HomeMy WebLinkAbout12/12/2000, 2D - FINANCIAL PLAN POLICIES AND ORGANIZATION council. "=d"°=ia i02 -00
j acEnaa uEpout '�"� 0
CITY OF SAN LUIS OBISPO/
FROM: Bill Statler, Director of Finance V
SUBJECT: FINANCIAL PLAN POLICIES AND ORGANIZATION
CAO RECOMMENDATION
Review and discuss Financial Plan policies and organization.
DISCUSSION
Overview
The following four features describe the City's Financial Plan process: goal-oriented, policy-
driven, multi-year and technically rigorous. . For 2001-03, we plan to continue using a two-year
budget that emphasizes long-range planning and effective program management. We believe the
benefits identified when the City's first two-year plan budget was prepared for 1983-85 continue
to be realized:
■ Reinforcing the importance of long-range planning in managing the City's fiscal affairs.
■ Concentrating on developing and budgeting for the accomplishment of significant
objectives.
■ Establishing realistic timeframes for achieving objectives.
■ Creating a pro-active budget that provides for stable operations-and assures the City's
long-term fiscal health.
■ Promoting more orderly spending patterns.
■ Reducing the amount of time and resources allocated to preparing annual budgets.
Appropriations continue to be made annually; however, the Financial Plan is the foundation for
preparing the budget for the second year. Additionally, unexpended operating appropriations
from the first year may be carried over for specific purposes into the second year with the
approval of the City Administrative Officer.
Financial Plan Policies
Fiscal heath is a lot like your personal health—it's not what you live for, but it's hard to enjoy
life without it.
Like personal health, fiscal health is rarely luck---clear, articulated fiscal policies are an
important foundation for fiscal health. In looking at cities across the nation that have reputations
for being well-managed financially—and have maintained their fiscal health through good times
2D-1
Council Agenda Report–Financial Plan Policies and Organization
Page 2
and bad—the one thing they have in common are clearly articulated fiscal policies, and they use
them in financial decision-making. Effective fiscal policies are not just for the "good times"—
they are equally important (perhaps even more) in "bad times," too.
While the underlying economic health of a community is important, it is not the most critical
factor in determining fiscal health. All we have to do is look at the Orange County bankruptcy to
know that financial management counts. Their bankruptcy was not due to faltering performance
of the local economy—Orange County is one of the wealthiest areas in the world—but due to a
lack of clear, appropriate investment.policies, and then following them.
Formal statements of key budget and fiscal policies provide the foundation for assuring long-
term fiscal health by establishing a clear framework for effective and prudent financial
decision-making.
The City's current budget and fiscal policies are set forth in the Policies and Objectives section
of the Financial Plan (Exhibit A). They cover a broad range of fiscal issues, including: Financial
Plan organization, revenue management, user fee cost recovery goals, enterprise fund rates and
fees, revenue distribution, investments, appropriations limit, minimum fund balance and working
capital levels, capital improvement management, capital financing and debt management, human
resource management, productivity and contracting for services.
Since approval of the 1999-01 Financial Plan, the only changes to the City's budget and fiscal
policies were in conjunction with the user fee update on November 21, 2000, when the Council
approved minor revisions in the City's user fee cost recovery policies related to planning and
recreation fees. These revisions are reflected in Exhibit A. At this time, we are not
recommending any changes to our Financial Plan policies. However, as we begin preparing the
2001-03 Financial Plan, we may identify other areas where we will recommend additions or
revisions to our budget and fiscal policies.
Financial Plan Organization
The purpose of the City's Financial Plan is to link what we want to accomplish for the
community over the next two years with the resources necessary to do so. In doing this, the
Financial Plan document plays four roles:
■ Policy Document. Sets forth goals and objectives to be accomplished, and the
fundamental fiscal principles upon which the budget is prepared.
■ Fiscal Plan. Identifies and appropriates the resources necessary to accomplish objectives
and deliver services; shows where our resources come from and how they are used; and
ensures that our budget our fiscal health is maintained by demonstrating our ability to pay
for the services that it funds—not just this year, but into the foreseeable future.
2D-2
Council Agenda Report—Financial Plan Policies and Organization
Page 3
■ Operations Guide. Shows how we are organized to deliver services; describes programs
and activities; provides measures on how effectively and efficiently we are doing this;
discusses what we do and why, not just how much does it cost.
■ Communications Tool+ Provides the public, policy makers and staff with a blueprint of
how public resources are being used and how these allocations were made; and
communicates key economic and fiscal issues.
In meeting these roles, the City's Financial Plan is organized into nine main sections:
Section A—Introduction. Includes the Budget Message from the City Administrative Officer,
highlighting key issues in the Financial Plan.
Section B—Policies and Objectives. Summarizes the fiscal policies that guide preparation and
management of the budget and presents major City goals..
Section C—Budget Graphics and Summaries. Provides simple pie charts and tables that
highlight key financial relationships and summarize the overall budget.
Section D—Operating Programs. Presents the City's 73 operating programs that form the
City's basic organizational units, allow for providing essential services to citizens and enable the
City to accomplish the following tasks:
■ Establish policies and goals that define the nature and level of services to be provided.
■ Identify activities performed in delivering program services.
■ Propose objectives for improving the delivery of service.
■ Identify and appropriate the resources required to perform activities and accomplish
objectives.
The City's operating programs are organized into six major functional areas that in many
instances cross departmental boundaries and funding sources: public safety; public utilities;
transportation; leisure, cultural & social services; community development; and general
government. This is the largest section in the Financial Plan.
Section 1-Capital Improvement Plan. Presents the City's capital improvement plan (CIP),
which includes all of the City's construction projects and equipment purchases that cost $15,000
or more.
Section F—Debt Service Requirements. Summarizes the City's debt obligations at the
beginning of the Financial Plan period.
2D-3
Council Agenda Report—Financial Plan Policies and Organization
Page 4
Section G—Changes in Financial Position. Provides combined and individual statements of
revenues, expenditures and changes in fund balance/working capital for each of the City's
operating funds.
Section H—Financial and Statistical Tables. Includes supplemental financial and statistical
information such as revenue estimates and assumptions, interfund transactions, authorized
staffing levels, appropriations limit history and general demographic information about the City.
Section I—Budget Reference Materials. Describes the major policy documents and
preparation guidelines used in developing and executing the Financial Plan; and provides a
Budget Glossary of terms that may be unique to local government finance or the City's Financial
Plan.
Functional Presentation
As noted above, the Financial Plan presents operating programs, CIP projects and debt service
costs on a functional basis. This helps focus the budget on what we do and why, rather than who
is responsible for managing the service or the funding source (although this information is
provided in the Financial Plan as well).
The highest level of summarization in the Financial Plan is the function level, which represents a
grouping of related operations and programs that may cross organizational (departmental)
boundaries aimed at achieving a broad goal or service. The six functions in the Financial Plan
are:
■ Public Safety
■ Public Utilities
■ Transportation
■ Leisure, Cultural & Social Services
■ Community Development
■ General Government
In general, our City organization is aligned very closely to these basic functional categories. For
example:
■ All Police and Fire Department programs fall under Public Safety.
■ The Utilities Department manages all Public Utilities programs.
■ The Public Works Department manages all Transportation programs.
On the other hand, a department like Public Works is responsible for a wide range of services
besides Transportation, such as:
■ Park and tree maintenance—Leisure, Cultural & Social Services
■ Engineering—Community Development
■ Building and vehicle maintenance—General Government
2D-4
Council Agenda Report—Financial Plan Policies and Organization
Page 5
Provided in Exhibit B are excerpts from the 1999-01 Financial Plan further describing the
organization of the City's operating programs.
