Takeaways. As described in greater detail below, all cities in California were facing the serious threat of significant State budget takeaways as the State struggled with its huge General Fund budget deficit, estimated at $15.2 billion. Estimates of the possible impact on the City ranged from $30,000 to $2.8 million, with a case that could be made for the validity of either number, or any in between. It was the City's adopted strategy in the 2008-09 Budget to use fund balance (reserves) as the first line of defense against any significant State budget cuts to cities. For the City, it appears that the impact of State budget balancing cuts will be very modest: about $20,000 from a 10%reduction in booking fee offsets. 5. Recommended Short-Term Budget Actions. In closing the $4.8 million budget gap, we recommend a combination of expenditure reductions in operating programs and Capital -a r Short-Term Budget Actions Page 3 Improvement Plan (CIP) projects; and the use of reserves. The following summarizes these recommended actions, which are discussed in greater detail below. Recommended Short-Term Budget Actions Action Amount Use of Reserves to 20% Policy Level 700,000 Available Balances: Completed CIP Projects 348,500 Fire Revenue Transfers: Mutual Aid &CUPA Fines 150,000 Operating Budget Reductions Funds No Longer Needed Added Binding Arbitration Legal Costs 100,000 Tour of California 20,000 Budget Reductions 855,700 CIP Project Deferrals Silt Removal: Defer to Summer 2009 & Fund with Zone 9 Revenues 300,000 Other CIP Deferrals 2,315,100 Total 1 $4,789,300 The following summarizes the contribution that each component brings to the budget balancing recommendation. As reflected in this chart, 75% of the budget balancing strategy relies on expenditure reductions (20%operating and 55% capital). Proposed Short-Term Budget Balancing Strategy ❑Reserves 15% ®Completed Projects 7% p Fire Re%enue ®CIP Project Transfers Deferrals 3% 55% ❑ Operating Expenditure Budget Reductions: 75°lo Reductions 20% The proposed expenditure reductions are detailed in report attachments, but include cuts in every City department. These budget cuts will impact street and sidewalk maintenance, flood protection,pedestrian and signal improvements, open space enhancements, tree maintenance, City grants and recreation facilities (including a new senior center study). Neighborhood policing,graffiti coordination, development review processing and telecommunications management will also be impacted as positions in all of these areas will be left vacant. ��3 Short-Term Budget Actions Page 4 Even with these reductions, Measure Y continues to be a vital and strong source of added revenue for the City in supporting service enhancements and protecting us against more drastic reductions now, and in the longer term. DISCUSSION Background The 2008-09 Budget Message described the City's fiscal situation as stable but stressed with three key uncertainties facing us: 1. Unknown impacts on cities as the State addresses its very serious budget problems. 2. Direction of the economy and its impact on key City revenues such as sales tax, property tax and transient occupancy tax (TOT). 3. Results of binding arbitration with the Police Officers Association. We now know that State budget takeaways—at least for 2008-09—will have a very minor impact on the City. However, we are facing a budget gap of$4.8 million in 2008-09 due to these other two factors. Implementing the Fiscal Health Contingency Plan Our first response upon learning about the binding arbitration decision on June 4 (one day after the Council adopted the 2008-09 Budget) was to activate our Fiscal Health Contingency Plan. This meant beginning to develop and implement both short-term and long-term response strategies. Immediate actions included the following short-tern steps as set forth in the plan: 1. Hiring "Chill." This is not an absolute freeze in filling vacant positions. However, CAO approval is required to fill all vacant regular positions. To do so, Department Heads must demonstrate that it is necessary in meeting public health, safety or other high-priority service needs that cannot be met on an interim, basis through contract, overtime or temporary staffing. In implementing the "chill," the goal is not just short-term savings, but preserving future options in the longer term. This applies to regular positions in the enterprise and other funds as well as the General Fund. It does not apply to filling temporary positions, as this may be one of the strategies for short-tern mitigations of the hiring chill. `Banking" vacant positions has been a key strategy in avoiding lay-offs in the past when responding to tough fiscal times. While we made position reduction decisions based solely on service priorities and minimizing community impacts (not on vacant positions, which are solely due to serendipity), we banked enough vacant positions during the "chill" to avoid regular staff lay-offs. Short-Term Budget Actions Page 5 In positioning us for difficult challenges that lie ahead of us in preparing the 2009-11 Financial Plan, the hiring chill is likely to remain in effect until June 2009. 2. Travel Chill. We will carefully review travel and training costs and CAO approval will continue to be required for all Travel Authorizations. 3., CIP Deferrals and Deletions. The CIP Review Committee, composed of the Assistant CAO, Directors of Public Works, Finance & Information, Utilities, Community Development, Parks & Recreation and the Fire Chief, was tasked with identifying candidate projects for deferral or deletion. 4. Operating Cost Review. The Budget Review Team (also a staff committee composed of the Director of Finance & Information Technology, Assistant CAO, Director of Human Resources and Finance Manager)was tasked with identifying special projects in the operating budget for possible deferral or deletion. Additionally, all General Fund departments were tasked with identifying candidate operating budget reductions. 5. Fund Balance (Reserves). Depending on the circumstances, the use of reserves — either above or below our policy levels (20% of operating expenditures) — may be an appropriate action. 6. Other Steps. The City will consider other short-term expenditure curtailments as appropriate. This includes short-term budget deferrals that may be placed in effect by department heads pending subsequent Council approval. For example, the Police Chief deferred moving forward with the new four-officer Neighborhood Policing Team and the enhanced graffiti abatement program until more is known about the specific budget reductions we will be making. This report defines the short-term problem facing us and presents the results of the reviews that have been underway since June 2008 as described above. However, it is important to stress that these are short-term budget-balancing actions for 2008-09. The five-year fiscal forecast, which will be presented to the Council on December 16, 2008, will provide the best basis for assessing the long-term fiscal challenges facing us. Strategies for meeting these long-term challenges as framed by this forecast will be an integral part of the 2009-11 budget process. State Budget Takeaways The Good News — At Least for 2008-09. As noted above, it appears that the impact of State budget cuts will be very modest: about $20,000 in 2008-09 based on a 10% reduction in booking fees offsets. State "COPS" funding, which provides financial support for local law enforcement, was also reduced by 10%. However, it appears that the minimum annual allocation of$100,000, which is the City's share of this program,was not reduced. While the impact on the City was modest, this is not true for many other cities in the State that have redevelopment agencies: $350 million was taken from them. 1-.5 Short-Term Budget Actions Page 6 Lastly, although the end result was a positive one for us (especially given the draconian possibilities that existed), it should be noted that the threat of deep State budget cuts to cities was very real. As of the preparation date of this report, the State has gone over 80 days without an adopted budget — the longest in its history. This impasse is due to the State's rare requirement (compared with other states) for two-thirds legislative approval of the budget — and the strong position of Democrats (who control a majority of the seats in both the Senate and Assembly) to increase revenues in order to avoid borrowing; and the equally strong opposition by Republicans to revenue increases. Given these circumstances, it was difficult to envision how these deeply- dug-in sides could find common ground Stated simply, they did so by the tried and true practices of the last five years: by one-time fixes, transfers and loans that will simply move the problem to next year. And that's why we,cannot be too sanguine about these results. On one hand, we were served well by the passage of Proposition IA in 2004, which makes it hard (but not impossible) for the State to take revenues away from cities; and by the leadership of the League of California Cities and local elected officials in achieving this result. On the other hand, the State is looking at another $7 to $8 billion deficit next year. So, the chances are high that this serious threat will not go away as long as the State continues to fail in its efforts to achieve fiscal stability and sustainability. Revised Financial Condition Due to Local Fiscal Circumstances Provided in Attachment LA is an analysis that provides the following comparisons based solely on changes in local fiscal circumstances as follows, without factoringin the impacts of the results of binding arbitration ("baseline revision"): 1. Comparison of revenues, expenditures and changes in fund balance: budget versus actual results for 2007-08. (Note: These are interim results and subject to change based on audit findings. However, we believe that any changes are likely to be insignificant.) 