HomeMy WebLinkAbout01-26-2013 other background informationSection 1 1
Background Material s
OTHER BACKGROUND INFORMATION
• BUDGET AND FISCAL POLICIE S
FINANCIAL PLAN PURPOS E
AND ORGANIZATION
A .Financial Plan Objectives .Through its
Financial Plan, the City will link resources wit h
results by :
1.Identifying community needs for essentia l
services .
2.Organizing the programs required to provide
these essential services .
3.Establishing program policies and goals,
which define the nature and level o f
program services required .
4.Identifying activities performed i n
delivering program services .
5.Proposing objectives for improving th e
delivery of program services.
• 6 . Identifying and appropriating the resource s
required to perform program activities an d
accomplish program objectives .
7 . Setting standards to measure and evaluat e
the :
Output of program activities .
Accomplishment of program objectives .
Expenditure of program appropriations .
B .Two-Year Budget .Following the City's
favorable experience, the City will continue
using a two-year financial plan, emphasizin g
long-range planning and effective progra m
management. The benefits identified when the
City's first two-year plan was prepared for 1983 -
85 continue to be realized :
1.Reinforcing the importance of long-rang e
planning in managing the City's fisca l
affairs .
2.Concentrating on developing and budgetin g
for the accomplishment of significant
objectives .
3.Establishing realistic timeframes fo r
achieving objectives .
4.Creating a pro-active budget that provide s
for stable operations and assures the City's
long-term fiscal health .
5.Promoting more orderly spending patterns .
6.Reducing the amount of time and resource s
allocated to preparing annual budgets .
C .Measurable Objectives .The two-year
financial plan will establish measurable program
objectives and allow reasonable time t o
accomplish those objectives .
D .Second Year Budget .Before the beginning o f
the second year of the two-year cycle, th e
Council will review progress during the first
year and approve appropriations for the secon d
fiscal year .
E.Operating Carryover .Operating program
appropriations not spent during the first fiscal
year may be carried over for specific purpose s
into the second fiscal year with the approval o f
the City Manager.
F . Goal Status Reports . The status of majo r
program objectives will be formally reported t o
the Council on an ongoing, periodic basis .
G .Mid-Year Budget Reviews .The Council wil l
formally review the City's fiscal condition, an d
amend appropriations if necessary, six months
after the beginning of each fiscal year.
H .Balanced Budget.The City will maintain a
balanced budget over the two-year period of th e
Financial Plan . This means that :
1.Operating revenues must fully cove r
operating expenditures, including deb t
service .
2.Ending fund balance (or working capital i n
the enterprise funds) must meet minimu m
policy levels . For the general and enterpris e
funds, this level has been established at 20 %
of operating expenditures.
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BUDGET AND FISCAL POLICIES
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Under this policy, it is allowable for tota l
expenditures to exceed revenues in a give n
year;however, in this situation, beginnin g
fund balance can only be used to fun d
capital improvement plan projects, or othe r
"one-time," non-recurring expenditures .
FINANCIAL REPORTIN G
AND BUDGET ADMINISTRATION
A . Annual Reporting .The City will prepar e
annual financial statements as follows :
1.In accordance with Charter requirements ,
the City will contract for an annual audit b y
a qualified independent certified publi c
accountant . The City will strive for an
unqualified auditors' opinion .
2.The City will use generally accepte d
accounting principles in preparing its annual
financial statements, and will strive to mee t
the requirements of the GFOA's Award fo r
Excellence in Financial Reporting program .
3.The City will issue audited financia l
statements within 180 days after year-end .
B .Interim Reporting .The City will prepare and
issue timely interim reports on the City's fisca l
status to the Council and staff. This includes :
on-line access to the City's financia l
management system by City staff; monthly
reports to program managers ; more forma l
quarterly reports to the Council and Departmen t
Heads ; mid-year budget reviews ; and interim
annual reports .
C .Budget Administration. As set forth in the
City Charter, the Council may amend o r
supplement the budget at any time after it s
adoption by majority vote of the Counci l
members . The City Manager has the authorit y
to make administrative adjustments to the
budget as long as those changes will not have a
significant policy impact nor affect budgeted
year-end fund balances .