Financial Plan Appendices
In addition to the Financial Plan, the Council will receive two Appendices providing
supplemental detail information:
■ Appendix A provides detailed information on all proposed significant operating program
changes. This includes: any regular staffing changes, major service expansions (or
curtailments), major changes in the method of delivering services, significant one-time
costs, changes in operations that affect other departments or customer service, and
changes that affect current policies. Each significant operating program change request
will identify: key objectives, factors driving the need for the change, alternatives, cost and
implementation issues.
■ Appendix B provides detailed information on each proposed capital improvement plan
(C1P) project. Each request will describe the project and identify: project objectives; the
existing situation; goal and policy links; environmental review considerations; project
work completed; project phasing, costs and funding sources; effect on the operating
budget; alternatives; and location via a site map or schematic design if applicable.
EXHIBITS
A. Current Financial Plan Policies
B. Operating Programs—Excerpts from 1999-01 Financial Plan
1. Purpose and Organization
2. Summary of Major Functions and Operations
3. Operating Program Narratives
G:2001-03 Financial Plan/Council Goal-Setting/Agenda Reports/Financial Plan Policies and Organization
2D-5
�iiii�llllllllllllll����llll I city of
san Luis ompo EXHIBITA
Budget and Fiscal Policies
V
FINANCIAL PLAN PURPOSE 2. Concentrating on developing and budgeting
AND ORGANIZATION - _ _ _ for the accomplishment of significant
--- -- -- — ------ objectives.
A. Financial Plan Objectives. Through its 3. Establishing realistic timeframes, for
Financial Plan, the City will link resources with achieving objectives.
results by: 4. Creating a pro-active budget that provides
for stable operations and assures the City's
1. Identifying community needs for essential long-term fiscal health.
services.
5. Promoting more orderly spending patterns.
2. Organizing the programs required to provide
these essential services. 6. Reducing the amount of time and resources
allocated to preparing annual budgets.
3. Establishing program policies and goals,
which define the nature and level of C. Measurable Objectives. The two-year
program services required. financial plan will establish measurable program
4. Identifying activities performed in objectives and allow reasonable time to
delivering program services. accomplish those objectives.
5. Proposing objectives for improving the D. Second Year Budget. Before the beginning of
delivery of program services. the second year of the two-year cycle, the
6. Identifying and appropriating the resources Council will review progress during the first
required to perform program activities and year and approve appropriations for the second
accomplish program objectives. fiscal year.
7. Setting standards to measure and evaluate E. Operating Carryover. Operating program
the: appropriations not spent during the first fiscal
a. Output of program activities. year may be carried over for specific purposes
b. Accomplishment of program objectives. into the second fiscal year with the approval of
the City Administrative Officer(CAO).
c. Expenditure of program appropriations.
F. Goal Status Reports. The status of major
B. Two-Year Budget. Following the City's program objectives will be formally reported to
favorable experience over the past sixteen years, the Council on an ongoing, periodic basis.
the City will continue using a two-year financial
plan, emphasizing long-range planning and G. Mid-Year Budget Reviews. The Council will
effective program management. The benefits formally review the City's fiscal condition, and
identified when the City's first two-year plan amend appropriations if necessary, six months
was prepared for 1983-85 continue to be after the beginning of each fiscal year.
realized:
H. Balanced Budget. The City will maintain a
1. Reinforcing the importance of long-range balanced budget over the two-year period of the
planning in managing the City's fiscal Financial Plan. This means that:
affairs.
2D-6
-1-
Budget and Fiscal Policies EXHIBIT A
1. Operating revenues must fully cover supplement the budget at any time after its
operating expenditures, including debt adoption by majority vote of the Council
service. members. The CAO has the authority to make
2. Ending fund balance (or working capital in administrative adjustments to the budget as long
the enterprise funds) must meet minimum as those changes will not have a significant
policy levels. For the general and enterprise policy impact nor affect budgeted year-end fund
funds,this level has been established at 20% balances.
of operating expenditures. GENERAL REVENUE MANAGEMENT
Under this policy, it is allowable for total - --- ~---�
expenditures to exceed revenues in a given year;
situation, beginning fund A. Diversified and Stable Base. The City will
however, in this s
balance can only it used to fund capital seek to maintain a diversified and stable revenue
improvement plan projects, or other "one-time," base to protect it from short-term fluctuations in
non-recurring expenditures. any one revenue source.
FINANCIAL REPORTING B. Long-Range Focus. To emphasize and
AND BUDGET ADMINISTRATION facilitate long-range financial planning, the City
— — - — - --- - - - will maintain current projections of revenues for
---—�— - ' _ - - the succeeding five years.
A. Annual Reporting. The City will prepare
annual financial statements as follows: C. Current Revenues for Current Uses. The
City will make all current expenditures with
1. In accordance with Charter requirements, current revenues, avoiding procedures that
the City will contract for an annual audit by balance current budgets by postponing needed
a qualified independent certified public expenditures, accruing future revenues, or
accountant. The City will strive for an rolling over short-term debt.
unqualified auditors' opinion.
D. Interfund Transfers and Loans. In order to
2. The City will use generally accepted achieve important public policy goals, the City
accounting principles in preparing its annual has established various special revenue, capital
financial statements, and will strive to meet project, debt service and enterprise funds to
the requirements of the GFOA's Award for account for revenues whose use should be
Excellence in Financial Reporting program. restricted to certain activities. Accordingly,
each fund exists as a separate financing entity
3. The City will issue audited financial from other funds, with its own revenue sources,
statements within 180 days after year-end. expenditures and fund equity.
B. Interim Reporting. The City will prepare and Any transfers between funds for operating
issue timely interim reports on the City's fiscal purposes are clearly set forth in the Financial
status to the Council and staff. This includes: Plan, and can only be made by the Director of
on-line access to the City's financial Finance in accordance with the adopted budget.
management system by City staff; monthly These operating transfers, under which financial
reports to program managers; more formal resources are transferred from one fund to
quarterly reports to the Council and Department another, are distinctly different from Interfund
Heads; mid-year budget reviews; and interim borrowings, which are usually made for
annual reports. temporary cash flow reasons, and are not
intended to result in a transfer of financial
C. Budget Administration. As set forth in the resources by the end of the fiscal year. In
City Charter, the Council may amend or summary, interfund transfers result in a change
2D-7
-2-
Budget and Fiscal Policies EXHIBIT A
in fund equity; interfund borrowings do not, as service nature of the program or activity.
the intent is to repay in the loan in the near term. The use of general purpose revenues is
appropriate for community-wide services,
From time-to-time, interfund borrowings may be while user fees are appropriate for services
appropriate; however, these are subject to the that are of special benefit to easily identified
following criteria in ensuring that the fiduciary individuals or groups.
purpose of the fund is met:
2. Service Recipient Versus Service Driver.
1. The Director of Finance is authorized to After considering community-wide versus
approve temporary interfund borrowings for special benefit of the service, the concept of
cash flow purposes whenever the cash service recipient versus service driver
shortfall is expected to be resolved within should also be.considered. For example, it
45 days. The most common use of interfund could be argued that the applicant is not the
borrowing under this circumstance is for beneficiary of the City's development
grant programs like the Community review efforts: the community is the
Development Block Grant, where costs are primary beneficiary. However, the
incurred before drawdowns are initiated and applicant is the driver of development
received. However, receipt of funds is review costs, and as such, cost recovery
typically received shortly after the request from the applicant is appropriate.
for funds has been made.