2. Comparison of revenues, expenditures and changes in fund balance: budget versus revised estimates for 2008-09, using actual results as the basis for recasting revenue estimates. 3. Two-year total of the variance from the 2008-09 Budget. The following highlights key results from this analysis: 1. Sales Tax. General sales tax receipts in 2007-08 were $143,300 lower than estimates due to a decline in sales in nearly every major business category, an experience that is common across the nation. The slowing economy has resulted in fewer sales of new motor vehicles, lumber and building materials, home furnishings and department stores. The losses were partially offset by higher fuel prices, which boosted revenues from service stations. The two- year total decline is almost $300,000. Revenues from our local %- cent sales tax (Measure Y accounted for just over $6 million in revenues, performing slightly better than expected. This underscores Measure Y's /-6 Short-Term Budget Actions Page 7 importance for the City's ability to deliver services to the community, especially in light of adverse results in other key revenues. 2. Property Tax. The $458,000 shortfall in property tax revenues in 2007-08 is largely due to a decrease in supplemental tax roll revenues. Property taxes are based on assessed valuation in January of the prior year, however certain events during the year such property sales and construction in progress can trigger supplemental taxes. As reflected in the sidebar chart, supplemental assessments in 2007-08 were down by $381,000 from 2006-07 (about 50%). This accounts for over 80% of the decrease. The County Assessor can also make downward valuation adjustments based on market conditions. Each of these Supplemental Current Secured Property factors played a role in our Fiscal Incr(Decr)from Prior Year supplemental assessments being Year Receipts Amount % 2007-08 397,968 (381,671) -49% lower than anticipated. 2006-07 779,639 28,896 4% 2005-06 750,743 346,265 86% The good news from this analysis is 2004-05 404,478 100,480 33% that while the growth in property 2003-04 303,998 22,406 8% taxes is down compared to prior 2002-03 281,592 years, we do not seem to be experiencing the drop in property values that many other communities are experiencing. On the other hand, we can expect to see this lower level of supplemental assessment as the "new normal" for the foreseeable future. This results in a two-year decrease of over$900,000 from 2008-09 Budget estimates. 3. Transient Occupancy Tax (TOT). As indicated in the recent TOT newsletter, results for the year did not meet our projections after a weak fourth quarter. This weaker"base" will result in dower revenue projections for future years. Given the results, our modest projection of 2% growth for 2008-09 seems reasonable. However, this results in a two-year decrease compared with 2008-09 Budget projections of$134,900. 4. Weak Performance from Our Top Three Revenues. The City's top three General Fund revenue sources — sales tax, property tax and TOT — account for 60% of total General Fund revenues. The two-year shortfall from our top three revenues is $1.4 million. The Moral of the Story: Maintaining sustainable operations is very difficult when your top revenues are not performing as expected. 5. Development Review Fees. While development review fees were right on target for 2007-08, these are driven by the timing of private sector permit applications, which are difficult to project. Fees for several large projects were received during 2007-08, and as such, revenue we received this year may simply mean lower revenues next year. Moreover, based on current trends in the construction market, we may see significantly lower development review activity in the future, resulting in lower development review fees. 6. Recreation Fees. Revenues from the recently completed therapy pool exceeded estimates, which largely accounts for the variance in recreation fees. I -7 Short-Term Budget Actions Page 8 7. Interest Earnings. Revenues from interest earnings in 2007-08 were on target with our estimates. However, we will see declines from this level in 2008-09 due to lower interest rates as well as lower investable balances. 8. Mutual Aid Revenues. This "one-time" revenue was above estimates by $584,000. These revenues result when Fire personnel respond to significant events (usually wildland fires) for which the City receives reimbursement from Federal or State sources. This amount reflects reimbursements for indirect and other costs that were greater that our direct cost of responding to the event. This was an unusually high year for this one-time revenue source. Accordingly, we recommend using this one-time revenue for a strategic one-time purpose by transferring these funds to the Fleet Replacement Fund to partially offset the $1.03 million estimated cost of a 100-foot ladder truck scheduled for replacement in 2009-10. 9. Expenditures. On the other hand, expenditures were less than estimated by $650,500. This reflects well on department stewardship practices; and was a key factor in offsetting revenue declines. (It should be noted that departments achieved these savings in addition to $1.5 million we budgeted for.) 10. Ending Fund Balance. Very Close to Projected Even with Revenue Downturns. Based solely on local fiscal circumstances — before accounting for the costs of the binding arbitration decision, we project ending 2008-09 with a fund balance that is within $339,000 of our 2008-09 Budget estimate; and is still $499,000 over our minimum policy level. Revised Financial Condition Plus Binding Arbitration The analysis in Attachment LB builds on the "baseline revision" provided in Attachment 1.A: it uses the same comparative format as Attachment LA and the same assumptions, but it includes the cost of the binding arbitration decision (highlighted in gray). As reflected in Attachment LB, there are three factors that determine this net added cost: MOA/Other Compensation Adjustments The City budgets for estimated new Memorandum of Agreement (MOA) and other compensation costs when current agreements do not fully cover a budget period (therefore we need to estimate a budget for the period not yet resolved through a negotiation). For the 2007-09 Financial Plan Supplement, this included agreements with the POA, SLOPSOA and management employees (who are unrepresented); funding for the compensation study; retirement pay-outs of unused vacation time; and estimated increases in cash-basis retiree health insurance costs. As reflected in Attachment LB, there is $1.8 million available in this account to offset the costs of the binding arbitration decision: $810,000 in 2007-08 and $996,000 in 2008-09. /,9 i I Short-Term Budget Actions Page 9 Cost of Binding Arbitration Decision:POA The compensation results of the binding arbitration decision were fully discussed in the July 15, 2008 report to the Council. This report is available for review in the Council office and on-line on the City's web site (www.slocity.org), and should be consulted for a full understanding of the City's history with binding arbitration and the arbitrator's decision. While there were a number of key compensation changes as part of that decision, including educational incentives and health insurance increases, the salary award was the largest cost driver, summarized as follows: January 2006 5.28%increase for swom POA members 10.82% increase for non-sworn POA members January 2007 6.00%increase for all POA members July 2007 6.00% increase for all POA members January 2008 5.00% increase for all POA members January 2009 5.00%increase for all POA members This results in a base salary increase of 30% for swom employees over the four year term; and 37% salary increase for all other members of the POA. This represents pay increases that are about 67%higher than the City's offer of 20% for the same period. On August 28, the City processed the first payroll with these changes, which included retroactive pay from January 2006 to August 6 (the paycheck was for the pay period ending August 20, so pay for that period was not retroactive, but paid at the new rate). The following summarizes the cost results of this payroll run: 2008-09 Binding_ Arbitration Cost Summa ry Retro Pay: January- 20062008 Payments to Employees 2,313,309 Regular Pay 1,634,403 Holiday Pay 40,812 Educational Incentive 246,437 Overtime 181,431 Uniform Allowance 16,100 Health Insurance Benefits 165,548 Other Pay 28,579 Benefit Payments to Others 651,235 PERS 608,439 Unemployment Insurance 9,253 Medicare 33,543 Total Retro Pay 2,964,544 Tota[Cost in 2008-09 Allocable to 2008-09: (July 1 to August 6) (278,700) 2008-09 Cost' 1 2,749,000 Total Cost in 2008-09 $5,434,844 Only reflects six months of the cost of January 1, 2009 salary raise of 5%. Ongoing Cost $2,990,500 l- 9 Short-Term Budget Actions Page 1.0 As reflected above the total cost in 2008-09 for POA is estimated at $5.4 million. It is based on actual payments made through August 2008; and estimates for the balance of the year based on the compensation now in place; and the scheduled 5% raise in January 2009. As also shown above, the estimated annual cost for 2008-09 is $2.7 million. However, it only reflects the six months of the January 2009 raise through June 30. Accordingly, accounting for the cost of the January 2009 raise for a full year, the ongoing annual cost of the arbitration decision is $2.99 million. Cost of Binding Arbitration Decision:SLOPSOA As noted above, SLOPSOA represents most sworn and non-sworn supervisors and managers in the Police Department: Sergeants, Lieutenants, Captains, Communications and Records Supervisors and the Communications/Records