GENERAL REVENUE MANAGEMENT
A.Diversified and Stable Base .The City wil l
seek to maintain a diversified and stable revenu e
base to protect it from short-term fluctuations i n
any one revenue source .
B.Long-Range Focus .To emphasize an d
facilitate long-range financial planning, the City
will maintain current projections of revenues fo r
the succeeding five years .
C.Current Revenues for Current Uses . The
City will make all current expenditures wit h
current revenues, avoiding procedures that
balance current budgets by postponing neede d
expenditures, accruing future revenues, o r
rolling over short-term debt .
D.Interfund Transfers and Loans .In order t o
achieve important public policy goals, the City
has established various special revenue, capita l
project, debt service and enterprise funds t o
account for revenues whose use should b e
restricted to certain activities . Accordingly ,
each fund exists as a separate financing entit y
from other funds, with its own revenue sources ,
expenditures and fund equity .
Any transfers between funds for operatin g
purposes are clearly set forth in the Financial
Plan, and can only be made by the Director o f
Finance & Information Technology i n
accordance with the adopted budget . Thes e
operating transfers, under which financial
resources are transferred from one fund t o
another, are distinctly different from interfun d
borrowings, which are usually made fo r
temporary cash flow reasons, and are no t
intended to result in a transfer of financia l
resources by the end of the fiscal year .
In summary, interfund transfers result in a
change in fund equity ; interfund borrowings do
not, as the intent is to repay in the loan in th e
near term.
From time-to-time, interfund borrowings may b e
appropriate ; however, these are subject to th e
following criteria in ensuring that the fiduciar y
purpose of the fund is met :
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1 . The D irector of Finance & Informatio n
Technology is authorized to approv e
temporary interfund bor rowings for cash
flow purposes whenever the cash shortfall i s
expected to be resolved within 45 days . The
most common use of interfund borrowin g
under this circumstance is for grant
programs like the Community Developmen t
Block Grant, where costs are incurre d
before drawdowns are initiated an d
received . However, receipt of funds i s
typically received shortly after the reques t
for funds has been made .
2 . Any other interfund borrowings for cash
flow or other purposes require case-by-cas e
approval by the Council .
3 . Any transfers between funds wher e
reimbursement is not expected within on e
fiscal year shall not be recorded as interfund
borrowings ; they shall be recorded as
interfund operating transfers that affec t
•equity by moving financial resources from
one fund to another .
USER FEE COST RECOVERY GOAL S
A.Ongoing Revie w
Fees will be reviewed and updated on an
ongoing basis to ensure that they keep pace wit h
changes in the cost-of-living as well as change s
in methods or levels of service delivery .
In implementing this goal, a comprehensiv e
analysis of City costs and fees should be mad e
at least every five years . In the interim, fees wil l
be adjusted by annual changes in the Consume r
Price Index . Fees may be adjusted during thi s
interim period based on supplemental analysi s
whenever there have been significant changes i n
the method, level or cost of service delivery .
B . User Fee Cost Recovery Level s
•
In setting user fees and cost recovery levels, th e
following factors will be considered :
1.Community-Wide Versus Special Benefi t
The level of user fee cost recovery shoul d
consider the community-wide versus special
service nature of the program or activity .
The use of general-purpose revenues i s
appropriate for community-wide services ,
while user fees are appropriate for service s
that are of special benefit to easily identifie d
individuals or groups .
2.Service Recipient Versus Service Driver .
After considering community-wide versu s
special benefit of the service, the concept o f
service recipient versus service drive r
should also be considered . For example, i t
could be argued that the applicant is not th e
beneficiary of the City's development
review efforts :the community is the
primary beneficiary . However, th e
applicant is the driver of developmen t
review costs, and as such, cost recovery
from the applicant is appropriate.
3.Effect of Pricing on the Demand for
Services.The level of cost recovery and
related pricing of services can significantly
affect the demand and subsequent level o f
services provided . At full cost recovery ,
this has the specific advantage of ensurin g
that the City is providing services for whic h
there is genuinely a market that is no t
overly-stimulated by artificially low prices .