3. Effect of Pricing on the Demand for
2. Any other interfund borrowings for cash Services. The level of cost recovery and
flow or other purposes require case-by-case related pricing of services can significantly
approval by the Council. affect the demand and subsequent level of
services provided. At full cost recovery,
3. Any transfers between funds where this has the specific advantage of ensuring
reimbursement is not expected within one that the City is providing services for which
fiscal year shall not be recorded as interfund there is genuinely a market that is not
borrowings; they shall be recorded as overly-stimulated by artificially low prices.
interfund operating transfers that affect Conversely, high levels of cost recovery will
equity by moving financial resources from negatively impact on the delivery of services
one fund to another. to lower income groups. This negative
feature is especially pronounced, and works
USER FEE COST RECOVERY GOALS against public policy, if the services are
specifically targeted to low income groups.
A. Ongoing Review 4. Feasibility of Collection and Recovery.
Although it may be determined that a high
Fees will be reviewed and updated on an level of cost recovery may be appropriate
ongoing basis to ensure that they keep pace with for specific services, it may be impractical
changes in the cost-of-living as well as changes or too costly to establish a system to identify
in methods or levels of service delivery. and charge the user. Accordingly, the
feasibility of assessing and collecting
B. User Fee Cost Recovery Levels charges should also be considered in
developing user fees, especially if
In setting user fees and cost recovery levels, the significant program costs are intended to be
following factors will be considered: financed from that source.
1. Community-Wide Versus Special Benefit.
The level of user fee cost recovery should
consider the community-wide versus special
2D-8
-3-
Budget and Fiscal Policies EXHIBIT A
C. Factors Favoring Low Cost Recovery Levels 2. Other private or public sector alternatives
could or do exist for the delivery of the
Very low cost recovery levels are appropriate service.
under the following circumstances:
3. For equity or demand management
1. There is no intended relationship between purposes, it is intended that there be a direct
the amount paid and the benefit received. relationship between the amount paid and
Almost all "social service" programs fall the level and cost of the service received.
into this category as it is expected that one
group will subsidize another. 4. The use of the service is specifically
discouraged. Police responses to
2. Collecting fees is not cost-effective or will disturbances or false alarms might fall into
significantly impact the efficient delivery of this category.
the service.
5. The service is regulatory in nature and
3. There is no intent to limit the use of (or voluntary compliance is not expected to be
entitlement to) the service. Again, most the primary method of detecting failure to
"social service" programs fit into this meet regulatory requirements. Building
category as well as many public safety permit, plan checks, and subdivision review
(police and fire) emergency response fees for large projects would fall into this
services. Historically, access to category.
neighborhood and community parks would
also fit into this category. E. General Concepts Regarding the Use of
Service Charges
4. The service is non-recurring, generally
delivered on a "peak demand" or emergency The following general concepts will be used in
basis, cannot reasonably be planned for on developing and implementing service charges:
an individual basis, and is not readily
available from a private sector source. 1. Revenues should not exceed the reasonable
Many public safety services also fall into cost of providing the service.
this category.
2. Cost recovery goals should be based on the
5. Collecting fees would discourage total cost of delivering the service, including
compliance with regulatory requirements direct costs, departmental administration
and adherence is primarily self-identified, costs, and organization-wide support costs
and as such, failure to comply would not be such as accounting, personnel, data
readily detected by the City. Many small- processing, vehicle maintenance and
scale licenses and permits might fall into insurance.
this category.
3. The method of assessing and collecting fees
D. Factors Favoring High Cost Recovery Levels should be as simple as possible in order to
reduce the administrative cost of collection.
The use of service charges as a major source of
funding service levels is especially appropriate 4. Rate structures should be sensitive to the
under the following circumstances: "market" for similar services as well as to
smaller, infrequent users of the service.
1. The service is similar to services provided
through the private sector. 5. A unified approach should be used in
determining cost recovery levels for various
programs based on the factors discussed
above.
2D-9
-4-
Budget and Fiscal Policies EXHIBIT A
F. Low Cost-Recovery Services 3. Cost recovery goals for recreation activities
are set as follows:
Based on the criteria discussed above, the
following types of services should have very High-Range Cost Recovery Activities
low cost recovery goals. In selected (60%to 100%)
circumstances, there may be specific activities a. Classes (Adult&Youth)
within the broad scope of services provided that b. Day care services
should have user charges associated with them. c. Adult athletics (volleyball, basketball,
However, the primary source of funding for the softball, lap swim)
operation as a whole should be general purpose d. Facility rentals (Jack House, other in-
revenues,not user fees. door facilities except the City/County
1. Delivering public safety emergency Library)
response services such as police patrol Mid-Range Cost Recovery Activities
services and fire suppression. (30%to 60%)
2. Maintaining and developing public facilities e. City/County Library room rentals
that are provided on a uniform, community- f. Special events (triathlon, other City-
wide basis such as streets, parks and general sponsored special events)
purpose buildings. g. Youth track
h. Minor league baseball
3. Providing social service programs and i. Youth basketball
economic development activities. j. Swim lessons
k. Outdoor facility and equipment rentals
G. Recreation Programs
Low-Range Cost Recovery Activities
The following cost recovery policies apply to (0 to 30%)
the City's recreation programs: 1. Public swim
m. Special swim classes
1. Cost recovery for activities directed to n. Community garden
adults should be relatively high. o. Youth STAR
p. Teen services
2. Cost recovery for activities directed to youth q. Senior services
and seniors should be relatively low. In
those circumstances where services are 4. For cost recovery activities of less than
similar to those provided in the private 100%, there should be a differential in rates
sector, cost recovery levels should be between residents and non-residents.
higher. However, the Director of Parks and
Recreation is authorized to reduce or
Although ability to pay may not be a eliminate non-resident fee differentials
concern for all youth and senior when it can be demonstrated that the fee is
participants, these are desired program reducing attendance and that there are no
activities, and the cost of determining need appreciable expenditure savings from the
may be greater than the cost of providing a reduced attendance.
uniform service fee structure to all
participants. Further, there is a community- 5. Charges will be assessed for use of rooms,
wide benefit in encouraging high-levels of pools, gymnasiums, ball fields, special-use
participation in youth and senior recreation areas, and recreation equipment for
activities regardless of financial status. activities not sponsored or co-sponsored by
the City. Such charges will generally
2D-10
-5-
Budget and Fiscal Policies EXHIBIT A
conform to the fee guidelines described clearly intended to serve the broader
above. However, the Director of Parks and community as well as the applicant. In this
Recreation is authorized to charge fees that case, the general level of cost recovery is set
are closer to full cost recovery for facilities at 45% to 100%, except for appeals, where
that are heavily used at peak times and no fee is charged.
include a majority of non-resident users.
3. However, in charging high cost recovery
6. A vendor charge of at least 10 percent of levels, the City needs to clearly establish
gross income will be assessed from and articulate standards for its performance
individuals or organizations using City in reviewing developer applications to
facilities for moneymaking activities. ensure that there is "value for cost."
7. Director of Parks and Recreation is I. Comparability With Other Communities
authorized to offer reduced fees such as
introductory rates, family discounts and In setting user fees, the City will consider fees
coupon discounts on a pilot basis (not to charged by other agencies in accordance with
exceed 18 months) to promote new the following criteria:
recreation programs or resurrect existing
ones. 1. Surveying the comparability of the City's
fees to other communities provides useful
8. The Parks & Recreation Department will background information in setting fees for
consider waiving fees only when the City several reasons:
Administrative Officer determines in
writing that an undue hardship exists. a. They reflect the "market" for these fees
and can assist in assessing the
H. Development Review Programs reasonableness of San Luis Obispo's
fees.