Manager. It has a re-opener in its contract to address salary compaction issues caused by the binding arbitration decision. Negotiations are still underway with this group and an agreement has not yet been finalized. However, based on the status of negotiations to-date, we estimate that there will be a retroactive cost of$60,000 and an annual ongoing cost of$343,000. Allocating Costs Between Fiscal Years In accordance with generally accepted accounting principles, we plan to accrue the portion of this cost that is applicable to 2007-08 and earlier to the 2007-08 fiscal year, summarized as follows: Allocation of Costs Between Fiscal Years 2007 08 2008-09 Total POA 2;685;800 2,749,000 5,434,800 SLOPSOA 60,000 343,000 403,000 Total 2,745,800 3,092,000 5,837,800 MOA/Other Compensation Adjustments 810,600 996,100 1,806,700 Net Cost $1,935;200 $2,095,900 $4,031,100 As reflected in this chart, $2.7 million of$5.8 million cost should be allocated to 2007-08 and $3.1 million to 2008-09. Additionally, we recommend that the Council appropriate the net amount required to offset these costs of$1.9 million in 2007-08 and $2.1 million in 2008-09. Closing the Gap: Short-Term Budget Actions As noted above, we recommend closing the $4.8 million gap with a combination of reserves (to the 20%policy level),revenue transfers, operating budget reductions and CIP project deferrals. -/0 Short-Term Budget Actions Page 11 Recommended Short-Term Budget Actions Action Amount Use of Reserves to 20% Policy Level 700,000 Available Balances: Completed CIP Projects 348,500 Fire Revenue Transfers: Mutual Aid & CUPA Fines 150,000 Operating Budget Reductions Funds No Longer Needed Added Binding Arbitration Legal Costs 100,000 Tour of California 20,000 Budget Reductions 855,700 CIP Project Deferrals Silt Removal: Defer to Summer 2009 & Fund with Zone 9 Revenues 300,000 Other CIP Deferrals 2,315,100 Total $4,789,300 The sidebar chart shows the expenditure Proposed Short-Term Budget Balancing Strategy reductions by function rather than by ❑ General type (operating versus capital)but still Go%emment o Reserves Economic god reflects the fact that expenditure Development, O 15% reductions account for 75% of the Planning,Open aComleted proposed solution. It also shows that 4%Space p Projects reduced funding for infrastructure 7%0 Leisure, maintenance like streets and flood Cultural& ❑Fire Revenue protection is taking the lead role in Social s%Services Transfers closing the gap. ❑Public Safety The short-term budget actions fall into ❑ Streets, 10% four main categories: Sidewalks, Flood Control 46% Expenditure 1. Use of Reserves. Allocating Reductions: 75% $700,000 from reserves will take us to our minimum policy level of 20% of operating expenditures; and accounts for 15%of the solution. 2. Completed CIP Projects. As part of its review, the CIP Review Committee took a close look at completed projects and available budget balances. This resulted in identifying $348,000 in freed-up resources that can be used to close the gap. It accounts for 7% of the recommended solution. Depa rtm ent Amount 3. Operating Program Reductions. Administration 38.,500 Provided in Attachment 2 are descriptions City Attomey 4,100 of the specific operating reductions or City Clerk 8,200 Finance & IT 135,000 other budget balancers, which are Human Resources 126,200 summarized by Department in the sidebar Community Development 96,500 chart. In the case of the Fire Department, Parks &Recreation 72,800 $150,000 of their proposed budget Public Works 164,700 balancers are actually revenue transfers Police 319,700 Fire 160,000 Total $1;125,700 r Short-Tenn Budget Actions Page 12 from net mutual aid revenues ($120,000) and CUPA fines ($30,000). These are further described in Attachment 2. Adjusting for this, operating budget reductions total $975,700. Of this amount, $120,000 relates to funds that are no longer needed for binding arbitration legal costs and serving as the host city for the Tour of Califon-iia. The most significant savings come from leaving.vacant four regular positions for the balance of the year, which accounts for: • Two Police Officer positions in the Police Department($287,000) • Associate Planner in Community Development ($96,000) • Telecommunications Supervisor in Finance & Information($135,000) Together the savings in 2008-09 from not filling these four vacant positions total $518,000 and account for over 50% of the proposed operating reductions. In the case of the two Police Officers, this will mean deferring the start of the new Neighborhood Team as previously envisioned until we have made long-term staffing decisions as part of the 2009-11 Financial Plan. This program may or may not continue after that time, depending upon the priorities established by Council. 4. CIP Project Deferrals. Provided in Attachment 3 is a detailed listing of our active General Fund CIP projects that are candidates for deferral. The list does not include projects that are: • Wholly or primarily grant funded. • Funded by the enterprise or special purpose funds. • Already under construction. While we could choose to stop a project mid-stream, in virtually all cases it would not be cost effective to do so. The listing is organized into two major categories: projects recommended for deferral and those that aren't. However, to facilitate Council review of these projects, we have organized the projects that we recommend retaining into two tiers based on priority: we believe that those projects in Tier 1 have a lower priority than those in Tier 2. Within the grouping, there is no priority"hierarchy;" similar projects are grouped together. In assessing priorities and making deferral recommendations to the CAO, the CIP Review Committee used the same criteria as it did in evaluating projects as part of the 2007-09 Financial Plan process,plus two added criteria(h and i): a. Is it mandated by the state or federal government? b. Is there significant outside funding for the project? c. Is it necessary to address an immediate public health or safety concern? d. Is it needed to adequately maintain existing infrastructure, facilities or equipment? e. Does it implement a Major City Goal for 2007-09? I -l� Short-Term Budget Actions_ Page 13 f. Will it result in significant operating savings or productivity improvements in the future that makes a compelling case for making this investment solely on a financial basis? g. Due to phasing, is completion of this project required in order for another high priority project to go forward? h. Is design substantially(or fully) complete, so we should go forward with the project in light of the significant investment we have already made? i. Do we have outstanding contractual commitments with third parties? (For example, have we already let the construction contract and therefore work is underway?) Reconsideration as Part of the 2009-11 Financial Plan. Projects deferred at this time are certainly eligible for reconsideration as part of the 2009-11 Financial Plan. This is why we use the term deferral rather than deletion. However, deferred projects will have to compete for limited resources against other projects in a much tougher fiscal environment than existed two years ago. Responding to Property Owners Association Recommendations The Property Owners Association has provided the City with several recommendations for "closing the gap." Several of them are conceptually reflected in this report; and moreover, many of them have been part of the City's longstanding practices for many years. One example is the City's extensive use of the private sector to deliver City services. Provided in Attachment 4 is an excerpt from our report on Measuring Our Performance: Using Benchmarks to Assess Our Fiscal Accountability, which shows that City has undertaken a wide variety of partnerships with the private sector, non-profit organizations and other government agencies in ensuring the best use of community resources in delivering City services. In total, these partnerships account for about 50% of total City expenditures. Recommended Short-Term Budget Action Summary Closing the$4.8 Million Budget Gap 1. Approve the use of$700,000 in reserves. 2. Delete funding for$348,500 in completed projects. 3. Reduce the 2008-09 General Fund operating budget by$975,500. 4. Defer CIP projects totaling $2,378,200 and reduce General Fund appropriations by this amount. (Note: This is based on the projects recommended for deferral, which is slightly higher—by$63,000—than the"target"of$2,315,100.) 5. Defer $300,000 in silt removal projects to 2009-10, reduce General Fund appropriations by this amount and use Zone 9 funding to complete them. As a practical matter, the work will still be completed in Summer 2009; but we can save $300,000 in General Fund resources with this approach. 6. Approve revenue transfers of$150,000 related to Fire operations. 1-13 Short-Term Budget Actions Page 14 Recognizing the Cost of Binding Arbitration 7. Appropriate $1,935,200 in 2007-08 to account for the net cost of binding arbitration from January 2006 to June 2008; and $2,095,900 in 2008-09, after accounting for the use of MOA/Other Compensation Adjustments funding. Assuring Adequate Funds for Fire Truck Replacement in 2009-10 8. Authorize the transfer of $584,000 in 2007-08 from net mutual aid revenues to the Fleet Replacement Fund. Preliminary Assessment of the Fiscal Outlook for 2009-11 We will go into the 2009-11 Financial Plan with mixed fiscal signals at best. On one hand, we are extremely fortunate to have the added resources from Measure Y, the %-cent sales tax measure approved by voters in November 2006, which generates about $6 million annually in General Fund revenues. Given the other challenges facing us, it is hard to conceive of the process we would need to follow to fill an added $6 million hole. So, compared with many other cities in the State,we are very fortunate. On the other hand, there are a number of economic dark clouds on the horizon: 1. Our top three revenues — sales tax, property tax and TOT—are projected to be $700,000 less than we projected in 2008-09. 