Conversely, high levels of cost recovery wil l
negatively impact the delivery of services t o
lower income groups . This negative feature
is especially pronounced, and works agains t
public policy, if the services are specificall y
targeted to low income groups .
4.Feasibility of Collection and Recovery.
Although it may be determined that a hig h
level of cost recovery may be appropriat e
for specific services, it may be impractica l
or too costly to establish a system to identify
and charge the user . Accordingly, th e
feasibility of assessing and collectin g
charges should also be considered i n
developing user fees, especially i f
significant program costs are intended to b e
financed from that source .
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C . Factors Favoring Low Cost Recovery Level s
Very low cost recovery levels are appropriate
under the following circumstances :
1.There is no intended relationship betwee n
the amount paid and the benefit received .
Almost all "social service" programs fal l
into this category as it is expected that on e
group will subsidize another .
2.Collecting fees is not cost-effective or wil l
significantly impact the efficient delivery o f
the service .
3.There is no intent to limit the use of (o r
entitlement to) the service . Again, most
"social service" programs fit into thi s
category as well as many public safet y
(police and fire) emergency response
services . Historically, access t o
neighborhood and community parks woul d
also fit into this category .
4.The service is non-recurring, generall y
delivered on a "peak demand" or emergenc y
basis, cannot reasonably be planned for o n
an individual basis, and is not readil y
available from a private sector source .
Many public safety services also fall int o
this category .
5.Collecting fees would discourag e
compliance with regulatory requirement s
and adherence is primarily self-identified ,
and as such, failure to comply would not b e
readily detected by the City . Many small -
scale licenses and permits might fall into
this category .
D . Factors Favoring High Cost Recovery Level s
The use of service charges as a major source o f
funding service levels is especially appropriat e
under the following circumstances :
I . The service is similar to services provide d
through the private sector .
2.Other private or public sector alternative s
could or do exist for the delivery of th e
service.
3.For equity or demand managemen t
purposes, it is intended that there be a direc t
relationship between the amount paid an d
the level and cost of the service received .
4.The use of the service is specificall y
discouraged . Police responses to
disturbances or false alarms might fall int o
this category .
5.The service is regulatory in nature an d
voluntary compliance is not expected to b e
the primary method of detecting failure t o
meet regulatory requirements . Building
permit, plan checks, and subdivision revie w
fees for large projects would fall into thi s
category .
E .General Concepts Regarding the Use of
Service Charge s
The following general concepts will be used i n
developing and implementing service charges :
1.Revenues should not exceed the reasonabl e
cost of providing the service.
2.Cost recovery goals should be based on th e
total cost of delivering the service, includin g
direct costs, departmental administratio n
costs and organization-wide support cost s
such as accounting, personnel, information
technology, legal services, flee t
maintenance and insurance .
3.The method of assessing and collecting fee s
should be as simple as possible in order to
reduce the administrative cost of collection .
4.Rate structures should be sensitive to th e
"market" for similar services as well as t o
smaller, infrequent users of the service .
5.A unified approach should be used i n
determining cost recovery levels for variou s
programs based on the factors discusse d
above .
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BUDGET AND FISCAL POLICIE S
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F . Low Cost-Recovery Service s
Based on the criteria discussed above, th e
following types of services should have ver y
low cost recovery goals . In selected
circumstances, there may be specific activitie s
within the broad scope of services provided that
should have user charges associated with them .
However, the primary source of funding for th e
operation as a whole should be general-purpos e
revenues, not user fees .
1.Delivering public safety emergenc y
response services such as police patro l
services and fire suppression .
2.Maintaining and developing public facilitie s
that are provided on a uniform, community -
wide basis such as streets, parks and
general-purpose buildings .
3.Providing social service programs and
5 economic development activities .
G .Recreation Program s
The following cost recovery policies apply t o
the City's recreation programs :
1 . Cost recovery for activities directed to
adults should be relatively high .
2 . Cost recovery for activities directed to yout h
and seniors should be relatively low. In
those circumstances where services ar e
similar to those provided in the privat e
sector, cost recovery levels should b e
higher.
