HomeMy WebLinkAbout06/21/2011, PH 1 - ADOPTION OF 2011-13 FINANCIAL PLAN i I
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CITY OF SAN LUI S O B I S P O
FROM: Katie Lichtig, City Manager
Mary Bradley, Interim Director of Finance & Information Technology
SUBJECT: ADOPTION OF 2011-13 FINANCIAL PLAN
RECOMMENDATION
Adopt a resolution approving the 2011-13 Financial Plan and 2011-12 Budget.
DISCUSSION
After extensive community participation and eight Council budget workshops and hearings
beginning in October 2010,the 2011-13 Financial Plan is ready for adoption. Key features include:
1. Creates a financially sustainable plan that closes a projected $4.4 million General Fund budget
gap and maintains General Fund Reserves at policy levels by the end of the second year of the
Financial Plan.
2. Balances delivery of essential services with resources available on an ongoing basis.
3. Addresses escalating staffing costs while maintaining the ability to attract and retain well-
qualified employees in all funds.
4: Implements a growing re-investment during the five-year Capital Improvement Plan to maintain
infrastructure, fleet,building facilities& IT assets.
5. Stays true to and focused on Measure Y priorities.
The 2011-13 Financial Plan includes budget appropriations for 2011-12 of $99.9 million as
summarized below:
2011-12 2012-13
Operating Programs $ 80,604,700 $ 80,915,900
Capital Improvement Plan 9,488,400 9,080,600
Debt Service 9,776,700 9,523,900
TOTAL $99,869,800 $99,520,400
Although the City adopts a two-year Financial Plan, appropriations continue to be made annually
under the process. The City Council must adopt the 2011-12 Budget by June 30, 2011.
Traditionally, this has been accomplished by resolution. The Budget Resolution is provided as
Attachment I to this report. It is recommended Council adopt the budget as presented, and then
make any changes by separate action.
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Adoption of 2011-13 Financial Plan Page 2
Changes to the Preliminary Financial Plan
In preparing for adoption at this meeting, the Council will have held three budget workshops and
hearings on June 2, 9 and 14. The following changes will be incorporated into the final budget
documents based on direction received as of June 9, 2011:
■ Additional clarification in the Major City Goal work program for Neighborhood Wellness
related to the evaluation of the composition of the City's Neighborhood Services Team to
ensure they are aligned with neighborhood wellness policies and are operating in the most
effective manner. This evaluation will include the appropriateness of adding community or
other agency members to the team.
■ Analytic information about the cost recovery associated with the use of various City
recreational facilities including the Damon Garcia Sports Fields, San Luis Obispo Baseball
Stadium, San Luis Obispo Swim Center, and the Laguna Lake Golf Course.
Any further direction received on June 14 or June 21 will be incorporated into the final budget
documents.
Budget and Fiscal Policy Changes
Although no additional changes to the Budget and Fiscal Policies are proposed, at the June 9, 2011
Council meeting, staff was asked to provide a legislative draft of the Budget and Fiscal Policies
(included in section B of the Preliminary Financial Plan)to enable Council to readily see the changes
since 2009-11. This is included as Attachment 2.
Adopted User Fees and Service Charges
Consistent with adopted City policy, fees are reviewed and updated on an ongoing basis to ensure
that they keep pace with changes in the cost-of-living as well as changes in methods or levels of
service delivery. A comprehensive cost of services study is undertaken at least every five years. In
the interim, the City's Master Fee Schedule is adjusted by annual changes in the Consumer Price
Index. The fee resolutions and policy have already been adopted, therefore no further Council action
is required at this time.
In addition, staff is currently reviewing the building fee structure, which will accomplish two key
things: it will simplify the structure, making sure it is easy to implement with the new EnerGov
system; and it will allow us to fully transition to a cost-based, rather than valuation-based,
methodology. Staff will return to Council when this study is completed for further
implementation steps as necessary.
Final Documents
After Council adoption of the 2011-13 Financial Plan, staff will prepare and distribute a final version
reflecting all approved changes from the Preliminary Financial Plan. Based on these changes, staff
will also revise and distribute a final version of Appendix A: Significant Operating Program
Changes; and Appendix B: Capital Improvement Plan. Along with a standard printed distribution of
these documents, they will also be published on the City's web site.
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Adoption of 2011-13 Financial Plan Page 3
Additionally, staff will prepare a Budget-in-Brief that highlights the City's budget process, key
budget features, major City goals and basic "budget facts." This budget summary is widely
distributed: it will be available at all public counters, included with the utility billings in August and
published on the City's web site. With this broad distribution, it will also meet the Measure Y
reporting commitments to the community on the use of these funds.
Ongoing Monitoring
Adoption of the Financial Plan is the beginning—not the end—of a continuous financial
management process. Ongoing monitoring efforts include:
1. Interim Financial Reports. On-line access to up-to-date financial information is provided to
staff throughout the organization. Additionally, comprehensive financial reports are prepared
monthly to monitor the City's fiscal condition, and a concise but comprehensive report is issued
on a quarterly basis. These are complemented by special reports such as the quarterly Sales Tax
Newsletter, Monthly TOT Report and Monthly Investment Report.
2. Goal Status Reports. Formal reports are provided to the Council on status of Major City Goals,
other important objectives and major Capital Improvement Plan projects at least three rimes each
year— in the fall, with the Mid-Year Budget Review, and in the spring with the Financial Plan
Supplement preparation . These are supplemented by ongoing updates through Agenda reports,
Council Notes and other special reports.
3. Mid-Year Budget Reviews. The Council formally reviews the City's financial condition and
makes course corrections as needed six months after the beginning of each fiscal year.
4. General Fund Five-Year Fiscal Forecast. As we move forward, the Council will receive
updates to the Five-Year Fiscal Forecast with the Mid-Year Budget Review and the Financial
Plan Supplement. Additional updates may be provided if large or unexpected changes to the
General Fund occur.
5. Financial Plan Supplement for 2012-13. While the City prepares a two-year Financial Pian,
appropriations are still made annually. As such, staff will return to the Council in June 2012 for
formal approval of the 2012-13 Budget. However, these"second year" appropriations will be
based on the foundation developed during the two-year planning and budgetary process. In
short, the Supplement is much like a mid-year budget review, and focuses on changes since
adoption of the Financial Plan.
6. Comprehensive Annual Financial Report This year-end report shows the final results of the
City's financial operations for all funds. It includes audited financial statements by the City's
independent certified public accountant as well as a comprehensive transmittal memorandum
highlighting key trends and findings about the City's financial condition.
Budget Process Review
Consistent with our long-standing practice, once the dust has settled on this Financial Plan process,
we will review areas where it went well, and areas where we can improve in the future. This will
include soliciting comments from the Council as well as Department Heads, Budget Review Team
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Adoption of 2011-13 Financial Plan Page 4
and key staff from the departments involved in the budget preparation process. This type of analysis
has been very valuable in the past in surfacing areas of improvement. After completing this review,
we will return to the Council at an appropriate time with recommendations for the 2013-15 Financial
Plan process.
ATTACHMENT
1. Resolution approving the 2011-13 Financial Plan and 2011-12 Budget
2. Legislative draft of Budget and Fiscal Policies
T:\Council Agenda Repom\Finance&IT CAR\Finance\2011\Agenda Report- Adoption of 2011-13 Financial Plan.doc
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Attachment 1
RESOLUTION NO. (2011 SERIES)
A RESOLUTION OF THE COUNCIL OF THE CITY OF SAN LUIS OBISPO
APPROVING THE 2011-13 FINANCIAL PLAN AND 2011-12 BUDGET
WHEREAS, the City Manager has submitted the 2011-13 Financial Plan to the Council
for its review and consideration in accordance with budget policies and objectives established by
the Council; and
WHEREAS, the 2011-13 Financial Plan is based upon extensive public comment and
direction of the Council after fourteen scheduled budget workshops and public hearings.
NOW, THEREFORE, be it resolved by the Council of the City of San Luis Obispo that
the 2011-13 Financial Plan is hereby approved and that the operating, debt service and capital
improvement plan budget for the fiscal year beginning July 1, 2011 and ending June 30, 2012 is
hereby adopted.
On motion of seconded by
and on the following vote:
AYES:
NOTE:
ABSENT:
the foregoing Resolution was passed and adopted on June 21, 2011.
Mayor Jan Marx
ATTEST:
Elaina Cano, City Clerk
APPROVED:
pristine Dietrick, City ttorney
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Attachment 2
Very few changes were made in the Budget and Fiscal Policies section between the 2009-11 Financial Plan and
the Preliminary 2011-13 Financial Plan. As requested at the June 9, 2011 Council meeting,attached is a
legislative draft showing the changes. Additions appear in bold underline and deletions appear in-'-i' o.
A summary of the changes is below. The page number refers to the attachment,not the Preliminary Financial
Plan document.
■ On page 2-6,Golf has been added as a High Range Cost Recovery Activity
■ On page 2-8,Golf has been removed from the list of Enterprise Funds and the remaining items have been
renumbered.
o On page 2-9, a sentence has been added to the end of the Property Taxes paragraph identifying how much the
City receives in each dollar of property taxes collected.