The following cost recovery policies apply to
the development review programs: b. If prudently analyzed, they can serve as
a benchmark for how cost-effectively
1. Services provided under this category San Luis Obispo provides its services.
include:
2. However, fee surveys should never be the
a. Planning (planned development permits, sole or primary criteria in setting City fees
tentative tract and parcel maps, as there are many factors that affect how
rezonings, general plan amendments, and why other communities have set their
variances, use permits). fees at their levels. For example:
b. Building and safety (building permits,
structural plan checks, inspections). a. What level of cost recovery is their fee
intended to achieve compared with our
c. Engineering (public improvement plan cost recovery objectives?
checks, inspections, subdivision
requirements,encroachments). b. What costs have been considered in
computing the fees.
d. Fire plan check. c. When was the last time that their fees
2. Cost recovery for these services should were comprehensively evaluated?
generally be very high. In most instances, d. What level of service do they provide
the City's cost recovery goal should be compared with our service or
100%. Exceptions to this standard include performance standards?
planning services, as this review process is
2D-11
-6-
Budget and Fiscal Policies EXHIBIT A
e. Is their rate structure significantly and gas: 2% of gross revenues from
different than ours and what is it operations. The appropriateness of charging
intended to achieve? the water fund a reasonable franchise fee for
the use of City streets is further supported
3. These can be very difficult questions to by the results of recent studies in Arizona,
address in fairly evaluating fees among Califomia, Ohio and Vermont which
different communities. As such, the concluded that the leading cause for street
comparability of our fees to other resurfacing and reconstruction is street cuts
communities should be one factor among and trenching for utilities.
many that is considered in setting City fees.
2. For the water fund, property tax in-lieu fees
ENTERPRISE FUND FEES AND RATES are established under the same methodology
used in assessing property tax in-lieu fees to
the Housing Authority under our 1976
A. Water, Sewer and Parking. The City will set agreement with them. Under this approach,
fees and rates at levels which fully cover the water fund property tax in-lieu charges are
total direct and indirect costs—including about $29,000 annually, and grow by 2%
operations, capital outlay, and debt service—of per year as allowed under Proposition 13.
the following enterprise programs: water, sewer
REVENUE DISTRIBUTIO—_N
and parking. _
B. Golf. Golf program fees and rates should fully
cover direct operating costs. Because of the The Council recognizes that generally accepted
nine-hole nature of the golf course with its focus accounting principles for state and local
on youth and seniors, subsidies from the governments discourage the "earmarking" of
General Fund to cover indirect costs and capital General Fund revenues, and accordingly, the
improvements may be considered by the practice of designating General Fund revenues for
Council as part of the Financial Plan process. specific programs should be minimized in the City's
management of its fiscal affairs. Approval of the
C. Transit. As set forth in the Short-Range Transit following revenue distribution policies does not
Plan, the City will strive to cover at least thirty prevent the Council from directing General Fund
percent of transit operating costs with fare resources to other functions and programs as
revenues. necessary.
D. Ongoing Rate Review. The City will review A. Property Taxes. With the passage of
and adjust enterprise fees and rate structures as Proposition 13 on June 6, 1978,California cities
required to ensure that they remain appropriate no longer can set their own property tax rates.
and equitable. in addition to limiting annual increases in
market value, placing a ceiling on voter-
E. Franchise and In-Lieu Fees. In accordance approved indebtedness, and redefining assessed
with long-standing practices, City will treat the valuations, Proposition 13 established a
water and sewer funds in the same manner as if maximum county-wide levy for general revenue
they were privately owned and operated. In purposes of 1% of market value. Under
addition to setting rates at levels necessary to subsequent state legislation, which adopted
fully cover the cost of providing water and formulas for the distribution of this county-wide
sewer service, this means assessing reasonable levy, the City now receives a percentage of total
franchise and property tax in-lieu fees. property tax revenues collected county-wide as
determined by the County Auditor-Controller.
1. Franchise fees are based on the state-wide
standard for public utilities like electricity Until November of 1996, the City had
provisions in its Charter that were in conflict
2D-12
-7-
Budget and Fiscal Policies EXHIBIT A
with Proposition 13 relating to the setting of capital outlay fund for Mission Plaza
property tax revenues between various funds. improvements and expansions.
For several years following the passage of
Proposition 13, the City made property tax INVESTMENTS
allocations between funds on a policy basis that
were generally in proportion to those in place
before Proposition 13. Because these were A. Responsibility. Investments and cash
general purpose revenues, this practice was management will be the responsibility of the
discontinued in 1992-93. With the adoption of a City Treasurer or designee.
series of technical revisions to the City Charter
in November of 1996, this conflict no longer B. Investment Objective. The City's primary
exists. investment objective is to achieve a reasonable
rate of return while minimizing the potential for
B. Gasoline Tax Subventions. All gasoline tax capital losses arising from market changes or
revenues (which are restricted by the State for issuer default. Accordingly, the following
street-related purposes) will be used for factors will be considered in priority order in
maintenance activities. Since the City's total determining individual investment placements:
expenditures for gas tax eligible programs and
projects are much greater than this revenue 1. Safety
source, operating transfers will be made from 2. Liquidity
the gas tax fund to the General Fund for this 3. Yield
purpose. This approach significantly reduces
the accounting efforts required in meeting State C. Tax and Revenue Anticipation Notes—Not
reporting requirements. for Investment Purposes. There is an
appropriate role for tax and revenue anticipation
C. Transportation Development Act (TDA) notes (TRANS) in meeting legitimate short-term
Revenues. All TDA revenues will be allocated cash needs within the fiscal year. However,
to alternative transportation programs, including many agencies issue TRANS as a routine
regional and municipal transit systems, bikeway business practice, not solely for cash flow
improvements, and other programs or projects purposes, but to capitalize on the favorable
designed to reduce automobile usage. Because difference between the interest cost of issuing
TDA revenues will not be allocated for street TRANS as a tax-preferred security and the
purposes, it is expected that alternative interest yields on them if re-invested at full
transportation programs (in conjunction with market rates.
other state or federal grants for this purpose)
will be self-supporting from TDA revenues. As part of its cash flow management and
investment strategy, the City will only issue
D. Transient Occupancy Taxes (TOT). Twenty TRANS or other forms of short-term debt if
percent (20%) of TOT revenues should be necessary to meet demonstrated cash flow
allocated for cultural activities, community needs; TRANS or any other form of short-term
promotion, and economic development debt financing will not be issued for investment
activities; remaining TOT revenues (80%) purposes. As long as the City maintains its
should be unrestricted within the General Fund current policy of maintaining fund/working
and used in funding programs or projects that capital balances that are 20% of operating
benefit our residents as well as visitors. expenditures, it is unlikely that the City would
need to issue TRANS for cash flow purposes
E. Parking Fines. All parking fine revenues will except in very unusual circumstances.
be allocated to the parking fund.
D. Selecting Maturity Dates. The City will strive
F. Mission Plaza Improvements. A minimum of to keep all idle cash balances fully invested
$50,000 annually shall be designated in the through daily projections of cash flow
2D-13
-8-
Budget and Fiscal Policies EXHIBIT A
requirements. To avoid forced liquidations and K. Investment Management Plan. The City
losses of investment earnings, cash flow and Treasurer will develop and maintain an
future requirements will be the primary Investment Management Plan which addresses
consideration when selecting maturities. the City's administration of its portfolio,
including investment strategies, practices, and
E. Diversification. As the market and the City's procedures.
investment portfolio change, care will be taken
to maintain a healthy balance of investment APPROPRIATIONS LIMITATION
types and maturities.