Although ability to pay may not be a
concern for all youth and senio r
participants, these are desired progra m
activities, and the cost of determining nee d
may be greater than the cost of providing a
uniform service fee structure to al l
participants . Further, there is a community -
wide benefit in encouraging high-levels o f
•participation in youth and senior recreatio n
activities regardless of financial status .
3 . Cost recovery goals for recreation activitie s
are set as follows :
High-Range Cost Recovery Activities
(60%to 100%)
a.Adult athletics
b.Banner permit applications
c.Child care services (except Yout h
STAR)
d.Facility rentals (indoor and outdoor ;
excludes use of facilities for interna l
City uses)
e.Triathlon
f.Gol f
Mid-Range Cost Recovery Activitie s
(30% to 60%)
g.Classe s
h.Holiday in the Plaz a
i.Major commercial film permi t
applications
Low-Range Cost Recovery Activities
(0to30%)
j.Aquatic s
k.Batting cage s
1 . Community garden s
m.Junior Ranger camp
n.Minor commercial film permit
applications
Skate park
Special events (except for Triathlon an d
Holiday in the Plaza)
q.Youth sport s
r.Youth STAR
s.Teen service s
t.Senior/boomer service s
4. For cost recovery activities of less tha n
100%, there should be a differential in rate s
between residents and non-residents .
However, the Director of Parks an d
Recreation is authorized to reduce o r
eliminate non-resident fee differentials
when it can be demonstrated that :
a.The fee is reducing attendance .
b.And there are no appreciable
expenditure savings from the reduce d
attendance .
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5.Charges will be assessed for use of rooms ,
pools, gymnasiums, ball fields, special-us e
areas, and recreation equipment fo r
activities not sponsored or co-sponsored b y
the City. Such charges will generall y
conform to the fee guidelines describe d
above . However, the Director of Parks an d
Recreation is authorized to charge fees tha t
are closer to full cost recovery for facilitie s
that are heavily used at peak times an d
include a majority of non-resident users .
6.A vendor charge of at least 10 percent of
gross income will be assessed fro m
individuals or organizations using Cit y
facilities for moneymaking activities.
7.Director of Parks and Recreation i s
authorized to offer reduced fees such a s
introductory rates, family discounts and
coupon discounts on a pilot basis (not t o
exceed 18 months) to promote ne w
recreation programs or resurrect existing
ones .
8.The Parks and Recreation Department wil l
consider waiving fees only when the Cit y
Manager determines in writing that an
undue hardship exists .
H .Development Review Programs
The following cost recovery policies apply t o
the development review programs :
1 . Services provided under this categor y
include :
a.Planning (planned development permits ,
tentative tract and parcel maps ,
rezonings, general plan amendments ,
variances, use permits).
b.Building and safety (building permits ,
structural plan checks, inspections).
c.Engineering (public improvement pla n
checks, inspections, subdivisio n
requirements, encroachments).
d.Fire plan check.
2.Cost recovery for these services shoul d
generally be very high . In most instances ,
the City's cost recovery goal should b e
100%.
3.However, in charging high cost recover y
levels, the City needs to clearly establis h
and articulate standards for its performanc e
in reviewing developer applications t o
ensure that there is "value for cost ."
In setting user fees, the City will consider fees
charged by other agencies in accordance with
the following criteria :
1 . Surveying the comparability of the City's
fees to other communities provides usefu l
background information in setting fees fo r
several reasons :
a.They reflect the "market" for these fee s
and can assist in assessing th e
reasonableness of San Luis Obispo's
fees.
b.If prudently analyzed, they can serve as
a benchmark for how cost-effectivel y
San Luis Obispo provides its services .
2 . However, fee surveys should never be th e
sole or primary criteria in setting City fee s
as there are many factors that affect ho w
and why other communities have set thei r
fees at their levels . For example :
a.What level of cost recovery is their fee
intended to achieve compared with ou r
cost recovery objectives ?
b.What costs have been considered i n
computing the fees ?
c.When was the last time that their fee s
were comprehensively evaluated?
d.What level of service do they provid e
compared with our service o r
performance standards ?
e.Is their rate structure significantl y
different than ours and what is i t
intended to achieve ?