■ On page 2-12,a sentence has been added to the end of the Future Capital Project Designations paragraph
providing an example.
■ On page 2-13,the last sentence of the Public Art section has been changed to reflect the current fiscal years
when discussing funding at 0.5%rather than 1%.
■ On page 2-15,vehicle leasing language has been added to the Factors Favoring Long Term Financing.
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POLICIES AND OBJECI i . ES Attachment 2
BUDGET AND FISCAL POLICIES
FINANCIAL PLAN PURPOSE 4. Creating a pro-active budget that provides
AND ORGANIZATION for stable operations and assures the City's
�'1 long-term fiscal health.
A. Financial Plan Objectives. Through its 5. Promoting more orderly spending patterns.
Financial Plan, the City will link resources with 6. Reducing the amount of time and resources
results by: allocated to preparing annual budgets.
1. Identifying community needs for essential C. Measurable Objectives. The two-year
services. financial plan will establish measurable program
2. Organizing the programs required to provide objectives and allow reasonable time to
these essential services. accomplish those objectives.
3. Establishing program policies and goals, D. Second Year Budget. Before the beginning of
which define the nature and level of the second year of the two-year cycle, the
program services required. Council will review progress during the first
4. Identifying activities performed in year and approve appropriations for the second
delivering program services. fiscal year.
5. Proposing objectives for improving the E. Operating Carryover. Operating program
delivery of program services. appropriations not spent during the first fiscal
6. Identifying and appropriating the resources year may be carried over for specific purposes
required to perform program activities and into the second fiscal year with the approval of
accomplish program objectives. the City Manager.
7. Setting standards to measure and evaluate F. Goal Status Reports. The status of major
the: program objectives will be formally reported to
a. Output of program activities. the Council on an ongoing,periodic basis.
b. Accomplishment of program objectives. G. Mid-Year Budget Reviews. The Council will
c. Expenditure of program appropriations. formally review the City's fiscal condition, and
amend appropriations if necessary, six months
B. Two-Year Budget. Following the City's after the beginning of each fiscal year.
favorable experience, the City will continue
using a two-year financial plan, emphasizing H. Balanced Budget. The City will maintain a
long-range planning and effective program balanced budget over the two-year period of the
management. The benefits identified when the Financial Plan. This means that:
City's first two-year plan was prepared for 1983-
85 continue to be realized: 1. Operating revenues must fully cover
operating expenditures, including debt
1. Reinforcing the importance of long-range service.
planning in managing the City's fiscal 2. Ending fund balance (or working capital in
affairs. the enterprise funds) must meet minimum
2. Concentrating on developing and budgeting policy levels. For the general and enterprise
for the accomplishment of significant funds, this level has been established at 20%
objectives. of operating expenditures.
3. Establishing realistic timeframes for
achieving objectives. ►�
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BUDGET AND FISCAL POLICIES
Under this policy, it is allowable for total GENERAL REVENUE MANAGEMENT
expenditures to exceed revenues in a given
year; however, in this situation, beginning
fund balance can only be used to fund A. Diversified and Stable Base. The City will
capital improvement plan projects, or other seek to maintain a diversified and stable revenue
"one-time,"non-recurring expenditures. base to protect it from short-term fluctuations in
any one revenue source.
FINANCIAL REPORTING
AND BUDGET ADMINISTRATION B. Long-Range Focus. To emphasize and
facilitate long-range financial planning, the City
will maintain current projections of revenues for
A. Annual Reporting. The City will prepare the succeeding five years.
annual financial statements as follows:
C. Current Revenues for Current Uses. The
1. In accordance with Charter requirements, City will make all current expenditures with
the City will contract for an annual audit by current revenues, avoiding procedures that
a qualified independent certified public balance current budgets by postponing needed
accountant. The City will strive for an expenditures, accruing future revenues, or
unqualified auditors' opinion. rolling over short-term debt.
2. The City will use generally accepted D. Interfund Transfers and Loans. In order to
accounting principles in preparing its annual achieve important public policy goals, the City
financial statements, and will strive to meet has established various special revenue, capital
the requirements of the GFOA's Award for project, debt service and enterprise funds to
Excellence in Financial Reporting program. account for revenues whose use should be
restricted to certain activities. Accordingly,
3. The City will issue audited financial each fund exists as a separate financing entity
statements within 180 days after year-end. from other funds, with its own revenue sources,
expenditures and fund equity.
B. Interim Reporting. The City will prepare and
issue timely interim reports on the City's fiscal Any transfers between funds for operating
status to the Council and staff. This includes: purposes are clearly set forth in the Financial
on-line access to the City's financial Plan, and can only be made by the Director of
management system by City staff; monthly Finance & Information Technology in
reports to program managers; more formal accordance with the adopted budget. These
quarterly reports to the Council and Department operating transfers, under which financial
Heads; mid-year budget reviews; and interim resources are transferred from one fund to
annual reports. another, are distinctly different from interfund
borrowings, which are usually made for
C. Budget Administration. As set forth in the temporary cash flow reasons, and are not
City Charter, the Council may amend or intended to result in a transfer of financial
supplement the budget at any time after its resources by the end of the fiscal year.
adoption by majority vote of the Council
members. The City Manager has the authority In summary, interfund transfers result in a
to make administrative adjustments to the change in fund equity; interfund borrowings do
budget as long as those changes will not have a not, as the intent is to repay in the loan in the
significant policy impact nor affect budgeted near term.
year-end fund balances.
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BUDGET AND FISCAL POLICIES
From time-to-time, interfund borrowings may be
appropriate; however, these are subject to the B. User Fee Cost Recovery Levels
following criteria in ensuring that the fiduciary
purpose of the fund is met: In setting user fees and cost recovery levels, the
following factors will be considered:
1. The Director of Finance & Information
Technology is authorized to approve 1. Community-Wide Versus Special Benefit.
temporary interfund borrowings for cash The level of user fee cost recovery should
flow purposes whenever the cash shortfall is consider the community-wide versus special
expected to be resolved within 45 days. The service nature of the program or activity.
most common use of interfund borrowing The use of general-purpose revenues is
under this circumstance is for grant appropriate for community-wide services,
programs like the Community Development while user fees are appropriate for services
Block Grant, where costs are incurred that are of special benefit to easily identified
before drawdowns are initiated and individuals or groups.
received. However; receipt of funds is
typically received shortly after the request 2. Service Recipient Versus Service Driver.
for funds has been made. After considering community-wide versus
special benefit of the service, the concept of
2. Any other interfund borrowings for cash service recipient versus service driver
flow or other purposes require case-by-case should also be considered. For example, it
approval by the Council. could be argued that the applicant is not the
beneficiary of the City's development
3. Any transfers between funds where review efforts: the community is the
reimbursement is not expected within one primary beneficiary. However, the
fiscal year shall not be recorded as interfund applicant is the driver of development
borrowings; they shall be recorded as review costs, and as such, cost recovery
interfund operating transfers that affect from the applicant is appropriate.
equity by moving financial resources from
one fund to another. 3. Effect of Pricing on the Demand for
Services. The level of cost recovery and
USER FEE COST RECOVERY GOALS related pricing of services can significantly
affect the demand and subsequent level of
services provided. At full cost recovery,
A. Ongoing Review this has the specific advantage of ensuring
that the City is providing services for which
Fees will be reviewed and updated on an there is genuinely a market that is not
ongoing basis to ensure that they keep pace with overly-stimulated by artificially low prices.
changes in the cost-of-living as well as changes
in methods or levels of service delivery. Conversely, high levels of cost recovery will
negatively impact the delivery of services to
In implementing this goal, a comprehensive lower income groups. This negative feature
analysis of City costs and fees should be made is especially pronounced, and works against
at least every five years. In the interim, fees will public policy, if the services are specifically
be adjusted by annual changes in the Consumer targeted to low income groups.
Price Index. Fees may be adjusted during this
interim period based on supplemental analysis 4. Feasibility of Collection and Recovery.
whenever there have been significant changes in Although it may be determined that a high
the method, level or cost of service delivery. level of cost recovery may be appropriate
2-4 PHI-9
'POLICIESOBJECI , (ES Attachment 21
BUDGET AND FISCAL POLICIES
for specific services, it may be impractical D. Factors Favoring High Cost Recovery Levels
or too costly to establish a system to identify
and charge the user. Accordingly, the The use of service charges as a major source of
feasibility of assessing and collecting funding service levels is especially appropriate
charges should also be considered in under the following circumstances:
developing user fees, especially if
significant program costs are intended to be 1. The service is similar to services provided
financed from that source. through the private sector.
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, information
readily detected by the City. Many small- technology, legal services, fleet
scale licenses and permits might fall into maintenance and insurance.
this category.
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,POLICIESOBJECI vES Attachment 2:
BUDGET AND FISCAL POLICIES
3. The method of assessing and collecting fees G. Recreation Programs
should be as simple as possible in order to
reduce the administrative cost of collection. The following cost recovery policies apply to
the City's recreation programs:
4. Rate structures should be sensitive to the
"market" for similar services as well as to 1. Cost recovery for activities directed to
smaller,infrequent users of the service. adults should be relatively high.