2. The results of binding arbitration, both direct (POA) and indirect (SLOPSOA) add $3.3 million annually to our operating costs. Since we would have expected added costs of about $1 million via the normal meet and confer process, this means added costs of abut $2.3 million annually. 3. Given increasing oil prices (which have moderated recently), the downturn in the construction market and the recent melt-downs of major financial corporations like FNMA, Merrill Lynch, Bear Stearns, Lehman Brothers and AIG, it is hard to envision a strong turn around in the national and State economy any time soon. 4. And because of this, the State of California, with its huge unresolved budget problems, continues to be the largest threat to our long-term fiscal health. We appear to have dodged a major bullet this year; but since the underlying problems facing the State have not changed, we can expect further close encounters with the State. We will have a better idea of the fiscal issues ahead of us when we complete the fiscal forecast in December 2008. However, in these early innings, it looks like we will have tough choices ahead of us in 2009-11. /_8 Short-Term Budget Actions Page 15 CONCURRENCES The affected departments concur with these gap-closing recommendations. FISCAL IMPACT The City is facing a $4.8 million budget gap in 2008-09 unless corrective action is taken. The recommended budget actions will close this gap and retain General Fund balance at policy levels at the end of the fiscal year. ALTERNATIVES Other Gap Closing Options. As presented in this report, there is a wide range of alternatives available to the Council in reducing expenditures or using reserves in closing the $4.8 million budget gap facing us in 2008-09. Take No Action. This will result in a reduction of$4.8 million in the City's reserves and the Police Department being over budget by$4 million. ATTACHMENTS 1. 2007-09 General Fund Changes in Fund Balance, Original and Revised a. `Baseline"based on changes in local economy and related revenue performance b. `Binding Arbitration"based on the "baseline"protection and the impact of the recent binding arbitration decision 2. Recommended Operating Budget Reductions 3. Recommended CIP Deferrals 4. Excerpt from Measuring Our Performance: Using Benchmarks to Assess Our Fiscal Accountability: Use of the Private Sector to Deliver City Services AVAILABLE FOR REIVEW IN THE COUNCIL OFFICE July 15, 2008 Council Agenda Report: Results of Binding Arbitration Decision T:\Council Agenda ReportsTinance&IT CAR\2008\Short-Term Budget Actions.,9-30-08\Short-Tenn Budgret Actions CAR,9-30-08.doc J i Attachment 1.A .. Cl) o 100000000000, 0 0 00 0 0 0 0 0 0' O 0 �o 0 0 0 0 O U I00 OiO CIO 0 0 0 0 0,0 O 000000000 Oh O O Oi O O O O m C Mi C-4 CD!0 N Nr C-4 M CD(CD M O O V� OF(O I R r r {p'j ' N CD v O O O } '10NOM�OOr � O t�!ci N V' CA V' oi- - - 7 O� O t` �t to O O t-.V M vN V'. •- 0);04 N (O CO CO M LO M L0 TA; a V' IOD' M M M M !N N��s�) r `-�r ir. to .b r (O CCI; (CI r AD RP cl) M M i _ f i m oi000f o o 000 0 0 0 0 0 00 00 v o:0.00 Coo 0.o000 0 0 0 00 00 C kOir i4) tD 1, � r Co tD'O N O O I� I I 1 O 1 V I I I I I . 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O C J 7 ... 7 N « O % d... d O �Q s y' O O 7 O Q.0 C7 � t, w0 ("L - > M 0It = mat- LL > � Oac90 � W OE501.- LLLL'd_m:mHI� ILY.. / 2 2008-09 Operating Budget Reductions SUMMARY Attachment 2 The following summarizes recommended General Fund operating budget reductions by Department. Department Amount Administration 38,500 City Attorney 4,100 City Clerk 8,200 Finance&IT 135,000 Human Resources 126,200 Community Development 96,500 Parks&Recreation 72,800 Public Works 164,700 Police 319,700 Fire 160,000 Total $1j2 700 - 1 - j I 2008-09 Operating Budget Reductions Attachment 2 ADMINISTRATION Description 11 Service Impact 2008-09 Savings ECONIOMC DEVELOPMENT Economic Development Contract Services. This Fewer research projects regarding economic $3,500 is a reduction in the amount of contract services development will be undertaken. This could have that will be undertaken in the City's Economic an impact on the nature and extent of the research Development program this year. Fewer contracts that the program can undertake but should not will be entered into. have an immediate impact on revenues to the City. Enhanced Promotions. Used for unanticipated Reduced promotion of unique activities and $25,000 unique opportunities for tourism promotion in the potentially lower Transient Occupancy Tax(TOT) Community Promotions Programs. revenues as a result of fewer visitors. Advertising Effectiveness Study. This study was No effect this year because staff will rely upon the $10,000 planned to analyze the effectiveness of the City's County's recently released study. However,lack direct advertising and promotional efforts of information could impact the service contracted under the Community Promotions effectiveness of the Community Promotions Program Program in the near future. TOTAL $38,500 CITY ATTORNEY Description Service Impact 2008-09 Savings Contract Services: Reduction of Legal Services Will limit ability to use outside counsel for 1,100 line consultation or assistance regarding discrete legal issues involving special expertise outside the customary scope of City Attorney's Office purview,without first obtaining Council authorization and budgetary approval Office Expense: Reduction to Publications& Will limit purchase of books,publications and 1,000 Subscriptions line updated materials for law library Travel,Meetings&Dues: Reductions in Will limit opportunities to attend conferences, 2,000 Education&Training,Professional Organizations, educational meetings and training sessions Trips and Meetings TOTAL $4,100 /- /I 2008-09 Operating Budget Reductions Attachment 2 CITY CLERK Description Service Impact 2008-09 Savings RECORDS&ADM"TRATION Reduce print media adverting for advisory body Will use other recruitment methods 1,000 recruitments Reduce funding for broadcast system maintenance Will rely on PEG access funds 1,000 Do not replace broadcast room chairs Staff will continue to use existing chairs 1,500 Reduce training Fewer staff members will attend training 2,200 Reduce funding for advisory body recognition Some impact on the quality of the event 1,000 dinner RECORDS&ADM MSTRATION Reduce elections training Fewer staff members will attend training 1,500 TOTAL $8,200 HUMAN RESOURCES Description Service Impact 2008-09 Savings HUMAN RESOURCES ADMINSTRATION Arbitration(Account 7227) None. No added funding for binding arbitration 100,000 legal costs will be required. This is a"course" correction in recognizing changed circumstances. Recruitment Advertising(7203 &7205) Hiring Chill should result in reduced need to 8,300 advertise Medical Services(7265) Hiring Chill should result in reduced need to $3,200 advertise Personnel Services(7279) Hiring Chill should result in reduced need to $3,500 advertise Professional Conferences(7529) Staff will not benefit from the opportunity to team $2,000 HR Staff will not attend CALPELRA conference about best practices and to network with this year. professionals. Contract Services(7227) The PACE Board voted to forgo the annual $9,200 contribution to PACE($9,200)as a short-term budget balancing strategy, with the assurance that software to support Employee University would be acquired. Other funding is available for this. TOTAL $126,200 /-ao 1 2008-09 Operating Budget Reductions Attachment 2 FINANCE & INFORMATION TECHNOLOGY Description Service Impact 2008-09 Savings INFORMATION TECHNOLOGY Freeze Vacant Telecommunications Supervisor. Given already limited staffing resources in serving $135,000 Continuing to leave this position vacant will result a complex IT environment,this will adversely in twelve month savings for 2008-09 of$135,000 impact our ability to meet day-today user support for salary and benefits. needs and move forward on several key IT projects. TOTAL $135,000 COMMUNITY DEVELOPMENT Description Service Impact 2008-09 Savings LONG RANGE PLANNING Freeze Vacant Associate Planner Position. A summary of the services impacted are $96,500 This position has been vacant since the end of categorized in the following areas: July 2008. Based on an annual cost for this position of$107,200,we will experience$96,500 Delay: in savings by leaving this position vacant through • Historic preservation ordinance the end of the fiscal year. . Annexation 1B • Green build&COSE implementation • Growth management changes • Inclusionary ordinance changes Several long range planning projects will require assistance from the Development Review Division staff, impacting application processing time. TOTAL $96,500 PARKS & RECREATION Description Service Impact 2008-09 Savings PARKS AND RECREATION Tour of California. The City will not host this No service impact: this is a"course"correction in 20,000 event in 2008-09 recognizing changed circumstances. Grants-In-Aid. Field Improvement Grants Moderate impact anticipated. Reduced funding 9,500 administered by the Joint Use Committee. means reduced allocations to grantees or number of field improvement grants funded($20,000 remains available for Youth Sports Association and$5,000 remains available for other community organizations.) / 2008-09 Operating Budget Reductions Attachment 2 PARKS & RECREATION continued Grants-In-Aid. Mayor's Youth Task Force Impact anticipated. The primary function of the 10,700 sponsorships and grants. Mayor's Youth Task Force is to administer the MYTF grant/sponsorship program Eliminating the grant funding will: 1)affect the youth serving organizations within the City of San Luis Obispo that traditionally receive this funding and 2)may eliminate the need for the MYTF altogether. Groups will be redirected to the HRC grants-in-aid program. Contract Services. Work Training Program Minimal impact to Department operations,but 1,200 (contracted service for minor janitorial services) eliminates the contract to the Work Training Program. Contract Labor. Minor construction,design, Moderate impact anticipated. This funding has 5,200 maintenance assistance. been used in the past for completing minor construction projects,purchasing signage, replacing equipment and other unanticipated expenses to park amenities(i.e. skate park;disc golf,playgrounds,etc.)that do not otherwise qualify as capital improvement projects. Eliminating funding will mean that these minor projects will not be completed. Education and Training. Moderate impact anticipated. Eliminating a 2,600 portion of each division's education and training budget is not desirable,but should allow attendance at conferences/trainings which are deemed essential. Temporary Staffing. 