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Home My WebLink About01/26/1993, 1-A - COUNCIL BUDGET GOAL-SETTING"�H��rN►�III►IIIIIPn IIpI11 city of San, JS OBISpo COUNCIL AGENDA REPORT FROM: John Dunn, City Administrative Of iJ Prepared by William C. Statler, Director of Finance SUBJECT: COUNCIL GOAL-SETTING CAO RECOMMENDATION For the Jmuuvy 26 Workshop ITEM N ER: , ■ Approve budget approach and calendar for preparing the 1993 -95 Financial Plan. ■ Review and discuss fiscal situation. ■ Receive eight point strategy for dealing with the City's revenue /expenditure gap. ■ Review and discuss services currently provided by the City. (This will be the primary focus of the January 26 Workshop.) For the Februmy 6 Workshop IN Receive status of existing City goals. ■ Receive candidate goals 'brainstormed" by the Management Team. i Receive suggested goals submitted in writing by Council members, Advisory Bodies, and other members of the public. ■ Receive advisory body and public comments. ■ Present goals from individual Council members and prioritize them. (This will be the primary focus of the February 6 Workshop.) These draft Council goals and priorities will be submitted for final approval at the workshop scheduled for early March, at which time it is recommended that the Council provide staff with strategic direction on preparing the 1993 -95 Financial Plan. DISCUSSION Overview There is probably no single Council meeting more important in early 1993 than the three workshops scheduled for goal- setting and strategic budget direction. It is essential that we "get off on the right foot" in establishing community priorities which will guide the preparation of what will be the most difficult budget in the recent history of the City. ��i�►►��uIIIIIII�P j��IU city o f San f 'S OBISPO COUNCIL AGENDA REPORT As outlined in the calendar provided in Section A of this workbook, the first two workshops scheduled for January 26 and February 6 will set a necessary foundation for the concluding "goal- setting /strategic budget direction" workshop scheduled for early March. At this third budget workshop, staff will summarize the Council's draft goals and priorities from the first two workshops and identify options for closing our projected revenue /expenditure gap. Most importantly, it is recommended that the Council provide direction to staff at this March workshop on the specific approach and best mix of solutions we should use in drafting a balanced budget for 1993 -95. As discussed in greater detail below, we are recommending that the Council use the same basic process for its 1993 -95 goal - setting that it used in preparing the 1991 -93 Financial Plan; we believe that this was a very successful approach in establishing Council direction early in the budget preparation process on the most important things for the City to accomplish. However, although the process may be similar, we believe that the challenges and needed outcomes are significantly different from two years ago. Over the past years, our efforts in goal - setting have been primarily focussed on those new things we should be doing in order to meet the legitimate needs and concerns of our community. During this upcoming financial plan period, however, we believe that the primary focus of goal- setting will be to determine those things we are doing today that we will no longer be able to do in the future. Does this preclude identifying and implementing new priorities? Not necessarily. But it does mean that we will have to prioritize more stringently, and to cut services currently being provided in order to achieve other priorities. These are trade- offs we have not had to make in the past, but ones we will have to make in the future given our current fiscal situation. Background - Summary of Our Current Situation The following sets forth in a straightforward manner the challenges facing us and what we must do in order to respond to them in a responsible. way: ■ The City has a projected General Fund deficit of $2.5 million, even without further State revenue cuts. Our five year forecast shows this to be an ongoing problem that cannot be addressed through "one time" methods. It is important to note that this forecast relies upon $1.0 million in operating expenditure cuts already made to the adopted 1992 -93 budget, along with implementing strict cost controls in the future and reducing our traditional level of capital improvements by 50 %. ■ On top of this, we expect the State government - for the third year in a row - to take a major amount of revenue from the City. Although it is not possible to project how much this might be - and we intend to aggressively resist any further State revenue cuts - we are preparing contingency plans for additional State take -aways from the City of up to $1.5 million annually. /- Z �� ►�Ni�►11111111p��u ►��dlll city Of San 1 "S OBISPO 1 COUNCIL AGENDA REPORT ■ As responsible stewards of the public resources that have been entrusted to us, we must be committed to having a balanced budget by the beginning of next fiscal year, regardless of how difficult that might be. ■ Consequently, it is staff s responsibility to identify possible ways of closing this gap, including closing it entirely through budget cuts. We have already begun this internal process in earnest. Based on the revenue /expenditure gap described above, this means we are preparing General Fund expenditure reduction options totalling $4.0 million, or approximately 20% of our General Fund operations. It is a difficult but necessary exercise. ■ In addition to identifying options for solving the problem entirely through cuts, we are also following up on several other strategies for presentation to the Council at its March budget workshop. The Council will be asked to examine these options and provide staff with direction as to the best mix of solutions to be used in developing a balanced budget for 1993 -95. ■ Will the ultimate package include significant budget cuts? Yes, it must. Will the problem be solved totally through budget cuts? Probably