5. A unified approach should be used in 2. Cost recovery for activities directed to youth
determining cost recovery levels for various and seniors should be relatively low. In
programs based on the factors discussed those circumstances where services are
above. similar to those provided in the private
sector, cost recovery levels should be
F. Low Cost-Recovery Services higher.
Based on the criteria discussed above, the Although ability to pay may not be a
following types of services should have very concern for all youth and senior
low cost recovery goals. In selected participants, these are desired program
circumstances, there may be specific activities activities, and the cost of determining need
within the broad scope of services provided that may be greater than the cost of providing a
should have user charges associated with them. uniform service fee structure to all
However, the primary source of funding for the participants. Further, there is a community-
operation as a whole should be general-purpose wide benefit in encouraging high-levels of
revenues,not user fees. participation in youth and senior recreation
activities regardless of financial status.
1. Delivering public safety emergency
response services such as police patrol 3. Cost recovery goals for recreation activities
services and fire suppression. are set as follows:
2. Maintaining and developing public facilities High-Range Cost Recovery Activities
that are provided on a uniform, community- (60%to 100%)
wide basis such as streets, parks and a. Adult athletics
general-purpose buildings. b. Banner permit applications
3. Providing social service programs and c. Child care services(except Youth
economic development activities. STAR)
d. Facility rentals(indoor and outdoor;
excludes use of facilities for internal
City uses)
e. Triathlon
E Golf
Mid-Range Cost Recovery Activities
(30% to 60%)
g. Classes
h. Holiday in the Plaza
i. Major commercial film permit
applications
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-POLICIES AND OBJECTI of ES Attachment
BUDGET AND FISCAL POLICIES
Low-Range Cost Recovery Activities introductory rates, family discounts and
(0 to 30%) coupon discounts on a pilot basis (not to
j. Aquatics exceed 18 months) to promote new
k. Batting cages recreation programs or resurrect existing
1. Community gardens ones.
m. Junior Ranger camp
n. Minor commercial film permit 8. The Parks and Recreation Department will
applications consider waiving fees only when the City
o. Skate park Manager determines in writing that an
p. Special events(except for Triathlon and undue hardship exists.
Holiday in the Plaza)
q. Youth sports H. Development Review Programs
r. Youth STAR
s. Teen services The following cost recovery policies apply to
t. Senior/boomer services the development review programs:
4. For cost recovery activities of less than 1. Services provided under this category
100%, there should be a differential in rates include:
between residents and non-residents.
However, the Director of Parks and a. Planning(planned development permits,
Recreation is authorized to reduce or tentative tract and parcel maps,
eliminate non-resident fee differentials variances,
general plan amendments,
v
when it can be demonstrated that: variances,use permits).
b. Building and safety (building permits,
a. The fee is reducing attendance. structural plan checks, inspections).
b. And there are no appreciable c. Engineering (public improvement plan
expenditure savings from the reduced checks, inspections, subdivision
attendance. requirements, encroachments).
5. Charges will be assessed for use of rooms, d. Fire plan check.
pools, gymnasiums, ball fields, special-use 2. Cost recovery for these services should
areas, and recreation equipment for generally be very high. In most instances,
activities not sponsored or co-sponsored by the City's cost recovery goal should be
the City. Such charges will generally 100%.
conform to the fee guidelines described
above. However, the Director of Parks and 3. However, in charging high cost recovery
Recreation is authorized to charge fees that levels, the City needs to clearly establish
are closer to full cost recovery for facilities
and articulate standards for its performance
that are heavily used at peak times and
in reviewing developer applications to
include a majority of non-resident users.
ensure that there is value for cost.
6. A vendor charge of at least 10 percent of
gross income will be assessed from
individuals or organizations using City
facilities for moneymaking activities.
7. Director of Parks and Recreation is
authorized to offer reduced fees such as
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POLICIES 1 OBJEC-i , vES Attachment 2:
BUDGET AND FISCAL POLICIES
I. Comparability With Other Communities ENTERPRISE FUND FEES AND RATES
In setting user fees, the City will consider fees
charged by other agencies in accordance with A. Water, Sewer and Parking. The City will set
the following criteria: fees and rates at levels which fully cover the
total direct and indirect costs—including
1. Surveying the comparability of the City's operations, capital outlay, and debt service—of
fees to other communities provides useful the following enterprise programs: water, sewer
background information in setting fees for and parking.
several reasons:
B. CoM. Golf r-eg ..m res iffina Fates; ,a.,...,a fully
a. They reflect the "market" for these fees eeier- dir-eet eper-ating–costs. Beeause of the
and can assist in assessing the nine ] ^'a-imMmue of the gelf ee^_se with its feees
reasonableness of San Luis Obispo's enyouth -aid—senier-s, subsidiesffem the
fees.
en4s may be eensider-ed by the
b. If prudently analyzed, they can serve as as paA of the Fina.,,.:.., Plan ,
a benchmark for how cost-effectively aleng with the need to possibly" subsidize a:-e^'
San Luis Obispo provides its services. .
2. However, fee surveys should never be the B. E Transit. Based on targets set under the
sole or primary criteria in setting City fees Transportation Development Act, the City will
as there are many factors that affect how strive to cover at least twenty percent of transit
and why other communities have set their operating costs with fare revenues.
fees at their levels. For example:
C. 1} Ongoing Rate Review. The City will
a. What level of cost recovery is their fee review and adjust enterprise fees and rate
intended to achieve compared with our structures as required to ensure that they remain
cost recovery objectives? appropriate and equitable.
b. What costs have been considered in
computing the fees? D. l Franchise Fees. In accordance with long-
standing practices, the City will treat the water
c. When was the last time that their fees and sewer funds in the same manner as if they
were comprehensively evaluated? were privately owned and operated. This means
d. What level of service do they provide assessing reasonable franchise fees in fully
compared with our service or recovering service costs.
performance standards?
At 3.5%, water and sewer franchise fees are
e. Is their rate structure significantly based on the mid-point of the statewide standard
different than ours and what is it for public utilities like electricity and gas(2%of
intended to achieve? gross revenues from operations) and cable
television(5%of gross revenues).
3. These can be very difficult questions to
address in fairly evaluating fees among As with other utilities, the purpose of the
different communities. As such, the franchise fee is reasonable cost recovery for the
comparability of our fees to other use of the City's street right-of-way. The
communities should be one factor among appropriateness of charging the water and sewer
many that is considered in setting City fees. funds a reasonable franchise fee for the use of
City streets is further supported by the results of
2-g PH1-13
� • . • : FAIRMTH=M WA
BUDGET AND FISCAL POLICIES
studies in Arizona, California, Ohio and
Vermont which concluded that the leading cause B. Gasoline Tax Subventions. All gasoline tax
for street resurfacing and reconstruction is street revenues (which are restricted by the State for
cuts and trenching for utilities. street-related purposes) will be used for
maintenance activities. Since the City's total
REVENUE DISTRIBUTION expenditures for gas tax eligible programs and
projects are much greater than this revenue
source, operating transfers will be made from
The Council recognizes that generally accepted the gas tax fund to the General Fund for this
accounting principles for state and local purpose. This approach significantly reduces
governments discourage the "earmarking" of the accounting efforts required in meeting State
General Fund revenues, and accordingly, the reporting requirements.
practice of designating General Fund revenues for
specific programs should be minimized in the City's C. Transportation Development Act (TDA)
management of its fiscal affairs. Approval of the Revenues. All TDA revenues will be allocated
following revenue distribution policies does not to alternative transportation programs, including
prevent the Council from directing General Fund regional and municipal transit systems, bikeway
resources to other functions and programs as improvements, and other programs or projects
necessary. designed to reduce automobile usage. Because
TDA revenues will not be allocated for street
A. Property Taxes. With the passage of purposes, it is expected that alternative
Proposition 13 on June 6, 1978, California cities transportation programs (in conjunction with
no longer can set their own property tax rates. other state or federal grants for this purpose)
In addition to limiting annual increases in will be self-supporting from TDA revenues.
market value, placing a ceiling on voter-
approved indebtedness, and redefining assessed D. Parking Fines. All parking fine revenues will
valuations, Proposition 13 established a be allocated to the parking fund, except for
maximum county-wide levy for general revenue those collected by Police staff(who are funded
purposes of 1% of market value. Under by the General Fund) in implementing
subsequent state legislation, which adopted neighborhood wellness programs.
formulas for the distribution of this countywide
levy, the City now receives a percentage of total 11WESTMENTS
property tax revenues collected countywide as
determined by the State and administered by the
County Auditor-Controller. The City receives A. Responsibility. Investments and cash
14.9% of each dollar collected in property tax management are the responsibility of the City
after allocations to school districts. Treasurer or designee. It is the City's policy to
appoint the Director of Finance and Information
Accordingly, while property revenues are often Technology as the City's Treasurer.
thought of local revenue sources, in essence
they are State revenue sources, since the State B. Investment Objective. The City's primary
controls their use and allocation. investment objective is to achieve a reasonable
rate of return while minimizing the potential for
With the adoption of a Charter revision in capital losses arising from market changes or
November 1996, which removed provisions that issuer default. Accordingly, the following
were in conflict with Proposition 13 relating to factors will be considered in priority order in
the setting of property tax revenues between determining individual investment placements:
various funds, all property tax revenues are now
accounted for in the General Fund. 1. Safety
2-9 PH1-14
IPOLICIES AND OBJECI ,-. ES Attachment 2
BUDGET AND FISCAL POLICIES
2. Liquidity The City will not invest in stock, will not
3. Yield speculate and will not deal in futures or options.
The investment market is highly volatile and
C. Tax and Revenue Anticipation Notes: Not for continually offers new and creative
Investment Purposes. There is an appropriate opportunities for enhancing interest earnings.
role for tax and revenue anticipation notes Accordingly, the City will thoroughly
(TRANS) in meeting legitimate short-term cash investigate any new investment vehicles before
needs within the fiscal year. However, many committing City funds to them.
agencies issue TRANS as a routine business
practice, not solely for cash flow purposes, but G. Authorized Institutions. Current financial
to capitalize on the favorable difference between statements will be maintained for each
the interest cost of issuing TRANS as a tax- institution in which cash is invested.
preferred security and the interest yields on Investments will be limited to 20 percent of the
them if re-invested at full market rates. total net worth of any institution and may be
reduced further or refused altogether if an
As part of its cash flow management and institution's financial situation becomes
investment strategy, the City will only issue unhealthy.