23,600 Reduce hours of office assistant staff by six hours Moderate impact anticipated. This position per week. performs entry levels function that will be absorbed by permanent staff. ($4800) Reduce facility and batting cage staff. Moderate impact anticipated.Will result in decreased number of staff present at facilities during rentals to outside user groups. ($8,000) Reduce front counter staff by 10 hours per week Moderate impact anticipated. Reduction to occur for six months. during off-peak seasons(mid-October to mid- April). Staff from other divisions will be required to fill in as needed,and customer service levels may be affected.($4,000) Reduce Contract Class Specialist position by 10 Moderate impact anticipated. Will result in hours per week. reduced ability of staff to interface with instructors and participants during class operating times and therefore could affect program quality and safety. ($6,800) TOTAL ���� $72,800 2008-09 Operating Budget Reductions Attachment 2 PUBLIC WORKS Description Service Impact 2008-09 Savings PARKS&LANDSCAPEMAINTENANCE Reduction in Utilities Looking at information from the last three years, 21,200 Reduction in City Water Service(7603) the Parks department utilizes 90-100%of funds budgeted for City Water Services. This is largely Reduction can be implemented immediately a function of weather. Staff doesn't anticipate a particularly dry season. Therefore,a reduction of 5%is considered reasonable. Impact:None anticipated. TREES Reduction in Tree Trimming Services Temporarily defer the tree trimming cycle. Tree 30,000 Reduction in Contract Services(7227) trimming is necessary to precede paving projects. A 50%reduction is anticipated for the 2008-09 Reduction can be implemented immediately paving projects. This reduction of paving projects would allow the extension of tree trimming cycles without severely hampering other construction projects. Impact:There is a potential for higher claims from limb drops. STREET MAINTENANCE Reduction on Trash Service Looking at information from the last three years, 6,600 Reduction in Utilities(762 1) the department has utilized 80%of budgeted funds for trash service and tipping fees. No additional Reduction can be implemented immediately budget was identified in the 2007-09 FP for Storm drain cleaning disposal so tipping fees will increase this year as a result of the ongoing system cleaning efforts. Staff anticipates approximately 10%of the trash services budget can be made available. Impact: None anticipated,however,debris collected from storm drain inlet and pipe cleaning has not been included in the current year calculations for trash disposal and remains an unknown. SIGNALS&STREET LIGHTS Reduction in Electricity Looking at information from the last three years, 8,600 Reduction in Utilities(7605) the department uses 90%of the allotted budget to provide power to traffic signals and lights. Staff Reduction can be implemented immediately anticipates that approximately 5%of the 2008-09 allotted budget could be made available. Impact:None anticipated,assurning the cost of electricity for newly installed signals and for the street light monitoring system does not consuming the remaining 5%"cushion". �-a3 2008-09 Operating Budget Reductions Attachment 2 PUBLIC WORKS continued PUBLIC WORKS ADMINISTRATION_ Reduction in Uniform Contract Potential savings were realized in the renewal of $5,000 Reduction in Contract Services(7227) the uniform contract. Reduction can be implemented immediately Impact:There are no reductions to the level of _ service associated with this savings. BUILDING MAINTENANCE Reduction of Janitorial Contract Potential savings were realized in the renewal of 50,000 Reduction in Contract Services(7227) the janitorial contract. Reduction can be implemented immediately Impact:There are no reductions to the level of service associated with this savings as long as the current contracts remain in place. Defer Minor Capital Projects Deferral of several Minor Capital Projects 31,000 Deferral of Minor Capital Projects(7957) originally slated for 2008-09 fiscal year. Reduction can be implemented immediately 1)Senior Center Large Map Room Painting (SOPC pg 210),$10,000 2)Police Station Upstairs HVAC Replacement (SOPC pg 210),$10,000 4)Fire Station Engine Bay Door Opener(SOPC, pg 210),$6,000 5)Fire Station#4 Fascia Painting(SOPC pg 210), $5,000 Impact:Improvements resulting from these projects will be deferred. Reduction in City Water Service Looking at information from the last three years, 2,300 Reduction in Utilities(7603) the department utilizes 90%of funds budgeted for domestic water services for City facilities. Reduction can be implemented immediately Therefore,a reduction of 5%is reasonable. Impact:None anticipated,but possible. TRANSPORTATION PLANNING Reduction in Minor Traffic Engineering Deferral of Contract Services for minor traffic 10,000 Contracts engineering contracts and traffic studies originally Reduction in Contract Services(7227) anticipated for 2008-09 fiscal year. Reduction can be implemented immediately Impact: The improvements resulting from these contracts will be deferred. TOTAL $164,700 4 2008-09 Operating Budget Reductions _ Attachment 2 POLICE Description Service Impact 2008-09 Savin s Patrol Services Freeze Vacant Police Officer Position. The Police Department will not be able to staff or 143,700 The Police Department will not fill one Police implement the new Neighborhood Team,which Officer position assigned to the Patrol Bureau, was created pursuant to the 2007-09 Public Safety resulting in salary and benefits savings(regular Major City Goal. Other consequences include staffing). The reduction will be implemented fewer officers to respond to calls for services; immediately. potentially longer response times to calls for service;increased workload on existing patrol officers. Freeze Vacant Police Officer Position. The Police Department will not be able to staff or 143,700 The Police Department will not fill one Police implement the new Neighborhood Team,which Officer position assigned to the Patrol Bureau, was created pursuant to the 2007-09 Public Safety resulting in salary and benefits savings(regular Major City Goal. Other consequences include staffing). The reduction will be implemented fewer officers to respond to calls for services; immediately. potentially longer response times to calls for service;increased workload on existing patrol officers. Neighborhood and Crime Prevention Services ._. - _ Freeze Vacant Graffiti Coordinator Position. The existing Graffiti Program will not be enhanced 21,300 The Police Department will not fill the new or expanded as planned pursuant to the 2007-09 Graffiti Program Coordinator position approved by Neighborhood Wellness Major City Goal. Council in June 2008. This will result in salary Existing graffiti abatement efforts will continue in savings(temporary staffmg). The reduction will the Police and Public Works Departments utilizing be implemented immediately. current staff members to help coordinate the program as a collateral duty to their regular positions. Investigative Services Freeze Vacant Diversion Coordinator Position. The Juvenile Diversion Program will not be able 11,000 The Police Department will not fill an existing to accommodate as many juvenile offenders Juvenile Diversion Program Coordinator position, without a coordinator and will be downsized resulting in salary savings(contract staffing). The accordingly. This will result in juveniles either not reduction will be implemented immediately. having access to Diversion,or being referred to the County's program with less intensive supervision. Existing staff(the Police Department School Resource Officer)will coordinate the smaller program as part of their regular duties. TOTAL $319,700 las 2008-09 Operating Budget Reductions Attachment 2 FIRE Description Service Impact 2008-09 Savings Hazard Prevention Use CUPA fine funds to offset staff enforcement CUPA funds will not be available for other 30,000 costs. prevention purposes Emergency Response Use mutual aid funds above direct wild land fire Funds will not be available for other purposes. 120,000 response costs to offset other department costs. Training Reduce non-mandatory training Minimal impact on training needs. 