I.Comparability With Other Communities
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BUDGET AND FISCAL POLICIE S
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3 . These can be very difficult questions t o
address in fairly evaluating fees amon g
different communities . As such, the
comparability of our fees to othe r
communities should be one factor amon g
many that is considered in setting City fees .
ENTERPRISE FUND FEES AND RATE S
A.Water, Sewer and Parking .The City will se t
fees and rates at levels which fully cover th e
total direct and indirect costs—includin g
operations, capital outlay, and debt service—of
the following enterprise programs : water, sewer
and parking.
B.Transit . Based on targets set under th e
Transportation Development Act, the City wil l
strive to cover at least twenty percent of transit
operating costs with fare revenues .
• C .Ongoing Rate Review .The City will revie w
and adjust enterprise fees and rate structures a s
required to ensure that they remain appropriat e
and equitable .
D.Franchise Fees.In accordance with long -
standing practices, the City will treat the wate r
and sewer funds in the same manner as if they
were privately owned and operated . This mean s
assessing reasonable franchise fees in fully
recovering service costs .
At 3 .5%, water and sewer franchise fees ar e
based on the mid-point of the statewide standar d
for public utilities like electricity and gas (2% o f
gross revenues from operations) and cabl e
television (5% of gross revenues).
As with other utilities, the purpose of th e
franchise fee is reasonable cost recovery for th e
use of the City's street right-of-way . The
appropriateness of charging the water and sewe r
funds a reasonable franchise fee for the use of
City streets is further supported by the results o f
studies in Arizona, California, Ohio an d
• Vermont which concluded that the leading caus e
for street resurfacing and reconstruction is street
cuts and trenching for utilities .
REVENUE DISTRIBUTIO N
The Council recognizes that generally accepte d
accounting principles for state and loca l
governments discourage the "earmarking" o f
General Fund revenues, and accordingly, the
practice of designating General Fund revenues fo r
specific programs should be minimized in the City's
management of its fiscal affairs . Approval of th e
following revenue distribution policies does no t
prevent the Council from directing General Fun d
resources to other functions and programs a s
necessary .
A.Property Taxes .With the passage o f
Proposition 13 on June 6, 1978, California citie s
no longer can set their own property tax rates .
In addition to limiting annual increases i n
market value, placing a ceiling on voter -
approved indebtedness, and redefining assesse d
valuations, Proposition 13 established a
maximum county-wide levy for general revenu e
purposes of 1% of market value . Under
subsequent state legislation, which adopte d
formulas for the distribution of this countywid e
levy, the City now receives a percentage of tota l
property tax revenues collected countywide a s
determined by the State and administered by th e
County Auditor-Controller . The City receives
14 .9% of each dollar collected in property tax
after allocations to school districts .
Accordingly, while property revenues are ofte n
thought of local revenue sources, in essence
they are State revenue sources, since the Stat e
controls their use and allocation .
With the adoption of a Charter revision i n
November 1996, which removed provisions tha t
were in conflict with Proposition 13 relating t o
the setting of property tax revenues betwee n
various funds, all property tax revenues are no w
accounted for in the General Fund .
B.Gasoline Tax Subventions .All gasoline tax
revenues (which are restricted by the State fo r
street-related purposes) will be used for
maintenance activities . Since the City's total
expenditures for gas tax eligible programs and
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BUDGET AND FISCAL POLICIES
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projects are much greater than this revenue
source, operating transfers will be made fro m
the gas tax fund to the General Fund for thi s
purpose . This approach significantly reduce s
the accounting efforts required in meeting Stat e
reporting requirements .
C.Transportation Development Act (TDA )
Revenues.All TDA revenues will be allocated
to alternative transportation programs, includin g
regional and municipal transit systems, bikeway
improvements, and other programs or project s
designed to reduce automobile usage . Because
TDA revenues will not be allocated for stree t
purposes, it is expected that alternativ e
transportation programs (in conjunction wit h
other state or federal grants for this purpose )
will be self-supporting from TDA revenues .
D.Parking Fines.All parking fine revenues will
be allocated to the parking fund, except fo r
those collected by Police staff (who are funde d
by the General Fund) in implementing
neighborhood wellness programs .