TRANS or other forms of short-term debt if
necessary to meet demonstrated cash flow H. Consolidated Portfolio. In order to maximize
needs; TRANS or any other form of short-term yields from its overall portfolio, the City will
debt financing will not be issued for investment consolidate cash balances from all funds for
purposes. investment purposes, and will allocate
investment earnings to each fund in accordance
As long as the City maintains its current policy with generally accepted accounting principles.
of maintaining fund/working capital balances
that are 20% of operating expenditures, it is I. Safekeeping. Ownership of the City's
unlikely that the City would need to issue investment securities will be protected through
TRANS for cash flow purposes except in very third-party custodial safekeeping.
unusual circumstances.
J. Investment Management Plan. The City
D. Selecting Maturity Dates. The City will strive Treasurer will develop and maintain an
to keep all idle cash balances fully invested Investment Management Plan that addresses the
through daily projections of cash flow City's administration of its portfolio, including
requirements. To avoid forced liquidations and investment strategies,practices and procedures.
losses of investment earnings, cash flow and
future requirements will be the primary K. Investment Oversight Committee. As set
consideration when selecting maturities. forth in the Investment Management Plan, this
committee is responsible for reviewing the
E. Diversification. As the market and the City's City's portfolio on an ongoing basis to
investment portfolio change, care will be taken determine compliance with the City's
to maintain a healthy balance of investment investment policies and for making
types and maturities. recommendations regarding investment
management practices.
F. Authorized Investments. The City will invest
only in those instruments authorized by the Members include the City Manager, Assistant
California Government Code Section 53601. City Manager, Director of Finance &
Information Technology/City Treasurer,Finance
Manager and the City's independent auditor.
2-10 PHl-15
POLICIES 1 OBJECI . ., ES Attachment 2
BUDGET AND FISCAL POLICIES
L. Reporting. The City Treasurer will develop F. The City will seek voter approval to amend its
and maintain a comprehensive, well- appropriation limit at such time that tax
documented investment reporting system, which proceeds are in excess of allowable limits.
will comply with Government Code Section
53607. This reporting system will provide the FUND BALANCE AND RESERVES
Council and the Investment Oversight
Committee with appropriate investment
performance information. A. Minimum Fund and Working Capital
Balances. The City will maintain a minimum
APPROPRIATIONS LIMITATION fund balance of at least 20% of operating
expenditures in the General Fund and a
minimum working capital balance of 20% of
A. The Council will annually adopt a resolution operating expenditures in the water, sewer and
establishing the City's appropriations limit parking enterprise funds. This is considered the
calculated in accordance with Article XIII-B of minimum level necessary to maintain the City's
the Constitution of the State of California, credit worthiness and to adequately provide for:
Section 7900 of the State of California
Government Code, and any other voter approved 1. Economic uncertainties, local disasters, and
amendments or state legislation that affect the other financial hardships or downturns in
City's appropriations limit. the local or national economy.
B. The supporting documentation used in 2. Contingencies for unseen operating or
calculating the City's appropriations limit and capital needs.
projected appropriations subject to the limit will 3. Cash flow requirements.
be available for public and Council review at
least 10 days before Council consideration of a B. Fleet Replacement. For the General Fund
resolution to adopt an appropriations limit. The fleet, the City will establish and maintain a Fleet
Council will generally consider this resolution Replacement Fund to provide for the timely
in connection with final approval of the budget. replacement of vehicles and related equipment
with an individual replacement cost of$15,000
C. The City will strive to develop revenue sources, or more. The City will maintain a minimum
both new and existing, which are considered fund balance in the Fleet Replacement Fund of
non-tax proceeds in calculating its at least 20% of the original purchase cost of the
appropriations subject to limitation. items accounted for in this fund.
D. The City will annually review user fees and The annual contribution to this fund will
charges and report to the Council the amount of generally be based on the annual use allowance,
program subsidy, if any, that is being provided which is determined based on the estimated life
by the General or Enterprise Funds. of the vehicle or equipment and its original
purchase cost. Interest earnings and sales of
E. The City will actively support legislation or surplus equipment as well as any related damage
initiatives sponsored or approved by League of and insurance recoveries will be credited to the
California Cities which would modify Article Fleet Replacement Fund.
XIII-B of the Constitution in a manner which
would allow the City to retain projected tax C. Future Capital Project Designations. The
revenues resulting from growth in the local Council may designate specific fund balance
economy for use as determined by the Council. levels for future development of capital projects
that it has determined to be in the best long-term
interests of the City. For example, replacement
2-11 PH1-16
POLICIES AND • :
BUDGET AND FISCAL POLICIES
of critical information technology and evaluate the draft CIP budget document, and
infrastructure or other projects. report CIP project 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
for encumbrances; and other reserves or Council through adoption of the Financial
designations required by contractual obligations, Plan.
state law, or generally accepted accounting
principles. 2. Study. Concept design, site selection,
feasibility analysis, schematic design,
CAPITAL IMPROVEMENT MANAGEMENT environmental determination, property
appraisals, scheduling, grant application,
grant approval, specification preparation for
A. CIP Projects: $15,000 or More. Construction equipment purchases.
projects and equipment purchases which cost
$15,000 or more will be included in the Capital 3. Environmental Review. EIR preparation,
Improvement Plan (CIP); minor capital outlays other environmental studies.
of less than $15,000 will be included with the
operating program budgets. 4. Real Property Acquisitions. Property
acquisition for projects,if necessary.
B. CIP Purpose. The purpose of the CIP is to
systematically plan, schedule, and finance 5. Site Preparation. Demolition, hazardous
capital projects to ensure cost-effectiveness as materials abatements, other pre-construction
well as conformance with established policies. work.
The CIP is a five-year plan organized into the
same functional groupings used for the 6. Design. Final design,plan and specification
operating programs. The CIP will reflect a preparation and construction cost
balance between capital replacement projects estimation.
that repair,replace or enhance existing facilities,
equipment or infrastructure; and capital facility 7. Construction. Construction contracts.
projects that significantly expand or add to the
City's existing fixed assets. 8. Construction Management. Contract
project management and inspection, soils
C. Project Manager. Every CIP project will have and material tests, other support services
a project manager who will prepare the project during construction.
proposal, ensure that required phases are
completed on schedule, authorize all project 9. Equipment Acquisitions. Vehicles, heavy
expenditures, ensure that all regulations and machinery, computers, office furnishings,
laws are observed, and periodically report other equipment items acquired and
project status. installed independently from construction
contracts.
D. CIP Review Committee. Headed by the City
Manager or designee, this Committee will 10. Debt Service. Installment payments of
review project proposals, determine project principal and interest for completed projects
phasing, recommend project managers, review funded through debt financings.
2-12 PHI-17
IPOLICIES AND OBJECI 1"I ES Attachment 2
BUDGET AND FISCAL POLICIES
Expenditures for this project phase are Project accounts,which have been appropriated,
included in the Debt Service section of the will not lapse until completion of the project
Financial Plan. phase.
Generally, it will become more difficult for a H. Program Objectives. Project phases will be
project to move from one phase to the next. As listed as objectives in the program narratives of
such, more projects will be studied than will be the programs,which manage the projects.
designed, and more projects will be designed
than will be constructed or purchased during the I. Public Art. CIP projects will be evaluated
term of the CIP. during the budget process and prior to each
phase for conformance with the City's public art
F. CIP Appropriation. The City's annual CII' policy, which generally requires that 1% of
appropriation for study, design, acquisition eligible project construction costs be set aside
and/or construction is based on the projects for public art. Excluded from this requirement
designated by the Council through adoption of are underground projects, utility infrastructure
the Financial Plan. Adoption of the Financial projects, funding from outside agencies, and
Plan CII' appropriation does not automatically costs other than construction such as study,
authorize funding for specific project phases. environmental review, design, site preparation,
This authorization generally occurs only after land acquisition and equipment purchases.
the preceding project phase has been completed
and approved by the Council and costs for the It is generally preferred that public art be
succeeding phases have been fully developed. incorporated directly into the project, but this is
not practical or desirable for all projects; in this
Accordingly, project appropriations are case, an in-lieu contribution to public art will be
generally made when contracts are awarded. If made. To ensure that funds are adequately
project costs at the time of bid award are less budgeted for this purpose regardless of whether
than the budgeted amount, the balance will be public art will be directly incorporated into the
unappropriated and returned to fund balance or project, funds for public art will be identified
allocated to another project. If project costs at separately in the CIP.
the time of bid award are greater than budget
amounts, five basic options are available: Given the City's fiscal situation for 2599 41
2011-13, public art will be funded at the same
1. Eliminate the project. level required by the private sector: 0.5% rather
2. Defer the project for consideration to the than 1%.
next Financial Plan period.