10,000 TOTAL $160,000 Budget Balance Remaining RECOMMENDED FOR DEFERRAL_ Public Safety 175,374 Public Safety Facility Site Evaluation 23,074 Police Station Remodel Lower Level: Design 4,000 Station 3 Engine Bay Painting 15,000 Station 4 Emergency Generator 133,300 Transportation: Streets 1,422,482 Paving: 20% Reduction from 2007-09 Budget 925,000 Traffic Signal Master Plan 22,482 South Higuera Widening: Margarita to Elks Lane 135,000 Directional Sign Program 40,000 Street Light Painting 100,000 Street Light Monitors 90,000 Guardrail Improvements 80,000 South Street Landscaping: Design 20,000 Santa Rosa Median Landscaping: Design 10,000 Transportation:Pedestrian Improvements 215,000 Downtown Pedestrian Signals 80,000 Mission Style Sidewalks 50,000 Sidewalk Repair: 50% Reduction from 2007-09 Budget 45,000 New Sidewalks: 50% Reduction from 2007-09 Budget 40,000 Transportation: Creek&Flood Protection 281,393 Minor Storm Drain Improvements: 50% Reduction from 2007-09 Budget 25,000 CMP (Storm Drain) Replacement: 15% Reduction from 2007-09 Budget 225,000 Marsh Street Bridge Repair: Study& Design Grant Match- Project Needs to Be Resco ed 31,393 Leisure, Cultural&Social Services 151500 Meadow Park Roof Replacement: Design 5,000 Play Equipment Replace Johnson Park: Design 10,000 Play Equipment Replace Santa Rosa: Design 20,000 Damon Garcia Maintenance Building 64,000 Senior/Community Center Needs Study 30,000 Public Art: 1% of Reduced CIP Backfill with Art In-Lieu __22,500 Open Space Protection 50,000 10,000 Johnson Ranch: Design/Construction Mgt(To Be Done In-House) Open Space Enhancements .40,000 General Govemment 8Z500 IT Disaster Recovery Plan 29,500 Aerial Photos 45,000 Fuel Station Repair: Design 8,000 Total Recommended for Deferral 2,378,249 _ 1 _ CIP DEFERRAL RECOMMENDATIONS Budget Balance Remaining NOT RECOMMENDED FOR DEFERRAL ---------- -- Tier One:Policy Considerations for the Council 1,359,767 Deeper Cuts in Street Maintenance ???? Neighborhood Traffic Management: Pismo& Buchon 175,512 Buchon/Johnson Intersection Improvements 100,000 Street Sweeper 168,800 Bill Roalman Bicycle Blvd (This project will require an added appropriation.) 18,822 Bob Jones Trail and Bridge Crossings 339,559 Deeper Cuts in CMP Replacement ???? Sinsheimer Equipment Replacement 100,000 Roller Rink Expansion 241,982 Skate Park Improvements 83,009 Deeper Cuts in Public Art ???? Corporation Yard Bldg Roof Repair 1 132,084 -2- Budget Balance Remaining NOT RECOMMENDED FOR DEFERRAL Tier Two:Policy Considerations for the Council Police Station Roof Replacement 54,500 Police Station Annex Rehabilitation 48,300 Police On Duty Weapons 49,000 Cardiac Monitor Battery 22,336 Fire Station Alerting System 292,600 Station 3 Shower& Floor Replacement: Design 10,000 Downtown Paving 80,000 Street Paving Main Account 1,594,471 Traffic Safety Report Improvements 182,962 Program Speed Sign Installation 40,000 Bridge Deck Maintenance 14,505 Signal Hardware Maintenance 51,935 Foothill/Tassajara Improvements 125,000 New Sidewalks 5,000 ADA Curb Ramps 54,384 Sidewalk Repair: Retain 50% of 2007-09 Budget 45,000 Sidewalk Access Improvements 81,400 RR Safety Trail Hwy 1/Foothill 24,700 Andrews Bypass 45,729 CMP (Storm Drain) Replacement 973,302 Silt Removal (Recommended to be Deferred and Proposed for Funding via Zone 9 in 2009-10) 313,641 Minor Storm Drain Improvements 25,000 Storm Drain Culverts 103,440 Storm Drain Improvements 6,500 Bishop-Augusta Creek Bank 33,000 Reuse Park Conversion 22,000 Park Restroom Replacement 231,257 Downtown Urban Forest Plan 50,000 Mission Plaza Step Replacement 79,139 Fleet Addition: Parks Pickup 19,000 Laguna Lake Dredging 13,977 French Park Playground 40,000 Laguna Lake Playground 50,000 Roller Rink Expansion 241,982 Skate Park Improvements 83,009 Play Equipment Replace Meadow Park: Design 15,500 Play Equipment Replace Throop Park: Design 10,000 Golf Course Tree Removal & Replacement 10,504 Golf Course Bridge Repair Golf Course 59,764 Golf Shop Roof Replacement 26,800 Jack House Fire Sprinkler 27,782 Little Theatre Sidewalk Repair 20,000 Jack House Foundation Repair 192,825 Fountain @ Marsh/Higuera 130,000 Little Theatre Sidewalk Art 5,200 Senior Center Parking Lot 245,141 Froom Creek Road Decommissioning 6,988 Johnson Ranch Improvements 52,173 Creek Mitigation 75,000 Open Space Protection 379,435 Dispatch Center/Fire Storage Facility (Primarily Debt Financed) 6,298,237 Radio System Upgrade (Primarily Debt Financed 3,891,757 r-a 9 -3- � 1 DEFERRALRECoNTMENDATIONS Budget Balance Remainin Fiber Equipment Relocate Station#1 49,500 Global Positioning System 55,000 City Hall Roof Repair 426,000 Corporation Yard Operations Center Remodel 47,000 Fueling&Gate System 23,800 CIP Reserve 393,559 I -30 -4- 4 BEST PRACTICE Excerpt from Measuring Our Performance: Using Benchmarks to Assess Our Fiscal Accountability PARTNERSHIPS AND COLLABORATIONS The City has undertaken a wide variety of partnerships with the private sector, non-profit organizations and other government agencies in ensuring the best use of community resources in delivering City services. In total,these account for about 50% of total City expenditures.. Private Sector Contracts The City makes extensive use of the private sector as a key productivity strategy in delivering City services. The following is a summary of City services delivered via contract by the private sector. Construction Contracts Virtually all construction work for the City is performed by the private sector. This is about $10 million annually. Along with direct construction contracts, this also includes contracting for specialized engineering, architectural, environmental, legal, financial and construction management services. Including debt service payments (which are administered by private sector companies, and reflect capital originally raised from the private sector), this represents about 25%of City expenditures. Operating Programs Key day-to-day services are also provided through the private sector, including: • Police and fire false alarm monitoring • Telecommunications • Water and sewer laboratory analysis • Radio maintenance • Parking meter collections • Utilities telemetry services • Parking citation collections • Computer network support services • Bus service: operations and maintenance • Application software for mission-critical • Recreation class instructors applications like public safety, financial • Park maintenance management and geographic information • Landscaped median maintenance services • Tree trimming • Computer programming • Janitorial services • Computer training • Property maintenance • Copier and printer maintenance • Planning services • Public information/community outreach • Building and fire plan check • Printing (unlike many cities, we do not • Community promotion have an in-house print shop) • Economic analysis • Property management • Equipment maintenance 4 BEST-PRACTICE" BENCHMARKS Excerpt from Measuring Our Performance Using Benchmarks to Assess Our Fiscal Accountability Government Agency Collaborations San Luis Coastal Unifted School District Public Safety • School Resource Officers: High School, Middle School, DARE program (all elementary schools) • 911-for-kids(All elementary schools) • Bicycle education demos (all elementary schools) • Special school zone enforcement Water Conservation • School education program development and implementation Recreation Programs: Cooperative Use of Facilities • Joint use athletic fields at every elementary school in the City, Laguna Middle School, former junior high school and SLO High School • Elementary school gymnasiums • Sinsheimer Park (owned by the School District) • Taylor Gymnasium(old Junior High School) • Before and after school child care programs • Laguna Middle School athletics (program provided by the City) County of San Luis Obispo • Emergency response planning • Gang task force (with other law enforcement agencies in the County) • Bomb task force (with other law enforcement agencies in the County) • Narcotics task force (with the State and other law enforcement agencies in the County) • Youth offender diversion program • Animal control and spay/neuter services • Ambulance service • Hazardous materials response team (with other fire agencies in the County) • Salinas Reservoir operations • Water and sewer service at the airport • Nacimiento pipeline project • El Chorro Park softball fields • Prado Day Center • Homeless shelter operations • Library services • Surveying services -2- i 4 PRACTICE BEST BENCHMARKS Excerpt from Measuring Our Performance: Using Benchmarks to Assess Our Fiscal Accountability Cal Poly • Joint police alcohol enforcement programs • Neighborhood mediation services (with Cal Poly and Cuesta) • Fire service • Water and sewer service • Transit service • Performing arts center • Fiber optic network California Joint Powers Insurance Authority • General liability insurance • Workers' compensation insurance • Property insurance Housing Authority • The City works closely with the Housing Authority on a number of programs to help address low and moderate income housing needs. Whale Rock Reservoir Commission • Water supply(joint commission of the City, Cal Poly and the Men's Colony) San Luis County Council of Governments • Transportation planning and funding • Regional bus system National Guard • Grizzly Youth Academy Challenge Program Other Agencies • We make extensive use of cooperative purchasing agreements for a wide range of goods and services, such as computers, office supplies, vehicles, heavy equipment (tractors, backhoes) and fire engines. • We also have an extensive system for mutual aid from other law enforcement, fire and public works agencies throughout the State. • Through grant programs, we work cooperatively with a number of state and federal agencies. I-33 -3- 4 BEST PRACTICE BENCA' Excerpt from Measuring Our Performance: Using Benchmarks to Assess Our Fiscal Accountability Non-Profit Agency Partnerships The City has an extensive network of partners from private,non-profit agencies. Social Services • Creative Mediation Services • Economic Opportunity Commission (EOC): Prado Day Center and Homeless Shelter • Hotline of SLO County • SLO YMCA • American Red Cross, San Luis