F. Authorized Investments. The City will invest A. The Council will annually adopt a resolution
only in those instruments authorized by the establishing the City's appropriations limit
California Government Code Section 53601. calculated in accordance with Article XIIIB of
The City will not invest in stock, will not the Constitution of the State of California,
speculate and will not deal in futures or options. Section 7900 of the State of California
The investment market is highly volatile and Government Code,and any other voter approved
continually offers new and creative amendments or state legislation that affect the
opportunities for enhancing interest earnings. City's appropriations limit.
Accordingly, the City will thoroughly
investigate any new investment vehicles before B. The supporting documentation used in
committing City funds to them. calculating the City's appropriations limit and
projected appropriations subject to the limit will
G. Authorized Institutions. Current financial be available for public and Council review at
statements will be maintained for each least 10 days before Council consideration of a
institution in which cash is invested. resolution to adopt an appropriations limit. The
Investments will be limited to 20 percent of the Council will generally consider this resolution
total net worth of any institution and may be in connection with final approval of the budget.
reduced further or refused altogether if an
institution's financial situation becomes C. The City will strive to develop revenue sources,
unhealthy. both new and existing, which are considered
non-tax proceeds in calculating its
H. Consolidated Portfolio. In order to maximize appropriations subject to limitation.
yields from its overall portfolio, the City will
consolidate cash balances from all funds for D. The City will annually review user fees and
investment purposes, and will allocate charges and report to the Council the amount of
investment earnings to each fund in accordance program subsidy, if any, that is being provided
with generally accepted accounting principles. by the General or Enterprise Funds.
I. Safekeeping. Ownership of the City's E. The City will actively support legislation or
investment securities will be protected through initiatives sponsored or approved by League of
third-party custodial safekeeping. California Cities which would modify Article
XIIIB of the Constitution in a manner which
J. Reporting. The City Treasurer will develop would allow the City to retain projected tax
and maintain a comprehensive, well- revenues resulting from growth in the local
documented investment reporting system, which economy for use as determined by the Council.
will comply with Government Code Section
53607. This system will provide the Council F. The City shall seek a vote of the public to
and Department Heads with appropriate amend its appropriation limit at such time that
investment performance information. tax proceeds are in excess of allowable limits.
2D-14
-9-
Budget and Fiscal Policies EXHIBIT A
FUND BALANCE for encumbrances; and other reserves or
DESIGNATIONS AND RESERVES_ _ _ designations required by contractual obligations,
— —J state law, or generally accepted accounting
- ----. �. .�-- -------- -- principles.
A. Minimum Fund and Working Capital
Balances. The City will maintain fund or CAPITAL IMPROVEMENT MANAGEMENT
working capital balances of at least 20% of
operating expenditures in the General Fund and
water, sewer and parking enterprise funds. This A. CIP Projects—$15,000 or More. Construction
is considered the minimum level necessary to projects and equipment purchases which cost
maintain the City's credit worthiness and to $15,000 or more will be included in the Capital
adequately provide for: Improvement Plan (CIP); minor capital outlays
of less than $15,000 will be included with the
1. Economic uncertainties, local disasters, and operating program budgets.
other financial hardships or downturns in
the local or national economy. B. CIP Purpose. The purpose of the CIP is to
2. Contingencies for unseen operating or systematically plan, schedule, and finance
capital needs. capital projects to ensure cost-effectiveness as
3. Cash flow requirements. well as conformance with established policies.
The CIP is a four year plan organized into the
B. Equipment Replacement. For General Fund same functional groupings used for the
assets, the City will establish and maintain an operating programs. The CIP will reflect a
Equipment Replacement Fund to provide for the balance between capital replacement projects
timely replacement of vehicles and capital which, repair, replace or . enhance existing
facilities, equipment or infrastructure; and
equipment with an individual replacement cost
of $15,000 or more. The City will maintain a capital facility projects which significantly
expand or add to the City's existing fixed assets.
minimum fund balance in the Equipment
Replacement Fund of at least 20% of the
original purchase cost of the items accounted for C. Project Manager. Every CIP project will have
in this fund. The annual contribution to this a project manager who will prepare the project
fund will generally be based on the annual use proposal, ensure that required phases are
allowance which is determined based on the completed on schedule, authorize all project
estimated life of the vehicle or equipment and expenditures, ensure that all regulations and
its original purchase cost. Interest earnings and laws are observed, and periodically report
sales of surplus equipment as well as any related project status.
damage and insurance recoveries will be
credited to the Equipment Replacement Fund. D. CIP Review Committee. Headed by the City
Administrative Officer or designee, this
C. Future Capital Project Designations. The Committee will review project proposals,
Council may designate specific fund balance determine project phasing, recommend project
levels for future development of capital projects managers, review and evaluate the draft CIP
which it has determined to be in the best long- budget document, and report CIP project
term interests of the City. progress on an ongoing basis.
D. Other Designations and Reserves. In addition E. CIP Phases. The CIP will emphasize project
to the designations noted above, fund balance planning, with projects progressing through at
levels will be sufficient to meet funding least two and up to ten of the following phases:
requirements for projects approved in prior
years which are carried forward into the new 1. Designate. Appropriates funds based on
year; debt service reserve requirements; reserves projects designated for funding by the
2D-15
_to_
Budget and Fiscal Policies EXHIBIT A
Council through adoption of the Financial F. CIP Appropriation. The City's annual CIP
Plan. appropriation for study, design, acquisition
and/or construction is based on the projects
2. Study. Concept design, site selection, designated by the Council through adoption of
feasibility analysis, schematic design, the Financial Plan. Adoption of the Financial
environmental determination, property Plan CIP appropriation does not automatically
appraisals, scheduling, grant application, authorize funding for specific project phases.
grant approval, specification preparation for This authorization generally occurs only after
equipment purchases. the preceding project phase has been completed
and approved by the Council and costs for the
3. Environmental Review. EIR preparation, succeeding phases have been fully developed.
other environmental studies.
Accordingly, project appropriations are
4. Real Property Acquisitions. Property generally made when contracts are awarded. If
acquisition for projects, if necessary. project costs at the time of bid award are less
than the budgeted amount, the balance will be
5. Site Preparation. Demolition, hazardous unappropriated and returned to fund balance or
materials abatements, other pre-construction allocated to another project. If project costs at
work. the time of bid award are greater than budget
amounts, five basic options are available:
6. Design. Final design, plan and specification
preparation, and construction cost 1. Eliminate the project.
estimation. 2. Defer the project for consideration to the
next Financial Plan period.
7. Construction. Construction contracts. 3. Rescope or change the phasing of the
project to meet the existing budget.
8. Construction Management. Contract
project management and inspection, soils 4. Transfer funding from another specified,
and material tests, other support services lower priority project.
during construction. 5. Appropriate additional resources as
necessary from fund balance.
9. Equipment Acquisitions. Vehicles, heavy
machinery, computers, office furnishings, G. CIP Budget Carryover. Appropriations for
other equipment items acquired and Cl? projects lapse three years after budget
installed independently from construction adoption. Projects which lapse from lack of
contracts. project account appropriations may be
resubmitted for inclusion in a subsequent CIP.
10. Debt Service. Installment payments of Project accounts, which have been appropriated,
principal and interest for completed projects will not lapse until completion of the project
funded through debt financings. phase.
Expenditures for this project phase are
included in the Debt Service section of the H. Program Objectives. Project phases will be
Financial Plan. listed as objectives in the program narratives of
the programs, which manage the projects.