J. General Plan Consistency Review. The
3. Rescope or change the phasing of the Planning Commission will review the
project to meet the existing budget. Preliminary CIP for consistency with the
4. Transfer funding from another specified, General Plan and provide is findings to the
lower priority project. Council prior to adoption.
5. Appropriate additional resources as CAPITAL FINANCING
necessary from fund balance. AND DEBT MANAGEMENT
G. CIP Budget Carryover. Appropriations for
CIP projects lapse three years after budget A. Capital Financing
adoption. Projects which lapse from lack of
project account appropriations may be 1. The City will consider the use of debt
resubmitted for inclusion in a subsequent CIP. financing only for one-time capital
2-13 PHl-18
IPOLICIES AND • :
BUDGET AND FISCAL POLICIES
improvement projects and only under the b. If adequate funds are not available at
following circumstances: that time, the Council will make one of
two determinations:
a. When the project's useful life will
exceed the term of the financing. • Defer the project until funds are
available.
b. When project revenues or specific • Based on the high-priority of the
resources will be sufficient to service
the long-term debt. project, advance funds from the
General Fund, which will be
2. Debt financing will not be considered reimbursed as soon as funds become
appropriate for any recurring purpose such available. Repayment of General
as current operating and maintenance Fund advances will be the first use
expenditures. The issuance of short-term of transportation impact fee funds
instruments such as revenue, tax or bond when they become available.
anticipation notes is excluded from this
limitation. (See Investment Policy) 5. The City will use the following criteria to
evaluate pay-as-you-go versus long-term
3. Capital improvements will be financed financing in funding capital improvements:
primarily through user fees, service charges,
assessments, special taxes or developer a Factors Favoring
agreements when benefits can be Pay-As-You-Go Financing
specifically attributed to users of the
facility. Accordingly, development impact 1. Current revenues and adequate fund
fees should be created and implemented at balances are available or project phasing
levels sufficient to ensure that new can be accomplished.
development pays its fair share of the cost 2. Existing debt levels adversely affect the
of constructing necessary community City's credit rating.
facilities.
3. Market conditions are unstable or
4. Transportation impact fees are a major present difficulties in marketing.
funding source in financing transportation
system improvements. However, revenues b. Factors Favoring Long Term
from these fees are subject to significant Financing
fluctuation based on the rate of new
a. Revenues available for debt service are
development. Accordingly, the following
deemed sufficient and reliable
guidelines will be followed in designing and that
building projects funded with transportation long-term financings can be marketed
with investment grade credit ratings.
impact fees:
b. The project securing the financing is of
a. The availability of transportation impact the type, which will support an
fees in funding a specific project will be investment grade credit rating.
analyzed on a case-by-case basis as c. Market conditions present favorable
plans and specification or contract interest rates and demand for City
awards are submitted for City Manager
or Council approval. financings.
d. A project is mandated by state or federal
requirements, and resources are
insufficient or unavailable.
2-14 PHl-19
Alk
' • 4 Lai PRIF.AlR6161-.51 X91M `
BUDGET AND FISCAL POLICIES
e. The project is immediately required to 7. The City will maintain good, ongoing
meet or relieve capacity needs and communications with bond rating agencies
current resources are insufficient or about its financial condition. The City will
unavailable. follow a policy of full disclosure on every
f. The life of the project or asset to be financial report and bond prospectus
financed is 10 years or longer. (Official Statement).
g. Vehicle leasing when market C. Debt Capacity
conditions and operational
circumstances present favorable 1. Genera[ Purpose Debt Capacity. The City
opportunities. will carefully monitor its levels of general-
purpose debt. Because our general purpose
B. Debt Management debt capacity is limited, it is important that
we only use general purpose debt financing
1. The City will not obligate the General Fund for high-priority projects where we cannot
to secure long-term financings except when reasonably use other financing methods for
marketability can be significantly enhanced. two key reasons:
2. An internal feasibility analysis will be a. Funds borrowed for a project today are
prepared for each long-term financing which not available to fund other projects
analyzes the impact on current and future tomorrow.
budgets for debt service and operations.
This analysis will also address the reliability b. Funds committed for debt repayment
of revenues to support debt service. today are not available to fund
operations in the future.
3. The City will generally conduct financings
on a competitive basis. However, In evaluating debt capacity, general-purpose
negotiated financings may be used due to annual debt service Opayments should
market volatility or the use of an unusual or generally not exceed 10/o of General Fund
complex financing or security structure. revenues; and in no case should they exceed
15%. Further, direct debt will not exceed
4. The City will seek an investment grade 2% of assessed valuation; and no more than
(Baa/BBB(BaaBB or greater) on any direct 60/o of capital improvement outlays will be
debt and will seek credit enhancements such funded from long-term financings.
as letters of credit or insurance when
necessary for marketing purposes, 2. Enterprise Fund Debt Capacity. The City
availability and cost-effectiveness. will set enterprise fund rates at levels
needed to fully cover debt service
5. The City will monitor all forms of debt requirements as well as operations,
annually coincident with the City's Financial maintenance, administration and capital
Plan preparation and review process and improvement costs. The ability to afford
report concerns and remedies, if needed, to new debt for enterprise operations will be
the Council. evaluated as an integral part of the City's
rate review and setting process.
6. The City will diligently monitor its
compliance with bond covenants and ensure D. Independent Disclosure Counsel
its adherence to federal arbitrage The following criteria will be used on a case-by-
regulations. case basis in determining whether the City
2-15 PH1-20
,POLICIESOBJECI ES Attachment 2,
BUDGET AND FISCAL POLICIES
should retain the services of an independent agreements or direct developer
disclosure counsel in conjunction with specific responsibility for the improvements.
project financings:
2. Eligible Improvements. Except as
1. The City will generally not retain the otherwise determined by the Council when
services of an independent disclosure proceedings for district formation are
counsel when all of the following commenced, preference in financing public
circumstances are present: improvements through a special tax district
shall be given for those public
a. The revenue source for repayment is improvements that help achieve clearly
under the management or control of the identified community facility and
City, such as general obligation bonds, infrastructure goals in accordance with
revenue bonds, lease-revenue bonds or adopted facility and infrastructure plans as
certificates of participation. set forth in key policy documents such as
b. The bonds will be rated or insured. the General Plan, Specific Plan, Facility or
Infrastructure Master Plans, or Capital
2. The City will consider retaining the services Improvement Plan.
of an independent disclosure counsel when
one or more of following circumstances are Such improvements include study, design,
construction and/or acquisition of:
present:
a. The financing will be negotiated, and a. Public safety facilities.
the underwriter has not separately b. Water supply, distribution and treatment
engaged an underwriter's counsel for systems.
disclosure purposes. c. Waste collection and treatment systems.
b. The revenue source for repayment is not d. Major transportation system
under the management or control of the improvements, such as freeway
City, such as land-based assessment interchanges; bridges; intersection
districts, tax allocation bonds or conduit improvements; construction of new or
financings. widened arterial or collector streets
c. The bonds will not be rated or insured. (including related landscaping and
d. The City's financial advisor, bond lighting); sidewalks and other
counsel or underwriter recommends that pedestrian paths; transit facilities; and
the City retain an independent bike paths.
disclosure counsel based on the e. Storm drainage, creek protection and
circumstances of the financing. flood protection improvements.
f. Parks, trails, community centers and
E. Land-Based Financings other recreational facilities.
1. Public Purpose. There will be a clearly g• Open space.
articulated public purpose in forming an h. Cultural and social service facilities.
assessment or special tax district in
financing public infrastructure i. Other governmental facilities and
improvements. This should include a improvements such as offices,
finding by the Council as to why this form information technology systems and
of financing is preferred over other funding telecommunication systems.