Obispo County Chapter • Assistance League of San Luis Obispo County • Big Brothers/Big Sisters • Camp Fire USA Central Coast Council • Casa Solana • Child Care Resource Connection • Community Counseling Center • Court Appointed Special Advocates (CASA) of SLO County • EOC Eviction Prevention/Rental Assistance Program • EOC Health Services • The Harvest Bag • Hotline of SLO County • The Literacy Council • Long-Term Care Ombudsman Services • Partnership for the Children of SLO County/La Clinica De Tolosa • San Luis Obispo A.L.P.H.A., Inc. • San Luis Obispo Child Development Center • San Luis Obispo County Aids Support Network • San Luis Obispo County Child Abuse Prevention Council • Senior Health Screening Program—EOC Health Services Division • Senior Legal Services Project • Senior Nutrition Program of San Luis Obispo County • Senior Volunteer Services, Caring Callers Program • (Retired) Senior Volunteer Services Program: Central Coast RSVP • Sexual Assault Recovery and Prevention Center of San Luis Obispo County(SARP) • Teen Academic Parenting Program: EOC Health Services Division • Transitions—Mental Health Association • Women's Shelter Program of San Luis Obispo County Recreation and Cultural Services • Children's Museum • Friends of Las Casas Adobes l— • San Luis Obispo Little Theater • Foundation for the Performing Arts -4- I � 4 BEST PRACTICE BENCHMARKS Excerpt from Measuring Our Performance: Using Benchmarks to Assess Our Fiscal Accountability • Railroad Museum • San Luis Obispo Arts Center • Cal Poly State University Foundation(Arts for Youth) • Cal Poly State University Foundation(Open House) • Central Coast Basketball Club • Central Coast Children's Choir • Central Coast Shakespeare Festival • Children's Creative Project • Civic Ballet of San Luis Obispo • Cuesta College Art Gallery" • Cuesta College Writers Conference • Foundation for San Luis Obispo County Public Libraries • First Tee Central Coast • Friends of Prado Day Center • Friends of San Luis Obispo Botanical Garden • Gold Coast Barbershop Chorus • KCBX-SLONET • Mission Prep Christmas Classic • Mission San Luis Obispo • Music and the Arts for Youth • Pacific Horizon Chorus • Pacific Repertory Opera • Peninsula Players, Inc. • San Luis Chamber Orchestra • San Luis Obispo Blues Society • San Luis Obispo City to the Sea Half-Marathon • San Luis Obispo Community Concert Association • San Luis Obispo County Arts Council • San Luis Obispo County Band • San Luis Obispo County Bicycle Coalition • San Luis Obispo County Child Abuse Prevention Council • San Luis Obispo County Historical Society • San Luis Obispo County Youth Symphony • San Luis Obispo Mozart Festival • San Luis Obispo Poetry Festival • San Luis Obispo Soccer Club • San Luis Obispo Swim Club • San Luis Obispo Symphony • San Luis Obispo Vintners &Growers Association • SLO International Film Festival • The Monday Club of San Luis Obispo • Tri-Counties Regional Center I • Women's Community Center of San Luis Obispo County -5- 4 BEST PRACTICE BENCHMARKS Attachment 4 Excerpt from Measuring Our Performance: Using Benchmarks to Assess Our Fiscal Accountability Housing and Economic Development Services • Chamber of Commerce • Visitors and Convention Bureau • UCSB Forecasting Project • Housing Trust Fund • Economic Vitality Corporation Environmental Services • ECOSLO • Land Conservancy -6- �i Page 1 of 1 Hampian, Ken From: Richard Kriet[rkriet@charter.net] Sent: Tuesday, September 30, 2008 8:04 AM To: Council, SloCity Cc: Hampian, Ken; Statler, Bill Subject: Council Meeting of September 30,2008 Council Members; will not be able to attend tonight's council meeting on the budget, but wish to share my concern regarding the direction of our city's finances. I'd also like to suggest an addition to the city's budgetary policies. As someone who participated throughout the Measure Y process (citizen's advisory committee, a cash contribution to the campaign favoring passage, and walking a couple of precincts) I am extremely disappointed in how it has been implemented. During the campaign the most frequent criticism heard was that the money would just end up increasing salaries of city employees. This now seems prescient. If Measure Y is to remain in effect at the time of the "sunset election" in about six years I would strongly urge you to limit the percentage of the budget devoted to salaries and make sure that funding for public works and cultural and recreation activities remains in place. While I appreciate your dilemma in having no ability to control the compensation provided to individual public safety employees you still do have control over the budget by controlling the number of officers we are paying. I would like to encourage you to set as City Policy that Public Safety expenditures will not exceed 50% of the city general fund expenditures over any two year period. As a result of this policy if binding arbitration forces an increase in compensation the number of public safety officers would need to decrease and duties would have to be shifted to non-sworn employees, or other funding sources would have to be found and implemented. Clearly, the salary and benefits now devoted to local police officers and dispatchers are wildly "out of whack"with anything available to nongovemmental employees in the area. A good salary comparison would be with nursing. RN's are in high demand, perform heavy, occasionally dangerous work in demanding high stress environments, and require similar levels of education. Their reimbursement is approximately half that of local police officers; and is now less than dispatchers. Soon firefighters will have their contract.come up for renewal. If more and more of the city's budget goes to raises I believe it is very unlikely that Measure Y will be extended. In fact, were it to come up today, I would be inclined to work against it. While the stopgap measures listed in the proposal before you tonight will get us through the year you must establish policies that will limit damage to the long term financial health of the city. Thank you for your consideration. Richard Kriet /l9 LbPy E/ylAtL 206 Marlene Dr. COUNCIL 2CDD DIR San Luis Obispo R/PAO 21FIN DIR (805) 440-9452 RED FILE ErACAO 2JIRE CHIEF MEETING AGENDA ATTORNEY Q�,'/PDIR G� aCLERK/ORIG POO LICE CHF DATE 30 0 ITEM #01 ❑ E T EADS PJ` EC DIR QHRDRT L IR �u ticL i caro 9/30/2008 San Luis. Obispo RECEIVED RED FILE Property Owners•AssociatQn SEP 2 6 2008 - MEETING AGENDA P.O.Box 12924 San Luis Obispo,CA 93406 6 U0.CITY CLERK DATE` EM #,&.1ZCoeuNCIL cDD D,R S ptember 26, 2008 14-ACRO `IWFIN DIR FIRE.CHIEF Honorable Mayor David Romero $?ATTORNEv VPW DIR Honorable Members of the San Luis Obispo City Council Ef CLERK/ORIG POLICE CHF The City of San Luis Obispo � D /T HE 990 Palm StreetADS EC DIR -Ti2il3 � HRID P'R San Luis Obispo, CA 93401-3249 u C�ERX RE: Long-Term City of San Luis Obispo General Fund and City Payroll and Benefit Related Savings Ideas Dear Mayor Romero and City Council Members: I1 has been approximately 12 weeks since the San Luis Obispo Property Owners' Association submitted our organization's July 7, 2008 initial "List of Possible Cost Savings Suggestions for the City of San Luis Obispo's Immediate Consideration." Hopefully,members of the City Council, City-Administrative and Finance Department Staff have had the opportunity to review, digest, and analyze our organization's well-researched suggestions for immediate`_`Short Term"potential cost savings during our present nationwide"Economic Slowdown", statewide budget reductions,and the results of our local Binding Arbitration with the San Luis Obispo Police Officers' Association. The officers of the SLOPOA Board also felt the preparation of a"Longer Term List of Possible Cost Related Savings Suggestions for Reducing the City's Personnel Salaries, Pensions, and Benefits"may be helpful in evaluating the potential range of city-wide cost savings alternatives to be considered prior to the development of the 2009-2011 Financial Plan and the presentation of the"Five Year Fiscal Forecast"in December of 2008. The attached Long Term Cost Saving Suggestions have been derived from a careful review of a broad range of ideas applicable to a city the size of and with a similar overall municipal budget as the City of San Luis Obispo. The attached List of Possible Cost Related Savings Suggestions for Personnel Salaries, Pensions and Benefits is, by no means, comprehensive in nature, but merely represents a starting point to evaluate potential longer term cost savings options in light of some troublesome city expenditure problems. Again,please remember that everything is possible and no idea should be automatically rejected in kind. The "Rules of Brainstorming"suggest that every idea invariably leads to another idea which may be considered plausible and/or usable under different circumstances. It is SLOPOA's opinion that in light of our current economic circumstances, nothing is sacred and no cost-saving idea or opportunity can be overlooked. Sometimes, small cost-saving suggestions can lead to significant cost-related savings over time. Respec Esi'd MCJS arc o, t Leslie Halls, Immediate Past President Stephen Barasch, Treasurer On behalf of the San Luis Obispo Property Owners' Association Board of Directors San Luis.Obispo Property Owners•Association . P.O.Box 12924 Sen Luis Obispo;CA 9MW POSSIBLE LONG TERM COST RELATED SAVINGS SUGGESTIONS FOR THE CITY OF SAN LUIS OBISPO PERSONNEL SALARIES PENSIONS AND BENEFITS (In Conjunction with the Previously Presented Possible Cost Savings Suggestions for the. City of San Luis Obispo's Immediate Consideration of July 7, 2008) 1. Establish city personnel salaries and benefits based on Central Califolnia/Regional overall family income levels for comparative public and private sector employees rather than per-selected`Base- Line" cities throughout California ote: SLO County median family income is presently about $63,000 to $65,000 for four to five person households.) 