not, as there are a number of other strategies which the Council will undoubtedly be interested in pursuing. However, some level of service and staffing cats are inevitable if we are to achieve our responsible goals of balwtmg the budget without further eroding our reserves. ■ Establishing service levels in the community is based primarily on two considerations: community priorities, and what a community can afford. Like nearly all other communities in the State, San Luis Obispo is facing a situation where we can no longer afford to do everything that we are now currently doing. Some tough choices must be made. There will be anxiety in the organization and in the community as we go through this very difficult analysis and decision- making process. But there is no way to avoid this if we are to honestly confront the situation and solve the problem. In summary, we have done much already and are doing much now, but much remains to be done in forthrightly confronting and resolving the fiscal challenges ahead of us. ■ Police and Fire services compose about 50% of our General Fund operating budget. Therefore, we cannot leave this large a component of our service programs unexamined in this process. Public safety needs to be examined along with all other services the City provides. Some level of cuts in these areas will be necessary to reduce unduly severe cuts in other areas. ■ Changing times require that we take a fresh look at everything we do, including how and at what level we provide all City services. This is the fundamental task before us as we prepare the 1993 -95 Financial Plan. / -3 ��►��u►iu►IIIIIIII � l��111 MY Of San 1 'S OBI SPO Ni;% COUNCIL AGENDA REPORT Budget Workshops No. 1 and 2 - The Goal- Setting Process Purpose The overall objective of the January 26 and February 6 workshops is for the Council to identify and agree upon the most important things for the City to accomplish over the next two years. In this way, we can ensure that the Preliminary Financial Plan and Budget presented for Council review and public comment later in the Spring includes the financial resources necessary to accomplish them. During the 1991 -93 Financial Plan process, the Council adopted the following criteria for determining "Major City Goals ", which we believe should continue to be used by the Council as part of the goal- setting process: ■ Be legitimate to our beliefs (real, supported) ■ Agreed upon by all Council members ■ Reduced in number for comprehension, communication, and focus ■ Set forth in one document: Financial Plan and Budget ■ Be clear, understandable ■ Established as a high priority and a real commitment ■ Translated into the objectives of employees at all levels in the organization ■ Created within a supportive atmosphere where participants aren't afraid to state their suggestions for improving goals or objections ■ Accepted to the point where resistance to them is reduced or eliminated Approach Prior to presenting and prioritizing goals on February 6, the following background information will be presented: At the January 26 meeting ■ Recommended budget process, including eight point strategy for dealing with our revenue /expenditure gap ■ Fiscal situation ■ Mission- driven service levels - an inventory of what we do and why /� '��i�Ni�lllllll�l�1�ui► jl City Of San' -IS OBISPO COUNCIL AGENDA REPORT At the Febraary 6 meeting ■ Status of existing goals ■ Suggestions submitted in writing by Council members, advisory bodies, and members of the public. ■ Other "candidate" goals ■ Comments from advisory body representatives or the public The Council will then begin the suggested goal - setting process described as follows: Presm&W Goals After reviewing this background information, individual Council members will present the specific programs, projects, or policy tasks that they would most like to see accomplished during 1993 -95. Consistent with the process used two years ago, the primary purpose of this step is to 'brainstorm' ideas and get them presented clearly. Accordingly, evaluation of ideas should be discouraged at this stage (this is scheduled for later in the goal- setting process). However, questions for clarification of the idea or goal (purpose, timing, benefits, scope, etc) are desirable. Prioritize Goals We are recommending that the Council use the same approach in prioritizing goals that we used in preparing the 1991 -93 Financial Plan, summarized as follows: Basic Premise. All goals presented by Council members are worthy and meritorious of funding consideration; however, they must be prioritized by the Council as a whole if they are to have meaning in allocating the City's limited financial resources. Ratings. Goals will be prioritized by the Council on a scale of A to D using the following guidelines: ■ Programs and Projects Rated A These represent high priority goals for the Council, and as such, they should be included in the Preliminary Financial Plan and adequate funding made available to accomplish them. Goals rated as "A" by all Council members are designated as "A +" objectives. These will be considered "Major City Goals" as they best meet the adopted criteria of being legitimate, agreed upon, reduced in number, and established as a high priority and a real commitment for the City to accomplish. They will become the focus of the City's quarterly goals and objectives reporting system. ■ Programs and Projects Rated B and C These are also Council priorities, but they will be considered in the context of higher priority goals and available resources as staff prepares the recommended budget. / 50, ��i�ib�►��IIIIIII�II ��11 MY Of San t S OBISPO COUNCIL AGENDA REPORT ■ Programs and Projects Rated D (Deferral) Although important, further consideration of these programs and projects will be deferred beyond 1993 -95. As was the case two years ago, at the conclusion of the February 6 session, staff will have clear direction on Major City Goals (A +), and general direction on including B and C priorities into the budget to the extent feasible. The Council will have