options such as impact fees, reimbursement
2-16 PHl-21
POLICIES AND i
BUDGET AND FISCAL POLICIES
School facilities will not be financed except receiving the concurrence of the City's
under appropriate joint community facilities financial advisor and bond counsel that a
agreements or joint exercise of powers lower value-to-debt ratio is financially
agreements between the City and school prudent under the circumstances, the City
districts. may consider allowing a value-to-debt ratio
of 3:1. The Council should make special
3. Active Role. Even though land-based findings in this case.
financings may be a limited obligation of
the City, we will play an active role in 7. Appraisal Methodology. Determination of
managing the district. This means that the value of property in the district shall be
City will select and retain the financing based upon the full cash value as shown on
team, including the financial advisor, bond the ad valorem assessment roll or upon an
counsel, trustee, appraiser, disclosure appraisal by an independent Member
counsel, assessment engineer and Appraisal Institute (MAI). The definitions,
underwriter. Any costs incurred by the City standards and assumptions to be used for
in retaining these services will generally be appraisals shall be determined by the City
the responsibility of the property owners or on a case-by-case basis, with input from
developer, and will be advanced via a City consultants and district applicants, and
deposit when an application is filed; or will by reference to relevant materials and
be paid on a contingency fee basis from the information promulgated by the State of
proceeds from the bonds. California, including the Appraisal
4. Credit Quality. When a developer requests Standards for Land-Secured Financings
a district,the City will carefully evaluate the prepared by the California Debt and
applicant's financial plan and ability to Investment Advisory Commission.
carry the project, including the payment of g, Capitalized Interest During Construction.
assessments and special taxes during build- Decisions to capitalize interest will be made
out. This may include detailed background, on case-by-case basis, with the intent that if
credit and lender checks, and the allowed, it should improve the credit quality
preparation of independent appraisal reports of the bonds and reduce borrowing costs,
and market absorption studies. For districts benefiting both current and future property
where one property owner accounts for owners.
more than 25% of the annual debt service
obligation, a letter of credit further securing 9. Maximum Burden. Annual assessments(or
the financing may be required. special taxes in the case of Mello-Roos or
5. Reserve Fund A reserve fund should be similar districts) should generally not
established in the lesser amount of: the exceed 1% of the sales price of the property;
maximum annual debt service; 125% of the and total property taxes, special assessments
and special taxes payments collected on the
annual average debt service; or 10% of the tax roll should generally not exceed 2%.
bond proceeds.
6. Value-to-Debt Ratios. The minimum value- 10. Benefit Apportionment Assessments and
special taxes will be apportioned according
to-debt ratio should generally be 4:1. This to a formula that is clear, understandable,
means the value of the property in the equitable and reasonably related to the
district, with the public improvements, benefit received by—or burden attributed
should least four times the amount of to—each parcel with respect to its financed
the assessment
ent or special tax debt. In improvement. Any annual escalation factor
special circumstances, after conferring and should generally not exceed 2%.
2-17 PH1-22
POLICIES OBJECI ES Attachment 2
BUDGET AND FISCAL POLICIES
b. There is a clearly articulated public
11. Special Tax District Administration. In the purpose in providing the conduit
case of Mello-Roos or similar special tax financing.
districts, the total maximum annual tax c. The applicant is capable of achieving
should not exceed 110% of annual debt this public purpose.
service. The rate and method of
apportionment should include a back-up tax 2. This means that the review of requests for
in the event of significant changes from the conduit financing will generally be a two-
initial development plan, and should include
procedures for prepayments. step process:
12. Foreclosure Covenants. In managing a. First asking the Council if they are
interested in considering the request,
administrative costs, the City will establish and establishing the ground rules for
minimum delinquency amounts per owner,
and for the district as a whole, on a case-by- evaluating it.
case basis before initiating foreclosure b. And then returning with the results of
proceedings. this evaluation, and recommending
approval of appropriate financing
13. Disclosure to Bondholders. In general, documents if warranted.
each property owner who accounts for more
than 10% of the annual debt service or This two-step approach ensures that the
bonded indebtedness must provide ongoing issues are clear for both the City and
disclosure information annually as described applicant, and that key policy questions are
under SEC Rule 15(c)-12. answered.
14. Disclosure to Prospective Purchasers. Full 3. The workscope necessary to address these
disclosure about outstanding balances and issues will vary from request to request, and
annual payments should be made by the will have to be determined on a case-by-
seller to prospective buyers at the time that case basis. Additionally, the City should
the buyer bids on the property. It should not generally be fully reimbursed for our costs
be deferred to after the buyer has made the in evaluating the request; however, this
decision to purchase. When appropriate, should also be determined on a case-by-case
applicants or property owners may be basis.
required to provide the City with a
disclosure plan. B. Refinancings
F. Conduit Financings 1. General Guidelines. Periodic reviews of all
outstanding debt will be undertaken to
1. The City will consider requests for conduit determine refinancing opportunities.
financing on a case-by-case basis using the Refinancings will be considered (within
following criteria: federal tax law constraints) under the
following conditions:
a. The City's bond counsel will review the
terms of the financing, and render an
opinion that there will be no liability to
the City in issuing the bonds on behalf
of the applicant.
2-18 PH1-23
POLICIES AND OBJECI ES Attachment
BUDGET AND FISCAL POLICIES
a. There is a net economic benefit.
b. It is needed to modernize covenants that a. Fill an authorized regular position.
are adversely affecting the City's b. Be assigned to an appropriate
financial position or operations. bargaining unit.
c. The City wants to reduce the principal c. Receive salary and benefits consistent
outstanding in order to achieve future with labor agreements or other
debt service savings, and it has available compensation plans.
working capital to do so from other
sources. 3. To manage the growth of the regular work
force and overall staffing costs, the City will
2. Standards for Economic Savings. In follow these procedures:
general, refinancings for economic savings
will be undertaken whenever net present a. The Council will authorize all regular
value savings of at least five percent(5%) of positions.
the refunded debt can be achieved. b. The Human Resources Department will
a. Refinancings that produce net present coordinate and approve the hiring of all
value savings of less than five percent regular and temporary employees.
will be considered on a case-by-case c. All requests for additional regular
basis, provided that the present value positions will include evaluations of:
savings are at least three percent (3%) • The necessity, term and expected
of the refunded debt. results of the proposed activity.
b. Refinancings with savings of less than . Staffingand materials costs
three percent (3%), or with negative
including salary, benefits,
savings, will not be considered unless
there is a compelling public policy equipment, uniforms, clerical
support and facilities.
objective.
• The ability of private industry to
HUMAN RESOURCE MANAGEMENT provide the proposed service.
• Additional revenues or cost savings,
A. Regular Staffing which may be realized.
1. The budget will fully appropriate the 4. Periodically, and before any request for
resources needed for authorized regular additional regular positions, programs will
staffing and will limit programs to the be evaluated to determine if they can be
regular staffing authorized. accomplished with fewer regular employees.
(See Productivity Review Policy)
2. Regular employees will be the core work
force and the preferred means of staffing 5. Staffing and contract service cost ceilings
ongoing, year-round program activities that will limit total expenditures for regular
employees, temporary employees, and
should be performed by full-time City
� employees rather than independent independent contractors hired to provide
contractors. The City will strive to provide operating and maintenance services.
competitive compensation and benefit
schedules for its authorized regular work B. Temporary Staffing
force. Each regular employee will:
2-19 PHl-24
POLICIES AND • :
BUDGET AND FISCAL POLICIES
1. The hiring of temporary employees will not that are anticipated to be delivered on an
be used as an incremental method for ongoing basis.
expanding the City's regular work force.
C. Overtime Management
2. Temporary employees include all employees
other than regular employees, elected 1. Overtime should be used only when
officials and volunteers. Temporary necessary and when other alternatives are
employees will generally augment regular not feasible or cost effective.
City staffing as extra-help employees,
seasonal employees, contract employees, 2. All overtime must be pre-authorized by a
interns and work-study assistants. department head or delegate unless it is
assumed pre-approved by its nature. For
3. The City Manager and Department Heads example, overtime that results when an
will encourage the use of temporary rather employee is assigned to standby and/or must
than regular employees to meet peak respond to an emergency or complete an
workload requirements, fill interim emergency response.
vacancies, and accomplish tasks where less
than full-time, year-round staffing is 3. Departmental operating budgets should
required. reflect anticipated annual overtime costs and
departments will regularly monitor overtime
Under this guideline, temporary employee use and expenditures.
hours will generally not exceed 50% of a
regular, full-time position (1,000 hours 4. When considering the addition of regular or
annually). There may be limited temporary staffing, the use of overtime as an
circumstances where the use of temporary alternative will be considered. The
employees on an ongoing basis in excess of department will take into account:
this target may be appropriate due to unique a. The duration that additional staff
programming or staffing requirements. resources may be needed.
However, any such exceptions must be b. The cost of overtime versus the cost of
approved by the City Manager based on the additional staff.
review and recommendation of the Human
Resources Director. c. The skills and abilities of current staff.
4. Contract employees are defined as d. Training costs associated with hiring
temporary employees with written contracts additional staff.
P
approved by the City Manager who may e. The impact of overtime on existing
receive approved benefits depending on staff.
hourly requirements and the length of their
contract. Contract employees will generally D. Independent Contractors
be used for medium-term (generally
between six months and two years) projects, Independent contractors are not City employees.
programs or activities requiring specialized They may be used in two situations:
or augmented levels of staffing for a
specific period. 1. Short-term, peak workload assignments to
be accomplished using personnel contracted
The services of contract employees will be through an outside temporary employment
discontinued upon completion of the assigned agency (OEA). In this situation, it is
project, program or activity. Accordingly, anticipated that City staff will closely
contract employees will not be used for services monitor the work of OEA employees and
2-20 PH1-25
,POLICIES AND OBJECI . , ES Attachment 2
BUDGET AND FISCAL POLICIES
minimal training will be required. E. Evaluating the ability of the private sector to
However, they will always be considered perform the same level of service at a lower
the employees of the OEA and not the City. cost.