INVESTMENT S
A .Responsibility .Investments and cas h
management are the responsibility of the City
Treasurer or designee . It is the City's policy to
appoint the Director of Finance and Informatio n
Technology as the City's Treasurer .
B .Investment Objective. The City's primar y
investment objective is to achieve a reasonabl e
rate of return while minimizing the potential fo r
capital losses arising from market changes o r
issuer default. Accordingly, the followin g
factors will be considered in priority order i n
determining individual investment placements :
1.Safety
2.Liquidity
3.Yiel d
C .Tax and Revenue Anticipation Notes : Not for
Investment Purposes .There is an appropriate
role for tax and revenue anticipation note s
(TRANS) in meeting legitimate short-term cash
needs within the fiscal year . However, many
agencies issue TRANS as a routine busines s
practice, not solely for cash flow purposes, but
to capitalize on the favorable difference betwee n
the interest cost of issuing TRANS as a tax -
preferred security and the interest yields o n
them if re-invested at full market rates .
As part of its cash flow management an d
investment strategy, the City will only issue
TRANS or other forms of short-term debt i f
necessary to meet demonstrated cash flow
needs ; TRANS or any other form of short-ter m
debt financing will not be issued for investmen t
purposes .
As long as the City maintains its current polic y
of maintaining fund/working capital balance s
that are 20% of operating expenditures, it i s
unlikely that the City would need to issu e
TRANS for cash flow purposes except in ver y
unusual circumstances .
D.Selecting Maturity Dates.The City will striv e
to keep all idle cash balances fully investe d
through daily projections of cash flo w
requirements . To avoid forced liquidations and
losses of investment earnings, cash flow an d
future requirements will be the primary
consideration when selecting maturities .
E.Diversification.As the market and the City's
investment portfolio change, care will be take n
to maintain a healthy balance of investmen t
types and maturities .
F.Authorized Investments .The City will inves t
only in those instruments authorized by the
California Government Code Section 53601 .
The City will not invest in stock, will no t
speculate and will not deal in futures or options .
The investment market is highly volatile an d
continually offers new and creativ e
opportunities for enhancing interest earnings .
Accordingly, the City will thoroughl y
investigate any new investment vehicles befor e
committing City funds to them .
G.Authorized Institutions .Cur rent financial
statements will be maintained for eac h
institution in which cash is invested .
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BUDGET AND FISCAL POLICIE S
Investments will be limited to 20 percent of th e
total net worth of any institution and may b e
reduced further or refused altogether if a n
institution's financial situation becomes
unhealthy.
H.Consolidated Portfolio .In order to maximize
yields from its overall portfolio, the City wil l
consolidate cash balances from all funds for
investment purposes, and will allocate
investment earnings to each fund in accordanc e
with generally accepted accounting principles .
I.Safekeeping.Ownership of the City's
investment securities will be protected throug h
third-party custodial safekeeping .
J.Investment Management Plan.The City
Treasurer will develop and maintain a n
Investment Management Plan that addresses th e
City's administration of its portfolio, includin g
investment strategies, practices and procedures .
• K .Investment Oversight Committee . As set
forth in the Investment Management Plan, thi s
committee is responsible for reviewing th e
City's portfolio on an ongoing basis t o
determine compliance with the City's
investment policies and for making
recommendations regarding investment
management practices .
Members include the City Manager, Assistan t
City Manager, Director of Finance &
Information Technology/City Treasurer, Financ e
Manager and the City's independent auditor .
L .Reporting .The City Treasurer will develo p
and maintain a comprehensive, well -
documented investment reporting system, whic h
will comply with Government Code Sectio n
53607 . This reporting system will provide th e
Council and the Investment Oversight
Committee with appropriate investment
performance information.
APPROPRIATIONS LIMITATIO N
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A . The Council will annually adopt a resolution
establishing the City's appropriations limit
calculated in accordance with Article XIII-B o f
the Constitution of the State of California,
Section 7900 of the State of Californi a
Government Code, and any other voter approve d
amendments or state legislation that affect th e
City's appropriations limit .