Generally, it will become more difficult for a
project to move from one phase to the next. As I. Public Art. CIP projects will be evaluated
such, more projects will be studied than will be during the budget process and prior to each
designed, and more projects will be designed phase for conformance with the City's public art
than will be constructed or purchased during the policy, which generally requires that 1% of
term of the CIP. eligible project construction costs be set aside
for public art. Excluded from this requirement
2D-16
-tt-
Budget and Fiscal Policies EXHIBIT A
are underground projects, utility infrastructure of constructing necessary community
projects, funding from outside agencies, and facilities.
costs other than construction such as study,
environmental review, design, site preparation, 4. Transportation impact fees are a major
land acquisition and equipment purchases. funding source in financing transportation
system improvements. However, revenues
It is generally preferred that public art be from these fees are subject to significant
incorporated directly into the project, but this is fluctuation based on the rate of new
not practical or desirable for all projects; in this development. Accordingly, the following
case, an in-lieu contribution to public art will be guidelines will be followed in designing and
made. To ensure that funds are adequately building projects funded with transportation
budgeted for this purpose regardless of whether impact fees:
public art will directly incorporated into the
project, funds for public art will be identified a. The availability of transportation impact
separately in the CIP. fees in funding a specific project will be
analyzed on a case-by-case basis as
CAPITAL FINANCING plans and specification or contract
AND DEBT MANAGEMENT awards are submitted for CAO or
Council approval.
A. Capital Financing b. If adequate funds are not available at
that time, the Council will make one of
1. The City will consider the use of debt two determinations:
financing only for one-time capital
improvement projects and only under the • Defer the project until funds are
following circumstances: available.
a. When the project's useful life will
• Based on the high-priority of the
exceed the term of the financing. project, advance funds from the
General Fund, which will be
b. When project revenues or specific reimbursed as soon as funds become
resources will be sufficient to service available. Repayment of General
the long-term debt. Fund advances will be the first use
of transportation impact fee funds
2. Debt financing will not be considered when they become available.
appropriate for any recurring purpose such
as current operating and maintenance 5. The City will use the following criteria to
expenditures. The issuance of short-term evaluate pay-as-you-go versus long-term
instruments such as revenue, tax or bond financing in funding capital improvements:
anticipation notes is excluded from this
limitation. (See Investment Policy) Factors Favoring
Pay-As-You-Go Financing
3. Capital improvements will be financed
primarily through user fees, service charges, a. Current revenues and adequate fund
assessments, special taxes or developer balances are available or project phasing
agreements when benefits can be can be accomplished.
specifically attributed to users of the
facility. Accordingly, development impact b. Existing debt levels adversely affect the
fees should be created and implemented at City's credit rating.
levels sufficient to ensure that new c. Market conditions are unstable or
development pays its fair share of the cost present difficulties in marketing.
2D-17
-12-
Budget and Fiscal Policies EXHIBIT A
Factors Favoring Long Term Financing 5. The City will monitor all forms of debt
annually coincident with the City's Financial
d. Revenues available for debt service are Plan preparation and review process and
deemed sufficient and reliable so that report concerns and remedies, if needed, to
long-term financings can be marketed the Council.
with investment grade credit ratings.
e. The project securing the financing is of 6. The City will diligently monitor its
the type, which will support an compliance with bond covenants and ensure
investment grade credit rating. its adherence to federal arbitrage
regulations.
f. Market conditions present favorable
interest rates and demand for City 7. The City will maintain good, ongoing
financings. communications with bond rating agencies
g. A project is mandated by state or federal about its financial condition. The City will
requirements, and resources are follow a policy of full disclosure on every
insufficient or unavailable. financial report and bond prospectus
(Official Statement).
h. The project is immediately required to
meet or relieve capacity needs and C. Debt Capacity
current resources are insufficient or
unavailable. 1. General Purpose Debt Capacity. The City
i. The life of the project or asset to be will carefully monitor its levels of general
financed is 10 years or longer. purpose debt. Because our general purpose
debt capacity is limited, it is important that
B. Debt Management we only use general purpose debt financing
for high-priority projects where we can not
1. The City will not obligate the General Fund reasonably use other financing methods:
to secure long-term financings except when funds borrowed for a project today are not
marketability can be significantly enhanced. available to fund other projects tomorrow;
and funds committed for debt repayment
2. An internal feasibility analysis will be today are not available to fund operations in
prepared for each long-term financing which the future.
analyzes the impact on current and future
budgets for debt service and operations. In evaluating debt capacity, general purpose
This analysis will also address the reliability annual debt service payments should
of revenues to support debt service. generally not exceed 10% of General Fund
revenues; and in no case should they exceed
3. The City will generally conduct financings 15%. Further, direct debt will not exceed
on a competitive basis. However, 2% of assessed valuation; and no more than
negotiated financings may be used due to 60% of capital improvement outlays will be
market volatility or the use of an unusual or funded from long-term financings.
complex financing or security structure.
2. Enterprise Fund Debt Capacity. The City
4. The City will seek an investment grade will set enterprise fund rates at levels
rating (Baa/BBB or greater) on any direct needed to fully cover debt service
debt and will seek credit enhancements such requirements as well as operations,
as letters of credit or insurance when maintenance, administration and capital
necessary for marketing purposes, improvement costs. The ability to afford
availability and cost-effectiveness. new debt for enterprise operations will be
evaluated as an integral part of the City's
rate review and setting process.
2D-18
-13-
Budget and Fiscal Policies EXHIBIT A
D. Independent Disclosure Counsel of financing is preferred over other funding
options such as impact fees, reimbursement
The following criteria will be used on a case-by- agreements or direct developer
case basis in determining whether the City responsibility for the improvements.
should retain the services of an independent
disclosure counsel in conjunction with specific 2. Active Role. Even though land-based
project financings: financings may be a limited obligation of
the City, we will play an active role in
1. The City will generally not retain the managing the district. This means that the
services of an independent disclosure City will select and retain the financing
counsel when all of the following team, including the financial advisor, bond
circumstances are present: counsel, trustee, appraiser, disclosure
counsel, assessment engineer and
a. The revenue source for repayment is underwriter. Any costs incurred by the City
under the management or control of the in retaining these services will generally be
City, such as general obligation bonds, the responsibility of the property owners or
revenue bonds, lease-revenue bonds or developer, and will be advanced via a
certificates of participation. deposit when an application is filed; or will
b. The bonds will be rated or insured. be paid on a contingency fee basis from the
proceeds from the bonds.
2. The City will consider retaining the services
of an independent disclosure counsel when 3. Credit Quality. When a developer requests
a district, the City will carefully evaluate the
one or more of following circumstances are
present: applicants financial plan and ability to
carry the project, including the payment of
a. The financing will be negotiated, and assessments and special taxes during build-
the underwriter has not separately out. This may include detailed background,
engaged an underwriter's counsel for credit and lender checks, and the
disclosure purposes. preparation of independent appraisal reports
and market absorption studies. For districts
b. The revenue source for repayment is not where one property owner accounts for
under the management or control of the more than 25% of the annual debt service
City, such as land-based assessment obligation, a letter of credit further securing
districts, tax allocation bonds or conduit the financing may be required.
financings.
c. The bonds will not be rated or insured. 4. Reserve Fund. A reserve fund should be
established in the lesser amount of: the
d. The City's financial advisor, bond maximum annual debt service; 125% of the
counsel or underwriter recommends that annual average debt service; or 10% of the
the City retain an independent bond proceeds.
disclosure counsel based on the
circumstances of the financing. 5. Value-to-Debt Ratios. The minimum value-
to-date ratio should generally be 4:1. This
E. Land-Based Financings means the value of the property in the
district, with the public improvements,
1. Public Purpose. There will be a clearly should be at least four times the amount of
articulated public purpose in forming an the assessment or special tax debt. In
assessment or special tax district in special circumstances, after conferring and
financing public infrastructure receiving the concurrence of the City's
improvements. This should include a financial advisor and bond counsel that a
finding by the Council as to why this form lower value-to-debt ratio is financially
2D-19
-14-
Budget and Fiscal Policies EXHIBIT A
prudent under the circumstances, the City disclosure information annually as described
may consider allowing a value-to-debt ratio under SEC Rule 15(c)-12.
of 3:1. The Council should make special
findings in this case. 12. Disclosure to Prospective Purchasers. Full
disclosure about outstanding balances and
6. Capitalized Interest During Construction. annual payments should be made by the
Decisions to capitalize interest will be made seller to prospective buyers at the time that
on case-by-case basis, with the intent that if the buyer bids on the property. It should not
allowed, it should improve the credit quality be deferred to after the buyer has made the
of the bonds and reduce borrowing costs, decision to purchase. When appropriate,
benefiting both current and future property applicants or property owners may be
owners. required to provide the City with a
disclosure plan.