All placements through an OEA will be
coordinated through the Human Resources F. Periodic formal reviews of operations on a
Department and subject to the approval of systematic, ongoing basis.
the Human Resources Director.
G. Maintaining a decentralized approach in
2. Construction of public works projects and managing the City's support service functions.
delivery of operating, maintenance or Although some level of centralization is
specialized professional services not necessary for review and control purposes,
routinely performed by City employees. decentralization supports productivity by:
Such services will be provided without close
supervision by City staff, and the required 1. Encouraging accountability by delegating
methods, skills and equipment will responsibility to the lowest possible level.
generally be determined and provided by the
contractor. Contract awards will be guided 2. Stimulating creativity, innovation and
by the City's purchasing policies and individual initiative.
procedures. (See Contracting for Services
Policy) 3. Reducing the administrative costs of
operation by eliminating unnecessary
PRODUCTIVITY review procedures.
4. Improving the organization's ability to
respond to changing needs, and identify and
Ensuring the "delivery of service with value for
implement cost-saving programs.
cost" is one of the key concepts embodied in the
City's Mission Statement (San Luis Obispo Style— 5. Assigning responsibility for effective
Quality With Vision). To this end, the City will operations and citizen responsiveness to the
constantly monitor and review our methods of department.
operation to ensure that services continue to be
delivered in the most cost-effective manner possible. CONTRACTING FOR SERVICES
This review process encompasses a wide range of
productivity issues, including: A. General Policy Guidelines
A. Analyzing systems and procedures to identify 1. Contracting with the private sector for the
and remove unnecessary review requirements. delivery of services provides the City with a
significant opportunity for cost containment
B. Evaluating the ability of new technologies and and productivity enhancements. As such,
related capital investments to improve the City is committed to using private sector
productivity. resources in delivering municipal services
as a key element in our continuing efforts to
C. Developing the skills and abilities of all City provide cost-effective programs.
employees.
2. Private sector contracting approaches under
D. Developing and implementing appropriate this policy include construction projects,
methods of recognizing and rewarding professional services, outside employment
exceptional employee performance. agencies and ongoing operating and
maintenance services.
2-21 PH1-26
AND i
BUDGET AND FISCAL POLICIES
3. In evaluating the costs of private sector 6. Does the use of contract services provide us
contracts compared with in-house with an opportunity to redefine service
performance of the service, indirect, direct, levels?
and contract administration costs of the City
will be identified and considered. 7. Will the contract limit our ability to deliver
emergency or other high priority services?
4. Whenever private sector providers are
available and can meet established service 8. Overall, can the City successfully delegate
levels, they will be seriously considered as the performance of the service but still
viable service delivery alternatives using the retain accountability and responsibility for
evaluation criteria outlined below. its delivery?
5. For programs and activities currently
provided by City employees, conversions to
contract services will generally be made </_
through attrition,reassignment or absorption VV
by the contractor.
B. Evaluation Criteria
Within the general policy guidelines stated
above, the cost-effectiveness of contract
services in meeting established service levels
will be determined on a case-by-case basis using
the following criteria:
1. Is a sufficient private sector market
available to competitively deliver this
service and assure a reasonable range of
alternative service providers?
2. Can the contract be effectively and
efficiently administered?
3. What are the consequences if the contractor
fails to perform, and can the contract
reasonably be written to compensate the
City for any such damages?
4. Can a private sector contractor better
respond to expansions, contractions or
special requirements of the service?
5. Can the work scope be sufficiently defined
to ensure that competing proposals can be
fairly and fully evaluated, as well as the
contractor's performance after bid award?
2-22 PHl_27
� council mcmoRan6um
June 20, 2011 RED FILE hard copy: emeua
MEETING AGENDA G coo CITY MGR v YMGR a R DDIR
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FROM: Katie Lichtig, City Manager o rREFJn o UMDIR
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Debbie Malicoat, Finance Manager o SLOCITY N ws o CGuwca
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SUBJECT: Budget Adoption and Amendment Questions
Several questions have been asked by various Council members as well as staff and the public
regarding adopting and amending the City's budget. This memo is provided in order to address
procedural questions that have been raised and provide clarification about the process of
adopting and amending the City's budget.
BACKGROUND
The City Charter sets forth the responsibilities and procedures for adoption of the City's annual
budget. The City Manager is responsible for presenting a budget to the City Council. After
reviewing the proposed budget and making revisions as it may deem advisable, the Council is
required to hold a public hearing on the proposed budget. Upon final adoption, the budget shall
be in effect for the ensuing fiscal year. The City's fiscal year begins on July 1 each year.
Budget Amendment Authority
■ Council. As provided under City Charter, the Council has the sole responsibility for
adopting the City's budget, and may amend or supplement the budget at any time after its
adoption by majority vote of the Council. After budget adoption, all supplemental
appropriations from fund balance or working capital require Council approval.
■ City Manager. The City Manager has the authority to make or approve administrative
adjustments to the budget as long as those changes will not have significant policy impacts
nor affect budgeted year-end fund balances or working capital.
Specific questions have been raised related to the Council's ability to make changes to the
budget after it has been adopted,these are addressed below.
Question 1. If the Council approves the budget, can they then decide not to approve an
expenditure (or expenditures) later on?
Answer 1. As addressed above, the Council can amend the budget in the future with a
simple majority voting to make the change. Logistically, once the Council has adopted the
budget, many expenditures are within the staff's authority to manage, therefore if the Council
is not inclined to approve a particular expenditure(s), it would be appropriate to so indicate at
this point in the process before any staff resources are spent executing the budget plan.
Budget Adoption and Amendment Page 2
Question 2. What items will come before the Council for further approval in the future and
could the Council make changes at that time?
Answer 2. Any capital project with a budget of over $100,000 will come before the Council
to approve the plans and specifications or purchase. At that time, the Council could provide
input to the staff to amend or even cancel the project. Significant staff time can be spent on a
project leading up to the Council's review of the plans and specifications, therefore if
Council is not inclined to approve a particular capital project, it would appropriate to so
indicate at this point in the process. However, it is certainly within the prerogative of the
Council to make amendments when the item comes back for approval.
Capital projects with budgets less than $100,000 will not be further reviewed by the Council;
authority to award the contract/purchase of those projects is with the City Manager.
Therefore, if the Council is not inclined to approve a project with a budget of less than
$100,000, it would appropriate to so indicate at this time.
Operating expenditure plans do not generally return to the Council, therefore if there are
operating budget changes that the Council should wish to amend, it would be appropriate to
so indicate at this point'in the process. One exception to this is the Council's authority to
award contracts for consultant services in excess of$25,000. Any contracts for consulting
services in excess of this amount would return to the Council for approval, at which time the
Council could provide direction to amend the budget for this service.
Question 3. How often does the Council receive budget updates?
Answer 3. The Council will receive formal updates on staff s progress in achieving the
Major City Goals at least three times per year: in the fall (usually in October or November),
with the Mid-Year Budget Review (which usually occurs in February), and with the
Financial Plan Supplement (in June 2012). In terms of updating the budget numbers, the
Council reviews the budget and amends appropriations if necessary at the Mid-Year Budget
Review and again when preparing the Financial Plan Supplement. In addition, staff
continually monitors the budget and staff would return to the Council outside of these
"normal" updates if there were significant changes in circumstances as identified in the
Fiscal Health Contingency Plan.
TACouncihCouncil Red Files\Budget Adoption.doc
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.119city of san WIS OBISPO
919 Palm Street - San Luis Obispo, CA 93401
June 21 , 2011
Evelyn Talmage
1408 Johnson Avenue
San Luis Obispo, CA 93401
Subject: Pismo Street Pavement Maintenance
Dear Ms. Talmage,
As you have noticed, the paving of Pismo Street in front of your home has been deferred for
many years and the need for this work is well known. Prior to paving of Pismo, the City
needed to complete some outstanding utility line replacement projects so that the new
roadway would not need to be cut to install the pipelines. The water line was replaced in
1999 and portions of the sewer line were completed just last year. The City was unable to
complete all the necessary sewerline replacements because some of that line travels-under
the railroad tracks to connect to the system in San Luis Drive, and that work requires special
coordination with the railroad company. The good news is the remaining sewerline work is
just starting and should be complete by September 2011 and the paving of Pismo Street will
be included as a part of our summer 2012 work.
I know that it was your hope to have Pismo Street paved soon and I also know that it is your
hope that the installation of curb, gutter, sidewalk and driveway would occur at the same
time. The City typically does not install sidewalks with our paving work. We do sometime
replace sidewalks when they have been damaged by trees, but new installation is not
common. The primary reason is cost; the City does not have enough funding to place curb,
gutter and sidewalk improvements at every location where they are missing. Costs for these
improvements are normally borne by the property owner during development or
redevelopment of the property.