further opportunities to refine 1993 -95 goals at later points in the process. Background Materials The following is a brief overview of the background materials provided in Sections A through F of the notebook: .:to r.ya ■ CAO's recommended Eight Point Strategy for dealing with the City's revenue expenditure gap. While briefly stated, it gets to the heart of the hard decision - making which will be before the Council this Spring. ■ Tentative Council meeting dates and master schedule for preparing the 1993 -95 Financial Plan. ■ Task force assignments currently underway in order to identify and evaluate revenue options, current service levels, and ways to reduce labor and construction costs. ■ Summary of guidelines and departmental targets for identifying service level /expenditure reductions that will close the projected gap between revenues and expenditures without any new (or increased) revenues or labor cost savings ('Total Cut Solution "). Section B Fiscal Situation Excerpt from the "Five Year Forecast for the General Fund" presented to the Council on November 10, 1992, describing the scenario which we believe provides the best basis for decision making at this time. This forecast scenario identifies ongoing deficits of $2.5 million annually, exclusive of any further State revenue cuts to cities. Section C Mission - Driven Service Levels - Inventory of City Progrmrs and Activities Comprehensive inventory of the services we provide today and why we provide them. All City programs and activities in this inventory are organized into one of the following "missions ": G ��n� ►�ui��Nlllllll� ��lll city of San 1 's OBIspo jj% COUNCIL AGENDA REPORT ■ Fundamental Health & Safety/Legal Mandates ( "A Missions "). Programs and activities that have a direct impact on the safety and health of the residents of the City and the minimum support required to maintain those services. These are distinguished from secondary levels of safety and health services by the immediate and emergency nature of the service demand. Also includes programs and activities that are mandated by State and /or Federal law or the City Charter. ■ Essential Maintenance & Support ( "B Missions "). Programs and activities that are required to provide the minimum standard infrastructure and facilities that are necessary for the City and its residents to function, and the minimum support required to maintain them. These services would include City buildings, vehicles, and facilities serving a basic need. This also would include basic internal control systems to safeguard the fiscal health and resources of the City. ■ Community -wide Core Services ( "C Missions "). Programs and activities that provide for a general need or demand for service within the community which typically benefit the entire community. These are considered the core programs of the City which address the typical needs arising from living in an urban environment. ■ Focused Services /Community Enrichment ( "D Missions "). Programs and services that address the needs or demands of a specific segment of the community, or program and activities which raise the levels of other services beyond the minimum required to provide for the basic need. Also includes programs and services that enrich the vitality of the community beyond other service levels and create an improved community identity through public investment that enhances economic vitality and raises esthetics or cultural standards and enriches quality of life. We believe that this inventory is an important part of our budgetary process for two key reasons: ■ It answers two basic questions about our organization: what services do we provide and why do we provide them? Ultimately, it is not possible to responsibly reduce our current service levels without a basic understanding of these fundamental questions. ■ It provides a useful guideline in identifying and evaluating programs and activities that should most appropriately be reduced if necessary. Although staff will be looking for ways to reduce costs without substantially reducing service levels in all mission categories, we will be considering service reductions in the C and D categories before cutting services in the A and B categories. Because of the importance of this inventory, it will be the focal point of the staff s presentation at the January 26 workshop. /--7 �� ►r►►►�Illlip��l��m��l� city of San t s OBISpo i COUNCIL AGENDA REPORT ,,, . �„ Quarterly Goals and Objectives status report as of December 31, 1992 providing the status of Major City Goals, key program objectives, and CEP projects. F 77 T 0707 Goal suggestions from Council Advisory Bodies and other public comments, including candidate goals raised by Council members at their January 5 meeting. Goals which the Council may wish to consider as "brainstormed" by the Management Team. �iWFWFJ 011-4 The task ahead of us in preparing a balanced budget for 1993 -95 - both financially and programmatically - will be a difficult and challenging one. The Council goal- setting process establishes an important and necessary foundation to develop the solutions necessary to successfully meet these challenges. 93-956ud1\ARGUALST.WP l_ V Section A RECOMMENDED BUDGET PROCESS The following materials outline the recommended approach for preparing the 1993 -95 Financial Plan: ■ CAO's recommended Eight Point Strategy for dealing with the City's revenue expenditure gap. While briefly stated, it gets to the heart of the hard decision- making which will be before the Council this Spring. 1 ■ Tentative Council meeting dates. 2 ■ Master schedule for preparing the 1993 -95 Financial Plan. 3 ■ Task force assignments currently underway in order to identify and evaluate revenue options, current service levels, and ways to reduce labor and construction costs. 5 ■ Summary of guidelines and departmental targets for identifying service level /expenditure reductions that will close the projected gap between revenues and expenditures without any new (or increased) revenues or labor cost savings ("Total Cut Solution "). 6