7. Maximum Burden. Annual assessments (or
special taxes in the case of Mello-Roos or F. Conduit Financings
similar districts) should generally not
exceed 1% of the sales price of the property; 1. The City will consider requests for conduit
and total property taxes, special assessments financing on a case-by-case basis using the
and special taxes payments collected on the following criteria:
tax roll should generally not exceed 2%.
a. The City's bond counsel will review the
8. Benefit Apportionment. Assessments and terms of the financing, and render an
special taxes will be apportioned according opinion that there will be no liability to
to a formula that is clear, understandable, the City in issuing the bonds on behalf
equitable and reasonably related to the of the applicant.
benefit received by—or burden attributed
to—each parcel with respect to its financed b. There is a clearly articulated public
improvement. Any annual escalation factor purpose in providing the conduit
should generally not exceed 2%. financing.
9. Special Tax District Administration. In the c. The applicant is capable of achieving
case of Mello-Roos or similar special tax this public purpose.
districts, the total maximum annual tax 2. This means that the review of requests for
should not exceed 110% of annual debt conduit financing will generally be a two-
service. The rate and method of step process: first asking the Council if they
apportionment should include a back-up tax are interested in considering the request,and
in the event of significant changes from the establishing the ground rules for evaluating
initial development plan, and should include it; and then returning with the results of this
procedures for prepayments. evaluation, and recommending approval of
10. Foreclosure Covenants. In managing appropriate financing documents if
administrative costs, the City will establish warranted. This two-step approach ensures
minimum delinquency amounts per owner, that the issues are clear for both the City and
and for the district as a whole, on a case-by- applicant, and that key policy questions are
case basis before initiating foreclosure answered.
proceedings. 3. The workscope necessary to address these
11. Disclosure to Bondholders. In general, issues will vary from request to request, and
will have to be determined on a case-by-
each property owner who accounts for more case basis. Additionally, the City should
than 10% of the annual debt service or generally be fully reimbursed for our costs
bonded indebtedness must provide ongoing
2D-20
-15-
Budget and Fiscal Policies EXHIBIT A
in evaluating the request; however, this equipment, uniforms, clerical
should also be determined on a case-by-case support and facilities.
basis. • The ability of private industry to
HUMAN RESOURCE MANAGEMENT provide the proposed service.
._ • Additional revenues or cost savings,
which may be realized.
A. Regular Staffing
4. Periodically, and before any request for
1. The budget will fully appropriate the additional regular positions, programs will
resources needed for authorized regular be evaluated to determine if they can be
staffing and will limit programs to the accomplished with fewer regular employees.
regular staffing authorized. (See Productivity Review Policy)
2. Regular employees will be the core work 5. Staffing and contract service cost ceilings
force and the preferred means of staffing will limit total expenditures for regular
ongoing, year-round program activities that employees, temporary employees, and
should be performed by full-time City independent contractors hired to provide
employees rather than independent operating and maintenance services.
contractors. The City will strive to provide
competitive compensation and benefit B. Temporary Staffing
schedules for its authorized regular work
force. Each regular employee will: 1. The hiring of temporary employees will not
be used as an incremental method for
a. Fill an authorized regular position. expanding the City's regular work force.
b. Be assigned to an appropriate
bargaining unit. Temporary employees include all employees
other than regular employees, elected
c. Receive salary and benefits consistent officials, and volunteers. Temporary
with labor agreements or other employees will generally augment regular
compensation plans. City staffing as extra-help employees,
seasonal employees, contract employees,
3. To manage the growth of the regular work interns and work-study assistants.
force and overall staffing costs,the City will
follow these procedures: 3. The City Administrative Officer (CAO) and
Department Heads will encourage the use of
a. The Council will authorize all regular temporary rather than regular employees to
positions. meet peak workload requirements, fill
interim vacancies, and accomplish tasks
b. The Human Resources Department will where less than full-time, year-round
coordinate and approve the hiring of all staffing is required.
regular and temporary employees.
Under this guideline, temporary employee
c. All requests for additional regular hours will generally not exceed 50% of.a
positions will include evaluations of: regular, full-time position (1,000 hours
annually). There may be limited
• The necessity, term and expected circumstances where the use of temporary
results of the proposed activity. employees on an ongoing basis in excess of
• Staffing and materials costs this target may be appropriate due to unique
including salary, benefits, programming or staffing requirements.
However, any such exceptions must be
2D-21
-16-
Budget and Fiscal Policies EXHIBIT A
approved by the CAO based on the review procedures. (See Contracting for Services
and recommendation of the Personnel Policy)
Director.
PRODUCTIVITY
4. Contract employees are defined as
temporary employees with written contracts
approved by the CAO who may receive Ensuring the "delivery of service with value for
approved benefits depending on hourly cost is one of the key concepts embodied in the
requirements and the length of their City's Mission Statement (San Luis Obispo Style—
contract. Contract employees will generally Quality With Vision). To this end, the City will
be used for medium-term (generally constantly monitor and review our methods of
between six months and two years)projects, operation to ensure that services continue to be
programs or activities requiring specialized delivered in the most cost-effective manner possible.
or augmented levels of staffing for a This review process encompasses a wide range of
specific period. The services of contract productivity issues, including:
employees will . be discontinued upon
completion of the assigned project, program A. Analyzing systems and procedures to identify
or activity. Accordingly, contract and remove unnecessary review requirements.
employees will not be used for services that
are anticipated to be delivered on an B. Evaluating the ability of new technologies and
ongoing basis. related capital investments to improve
productivity.
C. Independent Contractors
C. Developing the skills and abilities of all City
Independent contractors are not City employees. employees.
They may be used in two situations:
D. Developing and implementing appropriate
1. Short-term, peak workload assignments to methods of recognizing and rewarding
be accomplished using personnel contracted exceptional employee performance.
through an outside temporary employment
agency (OEA). In this situation, it is E. Evaluating the ability of the private sector to
anticipated that City staff will closely perform the same level of service at a lower
monitor the work of OEA employees and cost.
minimal training will be required.
However, they will always be considered F. Periodic formal reviews of operations on a
the employees of the OEA and not the City. systematic, ongoing basis.
All placements through an OEA will be
coordinated through the Personnel G. Maintaining a decentralized approach in
Department and subject to the approval of managing the City's support service functions.
the Personnel Director. Although some level of centralization is
necessary for review and control purposes,
2. Construction of public works projects and decentralization supports productivity by:
delivery of operating, maintenance or
specialized professional services not 1. Encouraging accountability by delegating
routinely performed by City employees. responsibility to the lowest possible level.