2. Adjust"Cost of Living Allpwances"for city personnel by providing improved Cost of Living Adjustment(COLA)benefits to employees who work beyond the minimum retirement age and deny COLA benefits to employees who may retire early. Alternatively. COLA benefits could be granted to employees if and when the plan is fully funded. 3. Require future city employees and/or new hires to have a combination of yew of service and age to equal 87 to 90 and be at least 57 years old before they can retire with full benefits. 4. Limit the accumulations of unused sick time for city employees to 12 months when calculating benefits and reduce COLAs to 1.5%and not the rate of inflation and establish a deadline for the present method of calculating COLAs. 5. Modify the city's current method of contributing to an employee's PERS Plan by basing the city's PERS Contribution a4 an employee's actual years of service. 6. Minimize city employees' overtime by limiting overtime pay for any employee who has not work a 40 hour work week and review"pay status"hours for both"safety"and non-safety personnel above state norms. (Note: this approach would reduce the overall amount and rate of paid over time while eliminating the potential of an employee working a 40 hour week and then adding sick time or vacation time to claim overtime on those same hours.) 7. Reduce or eliminate car allowances and other non-essential personnel perks such as cell phone allowances(except on an emergency or safety-related basis)and athletic club allowances and require those allowances to be self-funded. 8. Require voter approval for any future increases in employee pensions,benefits,or retirement rates. 9. Offer city employees appropriate incentives to retire early or leave the city in the event certain city functions are"outsourced"or no longer needed(such as a one time insurance payout plus one week of salary for every two years of service up to a maximum of 25 years of service.) 10. Vacant city positions cannot be filled for at.least six(6)months and money that would have gone towards the employee's salary during that time is used to pay for early retirement incentives. After six(6)months,vacant city positions can be filled at up to 60%to 70%of the previous employee's salary or the previous employee's duties be given appropriate raises for the additional new work which could be limited to 60%to 70%of the former employee's salary. (Note: The alternative is long term employee layoffs.) _ f San Luis.Obispo J Property ownersAssociation . P.O.Box 17924 San Luis Obispo,CA 93406 11. Outsource any specialized city media or public information programs including the televising of city council and planning commission meetings. (Note: The City of San Luis Obispo is the only city in the county to provide this ftulction and most therefore provide additional benefits to these specialized employees.) 12. Reduce city employee pensions when an employee's Social Security benefits kick in by the. appropriate amount of actual.Social Security benefits paid to that employee. 13. Place city employee salaries and related benefits on the city's website since this information is already public in order to facilitate full public salary&benefits disclosure. 14. Evaluate the restructuring of the city work force to better reflect the demographic characteristics of our local population. In practice,this means that we can require in future years that city employees can work longer(past 55 or 60). If we are hiring from the outside,perhaps the city can fill new hires with older workers who would be paid less over their careers and would be attracted to the"Central Coast Life Style." 15. Encourage and/or mandate"job-sharing"for all non-essential city positions in order to eliminate or reduce employee benefits and long term employee pensions. aote: The San Luis County Builders' Exchange and other local organizations have been doing this successfully for several years with complete employee satisfaction.) 16. Eliminate any non-essential or non-productive city programs and re-assign city personnel to essential or more productive tasks and eliminate those redundant specialized employees who are not adaptable for re-assignment. (Note: A good example of a non-essential city program is the multi- family inspection program currently administered by the SLO Fire Department as our city has had few major multi-family structure fires in the past decade and the city's present code violation complaint system has been effective in lessening the risks to building tenants and landlords,who are encouraged to self-patrol their properties to comply with their insurance carriers' requirements. Additionally, our city's park ranger staff has steadily grown in Past years beyond the number of usable walking and bike trails created. Perhaps local environmental groups could perform some of our park rangers' functions in return for other city related services such as free meeting space or access to city-managed open space which was previously considered"off limits"to the public. San Luis Obispo • Property Owners Association P.O.Box UM .. . - Sen Luis Obispo,G 93406 . POSSIBLE COST SAVINGS SUGGESTIONS FOR THE CITY OF SAN LUIS d1dISPO'S HWAEDIATE CONSIDERATION 1. ,Review how the police,are scheduled.Are there three 12 hour.shifts? .How much is overtime consuming the budget? Redoing the schedule will help, Is this possiblemuderthe binding arbitration? Put limits on overtime. If this cannot be done immediately,do so in January or whenever the bindiag arbitration agreement will allow. Give overtime to youngest officers first to prevent"spiking"for additional pension increases. 2. Review the need for;the additional new hires in fire and.police personnel. The money is simply¢ot there! 3. Review the need for the current volume of planners and building staff members. With the downturn this staff is not needed. The city has'been planned'already. Annexation of Santa Margarita can wait until the economy picks up. 4. Review cutting.every department budget by S%-10%. Review the possibility of promoting staff based on-performance reviews rather thanseniority. 5. Review the need for every non-safety position that was added in the past two-five years. (Look at these objectively,as we lived without them before and can do so again. , 6. Review the need for non-essential staffpositions and the possibility of making some city staff positions part time. 7. Review reducing fringe benefits for staff including gym memberships,parking,city cars,car allowances,etc.Eliminate nonessential vehicle allowances for all city departments and all city council members. 8. Review the need for the city to pay city employees'share of PERS contributions,and require city staff to pay a greater percentage of their health care plan costs. 9. Review reducing benefits for part-time employees such-as-those in the parking and traffic enforcement departments. 10. Encourage city employees such as police,fire and essential management positions to live in the city. If they live in the city they are more.invested.in it,will shop here,etc. This will bring in more tax money. They should be put on notice that this will be a job requirement starting in the next fiscal year,if they haven't relocated by then,they no longer qualify for the job and will be let go. This will go into the next cycle,,too. 11.Review eliminating or reducing benefits for city council members as a good faith effort to show you are sharing in'the pain. Eliminate travel budgets,conferences,etc.- 12. Review and/re-evaluate the basis.'of retirements from highest years'salary to averaSe of last five years of employment. Exclude overtime. Raise the age of retirement for non-safety personnel back to 65 from 55. 13. Review the need for unnecessary city publications and public relations pieces including repetitive newsletters,etc. 14. Review the need for nonessential subsidies to various community-based organizations and groups that do not"directly"benefit the city on a long term civic and/or economic basis. 15. Review the city's long term debt structure and the possibility of refinancing some existing long term debt. 16. Review selling off under-utilized city-owned property where fea4le•such as the Jack house. This saves on longterm maintenance costs. Lease open space to environmental groups to save the city maintenance costs.Review leasing out any under-utilized open and recreational space or areas. 17. Re-evaluate the ban on drive-throughs for restaurants,banks, &other businesses, Adopt a flat"drive-through fee to add a drive- through as a small additional immediate source of revenue,($10,000?),get it through quickly so it can be built,and it will increase overall sales tax revenues. 18.Review the current city billing practices and make it easy to pay all city bills online:In fact,offer an opportunity to prepay water and sewer bills,much like the post office has its"Forever"stamp:This will bring in more money immediately,since water rates are rising later.It will help us get over the hump and while it means a slight decrease in income later,by then we should be on a better footing. 19.Outsource as fi*W non-essential city-related functions as may be deemed appropriate,including general roadwork repairs and park maintenance in.order to jsave the city additional funds and eliminate unnecessary overhead costs. , 20.Appoint a broad-based local Task Force representing a diverse range of community-based organizations,to eliminate potential internal conflicts of interest,to evaluate possible changes to the city employee retirement programs and employee benefits structure. Implement the Task Force's recommendations,with the City Council's concurrence,as soon as possible.