B.The supporting documentation used i n
calculating the City's appropriations limit and
projected appropriations subject to the limit wil l
be available for public and Council review a t
least 10 days before Council consideration of a
resolution to adopt an appropriations limit . Th e
Council will generally consider this resolutio n
in connection with final approval of the budget .
C.The City will strive to develop revenue sources ,
both new and existing, which are considere d
non-tax proceeds in calculating its
appropriations subject to limitation .
D.The City will annually review user fees an d
charges and report to the Council the amount o f
program subsidy, if any, that is being provide d
by the General or Enterprise Funds .
E.The City will actively support legislation or
initiatives sponsored or approved by League o f
California Cities which would modify Articl e
XIII-B of the Constitution in a manner whic h
would allow the City to retain projected ta x
revenues resulting from growth in the loca l
economy for use as determined by the Council .
F.The City will seek voter approval to amend it s
appropriation limit at such time that ta x
proceeds are in excess of allowable limits .
FUND BALANCE AND RESERVE S
A.Minimum Fund and Working Capita l
Balances.The City will maintain a minimu m
fund balance of at least 20% of operating
expenditures in the General Fund and a
minimum working capital balance of 20% o f
operating expenditures in the water, sewer an d
parking enterprise funds . This is considered the
minimum level necessary to maintain the City's
credit worthiness and to adequately provide for :
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BUDGET AND FISCAL POLICIES
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1.Economic uncertainties, local disasters, an d
other financial hardships or downturns i n
the local or national economy .
2.Contingencies for unseen operating or
capital needs .
3.Cash flow requirements .
B.Fleet Replacement .For the General Fun d
fleet, the City will establish and maintain a Flee t
Replacement Fund to provide for the timel y
replacement of vehicles and related equipmen t
with an individual replacement cost of $15,00 0
or more. The City will maintain a minimu m
fund balance in the Fleet Replacement Fund o f
at least 20% of the original purchase cost of th e
items accounted for in this fund .
The annual contribution to this fund wil l
generally be based on the annual use allowance ,
which is determined based on the estimated life
of the vehicle or equipment and its origina l
purchase cost . Interest earnings and sales o f
surplus equipment as well as any related damag e
and insurance recoveries will be credited to th e
Fleet Replacement Fund .
C.Information Technology (IT) Replacemen t
Fund .The City will establish an IT
Replacement Fund for the General Fund t o
provide for the timely replacement o f
information technology, both hardware an d
software, with an individual replacement cost o f
$25,000 . The City will begin building the fun d
balance with the long term objective o f
maintaining a minimum fund balance in the I T
Replacement Fund of at least 20% of the
original purchase costs of the items accounte d
for in this fund .
D.Water and Sewer Rate Stabilization
Reserves .The City will maintain a reserve fo r
the purposes of offsetting unanticipate d
fluctuations in Water Fund or Sewer Fun d
revenues to provide financial stability, includin g
the stability of revenues and the rates an d
charges related to each Enterprise . The funding
target for the Rate Stabilization Reserve will b e
10% of sales revenue in the Water Fund and 5 %
of sales revenue in the Sewer Fund .
Conditions for utilization and plan for
replenishment of the reserve will be brought t o
Council for its consideration during th e
preparation and approval of the Financial Plan
or as may become necessary during any fisca l
year .
E.Future Capital Project Designations .The
Council may designate specific fund balanc e
levels for future development of capital project s
that it has determined to be in the best long-ter m
interests of the City . For example, replacement
of critical information technology infrastructure
or other projects .
F.Other Designations and Reserves .In additio n
to the designations noted above, fund balanc e
levels will be sufficient to meet fundin g
requirements for projects approved in prior
years which are carried forward into the ne w
year ; debt service reserve requirements ; reserve s
for encumbrances ; and other reserves o r
designations required by contractual obligations ,
state law, or generally accepted accountin g
principles .
CAPITAL IMPROVEMENT MANAGEMEN T
A.CIP Projects :$25,000 or More .Constructio n
projects and equipment purchases which cos t
$25,000 or more will be included in the Capita l
Improvement Plan (CIP); minor capital outlay s
of less than $25,000 will be included with th e
operating program budgets .