Such services will be provided without close
supervision by City staff, and the required 2. Stimulating creativity, innovation and
methods, skills and equipment will individual initiative.
generally be determined and provided by the
contractor. Contract awards will be guided
by the City's purchasing policies and
2D-22
-17-
Budget and Fiscal Policies EXHIBIT A
3. Reducing the administrative costs of B. Evaluation Criteria
operation by eliminating unnecessary
review procedures. 1. Within the general policy guidelines stated
above, the cost-effectiveness of contract
4. Improving the organization's ability to services in meeting established service
respond to changing needs, and identify and levels will be determined on a case-by-case
implement cost-saving programs. basis using the following criteria:
5. Assigning responsibility for effective 2. Is a sufficient private sector market
operations and citizen responsiveness to the available to competitively deliver this
department. service and assure a reasonable range of
alternative service providers?
CONTRACTING FOR SERVICES
3. Can the contract be effectively and
efficiently administered?
A. General Policy Guidelines
4. What are the consequences if the contractor
1. Contracting with the private sector for the fails to perform, and can the contract
delivery of services provides the City with a reasonably be written to compensate the
significant opportunity for cost containment City for any such damages?
and productivity enhancements. As such,
the City is committed to using private sector 5. Can a private sector contractor better
resources in delivering municipal services respond to expansions, contractions or
as a key element in our continuing efforts to special requirements of the service?
provide cost-effective programs.
6. Can the work scope be sufficiently defined
2. Private sector contracting approaches under to ensure that competing proposals can be
this policy include construction projects, fairly and fully evaluated, as well as the
professional services, outside employment contractor's performance after bid award?
agencies and ongoing operating and
maintenance services. 7. Does the use of contract services provide us
with an opportunity to redefine service
3. In evaluating the costs of private sector levels?
contracts compared with in-house
performance of the service, indirect, direct, 8. Will the contract limit our ability to deliver .
and contract, administration costs of the emergency or other high priority services?
City will be identified and considered.
9. Overall, can the City successfully delegate
4. Whenever private sector providers are the performance of the service but still
available and can meet established service retain accountability and responsibility for
levels, they will be seriously considered as its delivery?
viable service delivery alternatives using the
evaluation criteria outlined below.
5. For programs and activities currently
provided by City employees, conversions to
contract services will generally be made
through attrition, reassignment or absorption
by the contractor.
2D-23
As-
OPERATING PROGRAMS Exhibit �"1
OVERVIEW—PURPOSE AND ORGANIZATION
PURPOSE ■ Public Safety
■ Public Utilities
■ Transportation
The operating programs set forth in this section of the ■ Leisure,Cultural and Social Services
Financial Plan form the City's basic organizational ■ Community Development
units, provide for the delivery of essential services, ■ General Government
and allow the City to accomplish the following tasks:
Operation
■ Establish policies and goals which define the
nature and level of services to be provided. Grouping of related programs within a functional area
such as Police Protection within Public Safety or
■ Identify activities performed in delivering Water Service within Public Utilities.
program services.
Program
■ Set objectives for improving the delivery of
services. Basic organizational unit of the Financial Plan which
■ Appropriate the resources required to perform establishes policies, goals, and objectives that define
the nature and level of services to be provided.
activities and accomplish objectives.
ORGANIZATION Activity
Specific service performed within a program in the
The City's operating expenditures are organized into pursuit of its objectives and goals.
the following hierarchical categories:
■ Function Sample Relationship: Public Utilities
■ Operation The following is an example of the relationship
■ Program between functions, operations, programs and
■ Activity activities:
Function FUNCTION_Pubhe Utilities
OPERATION Water Service
The highest level of summarization used in the City's
Financial Plan, the "function" classification PROGRAM Water Treatment
represents a grouping of related operations and
programs which may cross organizational ACTIVITY Laboratory Analysis
(departmental) boundaries aimed at accomplishing a
broad goal or delivering a major service. The six
functions in the Financial Plan are:
2D-24
D-1
OPERATING PROGRAM Exhibit
OVERVIEW—SUMMARY OF FUNCTIONS AND OPERATIONS
Responsible Department Main Funding Source
Public Safety
Police Protection Police General Fund
Fire&Environmental Safety Fire General Fund
Public Utilities
Water Service Utilities Water Fund
Wastewater Service Utilities Sewer Fund
Whale Rock Reservoir Utilities Whale Rock
Transportation
Transportation Planning Public Works General Fund
Streets&Flood Protection Public Works General Fund
Parking Public Works Parking Fund
Municipal Transit System Public Works Transit Fund
Leisure, Culturn4&Social Services
Parks and Recreation
Recreation Programs Parks&Recreation General Fund
Golf Course Parks&Recreation Golf Fund
Maintenance Programs Public Works General Fund
Cultural Activities Administration General Fund
Social Services
Human Relations Human Resources General Fund
Housing Assistance Human Resources CDBG Fund
Community Development
Planning
Development Review&Long Range Planning Community Development General Fund
Natural Resources Protection Administration General Fund
Construction Regulation
Building&Safety Community Development General Fund
Engineering Public Works General Fund
Economic Health
Downtown Association(DA) Council&Advisory Bodies DA Fund
Community Promotion Administration General Fund
Economic Development Administration General Fund
General Government
Legislation&Policy Council&Advisory Bodies General Fund
General Administration
City Administration Administration General Fund
Public Works Administration Public Works General Fund
Legal Services City Attorney General Fund
Records&Elections City Clerk General Fund
Organizational Support Services
Human Resources Administration Human Resources General Fund
Risk Management Human Resources General Fund
Financial Management Finance General Fund
Information Systems Finance General Fund
GeoData Services Public Works General Fund
Building&Vehicle Maintenance Public Works General Fund
2D-25
D-2
OPERATING PROGRAMS Exhibit-(9--. 3
OVERVIEW-OPERATING PROGRAM NARRATIVES
The following information is provided for each Staffing Summary
operating program
Program Title Provides a four year summary of authorized regular
positions allocated to this program (1997-98 through
2000-01) along with full-time equivalents (FrE's) for
Presents the function, program name, operation, temporary staffing. Generally, whole regular
department responsible for program administration, positions are assigned to programs based on where
and the primary funding source at the top of the page. employees spend at least 50%of their time.
Program Costs Significant Operating Program Changes
Provides four years of historical and projected Summarizes significant operating program changes
expenditure information (1997-98 through 2000-01) from the prior Financial Plan, which include:
organized into four categories:
■ Major service curtailments or expansions.
■ Staffing. All costs associated with City staffing, ■ Any increases or decreases in regular positions.
including salaries for all regular, temporary, and ■ Significant one-tune costs
contract employees as well as related costs for
benefits and overtime. ■ Major changes in the method of delivering
services.
■ Contract Services. All expenditures related to ■ Changes in operation that will significantly affect
contract services. other departments or customer service
■ Changes that affect current policies.
■ Other Operating Expenditures. Purchases of
supplies, tools, utilities, insurance, and similar Detailed supporting documentation for each of the
operating expenditures. significant operating program changes is provided in
Appendix A of the Financial Plan.
■ Minor Capital. Capital acquisitions or projects
with a life in excess of one year and costs 1999-01 Program O_ bjectives
between $5,000 and $15,000. Capital
acquisitions or projects with a cost in excess of
$15,000 are included in the Capital Improvement Lists major program objectives for the next two years
Plan(CIP) section of the Financial Plan. to improve service delivery.
Program Description Performance and Workload Indicators
Describes program purpose,goals and activities. Provides four years of historical and projected
performance and workload indicators (1997-98
through 2000-01) in order to provide the Council and
public with an overview of the programs workscope
and effectiveness.
2D-26
D-3