We appreciate your concerns and interest for improving traffic safety for Pismo Street &
Johnson Avenue. Traffic Safety is a priority for the City, and since the inception of our formal
Traffic Safety Program in 2003, traffic collisions City-wide have declined by over 50% as a
result. It is through this program that the City formally identifies and prioritizes traffic safety
issues based upon collision rates. The City uses State and Federal standards for traffic
control decisions. These thresholds have been established to assist in the determination of
when signalization or all-way stop control is and is not appropriate since it has been shown
that improperly installed traffic control devices can cause more harm than good. The City
often uses State and Federal standards since we have significantly limited staff time, funding,
and other public resources.
Based on our review of State and Federal signalization thresholds applied to this location,
along with the low ranking in both the City's formal traffic safety and operations programs,
staff does not recommend installing a signal or all-way stop control at Johnson and Pismo at
this time. It is important to understand that a low ranking or not meeting thresholds does not
invalidate your concerns, it simply means that this location does not currently demonstrate
the need for signalization or all-way stop control when.compared to other locations in the City
that are already experiencing higher collision rates and have much higher volumes.
We are making some improvements in this area however. As part of the Pismo/Buchon
Neighborhood Traffic Management project, this section of Johnson Avenue will be resurfaced
and reconfigured. We will be restriping the section between Buchon and Pismo for one lane
in each direction with a two-way center left tum lane to improve access to the driveways that
front Johnson in this block. Cars will no longer need to sit in the through traffic lane to make
the turns into their driveway. We will also be installing a speed feedback sign on Johnson
between Marsh and San Luis Drive: to better inform motorists of their speed and the
prevailing speed limit on this section of roadway.
I know hope this information is helpful and if you have any further questions please contact
Matt Horn at 781-7108 regarding the paving schedule and Jake Hudson at 781-7255
regarding traffic control.
Sincerely,
ay alter
it ctor of Public Works
\\chstore4\PubbcWorkslAdministrative\Correspondence\Citizens\S-Walmage,Evelvn\06.17.11 paving.doc
AM council 11'1em01 , . 0 W
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June 17, 2011 PATE i ITEM # II a �oluc °P°ucEOW
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FROM: Katie Lichtig, City Manager
Mary Bradley, Interim Director of F ance & Information Technology
SUBJECT: 2011-13 Financial Plan Adoption
As the Council prepares to adopt the 2011-13 Financial Plan on June 21, 2011, the following
information is provided to identify changes to the Preliminary Financial Plan as well as summary
information about the budget. Also included is information requested by Councilmember Kathy
Smith.
The Preliminary Financial Plan as presented includes $99.9 million in funding for 2011-13 as
summarized below:
2011-12 2012-13
Operating Programs $ 80,604,700 $ 80,915,900
Capital Improvement Plan 9,488,400 9,080,600
Debt Service 9,776,700 9,523,900
TOTAL $99,869,800 $99,520,400
Based on Council direction during the June 2, 9 and 14 meetings, the following changes will be
reflected in the final budget documents:
1. Additional clarification in the Major City Goal work program for Neighborhood
Wellness related to the evaluation of the composition of the City's Neighborhood
Services Team to ensure they are aligned with neighborhood wellness policies and are
operating in the most effective manner. This evaluation will include the appropriateness
of adding community or other agency members to the team.
2. Analytic information about the cost recovery associated with the use of various City
recreational facilities including the Damon Garcia Sports Fields, San Luis Obispo
Baseball Stadium, San Luis Obispo Swim Center, and the Laguna Lake Golf Course.
3. Revenues in the Parking Fund will not increase by $5,100 for the proposed increase in
residential 10-hour meter permits and reference to this increase will be removed from the
revenue enhancement on page H-16 of the Financial Plan.
4. The Downtown Access Pass program will be funded 50% through the Parking Fund and
50% through user fees. Staff will return to the Council later this summer with details for
implementing this change.
S 2011-13 Financial Plan Adoption Page 2
5. The General Fund will pay for 20% of the Parking Manager's time in recognition of the
Downtown Champion role that is currently performed by this position. This will be
reflected in the interfund transfers between the General Fund and Parking Fund. Going
forward, staff will be monitoring Downtown Champion activities to ensure that the
service is being provided in the most effective manner, and that the time allocated to staff
in this role is accurate and appropriate.
In addition to the changes from the City Council, staff has discovered two small errors have been
identified by staff and will be corrected in the final budget document:
1. Capital Improvement Project for Playground Equipment Replacement (page 3-239 of
Appendix B). In 2011-12 the CIP request identifies $84,000 as necessary for design
costs. After further review it has been determined that a total of $84,000 is needed,
however the current 2010-11 budget has an allocation of $48,700. Therefore the
additional funding that will be required is only $35,300, not $84,000, and this reduced
amount will be reflected in the CIP.
2. The Significant Operating Program Change for Capital Improvement Plan Engineering
Project Support (page 103 of Appendix A) identified the extension of the position until
December 31, 2011. This position should be extended through February 29, 2012 which
will allow for departmental review of administrative staffing resources and will align
with processing of the Mid-Year Budget Review. Therefore the request should be
amended to reflect a total cost of$47,900 rather than $32,400, and this increased cost will
be reflected in the adopted budget.
Budget Balancing Elements—All Funds
The 2011-13 Financial Plan includes four primary budget balancing elements. As summarized
below, these elements are reflected across many funds, not just the General Fund. In particular,
the budget balancing strategy relies on concessions from City employees across all funds totaling
$4.5 million over the two year period.
2011-12 2012-13
General Enterprise General Enterprise
Fund Funds Total Fund Funds Total
Revenue enhancements $ 290,300 $ 20,900 $ 311,200 $ 360,100 $ 20,900 $ 381,000
Operating reductions 1,812,600 900,000 2,712,600 1,956,400 1,311,700 3,268,100
Employee concessions 1,300,000 249,600 1,549,600 2,600,000 499,200 3,099,200
10perating efficiencies 1 50,000 see below 50,000 100,000 see below 100,000
Total $ 3,452,900 1 $ 1,170,500 1 $ 4,623,400 $ 5,016,500 $ 1,831,800 1 $ 6,848,300
Council may notice that the employee concessions total for the Enterprise Funds is slightly
higher than the amounts presented on June 14, 2011 at the Enterprise Fund reviews. When the
Preliminary Financial Plan was published, the Enterprise Funds had estimated concessions
consistent with the original $2.1 million General Fund concession amount (6% of salary and
related benefits). Based on April 19`h Council direction, the General Fund assumption increased
to $2.6 million (7.4% of salary and related benefits). Negotiated concessions will apply to
! 2011-13 Financial Plan Adoption Page
employees in all funds, therefore staff has updated the concession assumptions in all funds to
consistently apply the 7.4%.
Operating efficiencies in Enterprise Funds are reflected and embedded in the individual program
budgets.
Summary Information requested by Councilmember Smith
The following information is in response to a request from Councilmember Smith.
For 2011-12: General Fund Water Fund Sewer Fund Parking Fund Transit Fund
Total reserve on hand at 6/30/12 $ 9,583,900 $ 6,686,200 $ 5,633,800 $ 4,457,500 $ 756,100
Total Operating Budget $50,203,100 $14,956,000 $ 7,571,900 $ 2,501,300 $ 3,080,100
Total CIP 4,142,000 311,400 3,711,500 228,600 54,000
Total Debt Service 2,705,200 2,343,800 3,245,000 1,482,700
Total budget $57,050,300 $17,611,200 $14,528,400 $ 4,212,600 $ 3,134,100
Base staffing costs $28,608,700 $ 2,159,900 $ 2,265,700 $ 859,500 $ 164,000
Benefit staffing costs 13,458,600 1,088,600 1,073,100 315,700 73,400
Total staffing costs $42,067,300 $ 3,248,500 $ 3,338,800 $ 1,175,200 $ 237,400
Total concessions $ 1,300,000 $ 82,900 $ 86,400 $ 49,700 $ 13,000
Changes in FTE's:
Additions 2.7 1
Deletions 12.30
For 2012-13: General Fund Water Fund Sewer Fund Parking Fund Transit Fund
Total reserve on hand at 6/30/13 $10,121,500 $ 5,907,700 $ 5,898,400 $ 6,581,200 $ 591,500
Total Operating Budget $50,420,400 $14,691,700 $ 7,687,700 $ 2,533,200 $ 3,243,900
Total CIP 3,766,900 200,000 4,370,000 195,000
Total Debt Service 2,699,600 1 2,348,900 2,995,000 1,480,400
Total budget $56,886,900 $17,240,600 $15,052,700 $ 4,208,600 $ 3,243,900
Base staffing costs $28,916,500 $ 2,205,000 $ 2,281,100 $ 866,900 $ 166,900
Benefit staffing costs 13,720,800 1,114,800 1,102,900 319,400 75,400
Total staffing costs $42,637,300 $ 3,319,800 $ 3,384,000 $ 1,186,300 $ 242,300
Total concessions $ 2,600,000 $ 165,700 $ 172,700 $ 50,200 $ 13,000
Changes in FTEs:
Additions
Deletions 1.00
T:1CounciRCouncil Red FilesTinancial Plan 2011-13.doc