B.CIP Purpose. The purpose of the CIP is t o
systematically plan, schedule, and financ e
capital projects to ensure cost-effectiveness a s
well as conformance with established policies .
The CIP is a five-year plan organized into th e
same functional groupings used for th e
operating programs . The CIP will reflect a
balance between capital replacement project s
that repair, replace or enhance existing facilities ,
equipment or infrastructure ; and capital facilit y
projects that significantly expand or add to th e
City's existing fixed assets .
C.Project Manager .Every CIP project will hav e
a project manager who will prepare the project
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BUDGET AND FISCAL POLICIE S
•
proposal, ensure that required phases are
completed on schedule, authorize all projec t
expenditures, ensure that all regulations an d
laws are observed, and periodically report
project status .
D .CIP Review Committee.Headed by the City
Manager or designee, this Committee wil l
review project proposals, determine projec t
phasing, recommend project managers, review
and evaluate the draft CIP budget document, an d
report CIP project progress on an ongoing basis .
E .CIP Phases .The CIP will emphasize projec t
planning, with projects progressing through at
least two and up to ten of the following phases :
I .Designate.Appropriates funds based on
projects designated for funding by th e
Council through adoption of the Financia l
Plan.
2.Study.Concept design, site selection ,
• feasibility analysis, schematic design ,
environmental determination, property
appraisals, scheduling, grant application ,
grant approval, specification preparation fo r
equipment purchases .
3.Environmental Review.EIR preparation,
other environmental studies .
4.Real Property Acquisitions .Property
acquisition for projects, if necessary .
5.Site Preparation.Demolition, hazardou s
materials abatements, other pre-construction
work.
6.Design.Final design, plan and specification
9.Equipment Acquisitions.Vehicles, heavy
machinery, computers, office furnishings ,
other equipment items acquired an d
installed independently from constructio n
contracts.
10.Debt Service.Installment payments o f
principal and interest for completed project s
funded through debt financings .
Expenditures for this project phase ar e
included in the Debt Service section of the
Financial Plan .
Generally, it will become more difficult for a
project to move from one phase to the next . A s
such, more projects will be studied than will b e
designed, and more projects will be designe d
than will be constructed or purchased during th e
term of the CIP .
F .CIP Appropriation .The City's annual CI P
appropriation for study, design, acquisitio n
and/or construction is based on the project s
designated by the Council through adoption o f
the Financial Plan . Adoption of the Financial
Plan CJP appropriation does not automatically
authorize funding for specific project phases .
This authorization generally occurs only afte r
the preceding project phase has been complete d
and approved by the Council and costs for the
succeeding phases have been fully developed .
Accordingly, project appropriations ar e
generally made when contracts are awarded . If
project costs at the time of bid award are les s
than the budgeted amount, the balance will b e
unappropriated and returned to fund balance o r
allocated to another project . If project costs at
the time of bid award are greater than budge t
amounts, five basic options are available :
7 .
preparation and construction
estimation.
cost
1 .Eliminate the project.
2 .Defer the project for consideration to th eConstrudion.Construction contracts.next Financial Plan period .
•
8 .Construction Management Contract
project management and inspection, soil s
and material tests, other support service s
during construction .
3.Rescope or change the phasing of th e
project to meet the existing budget .
4.Transfer funding from another specified ,
lower priority project .
5.Appropriate additional resources a s
necessary from fund balance .
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BUDGET AND FISCAL POLICIE S
G.CIP Budget Carryover.Appropriations for
CIP projects lapse three years after budge t
adoption. Projects which lapse from lack o f
project account appropriations may b e
resubmitted for inclusion in a subsequent CIP .
Project accounts, which have been appropriated ,
will not lapse until completion of the projec t
phase.
H.Program Objectives. Project phases will b e
listed as objectives in the program narratives o f
the programs, which manage the projects .
I.Public Art . CIP projects will be evaluate d
during the budget process and prior to each
phase for conformance with the City's public ar t
policy, which generally requires that 1% of
eligible project construction costs be set asid e
for public art . Excluded from this requirement
are underground projects, utility infrastructur e
projects, funding from outside agencies, an d
costs other than construction such as study ,
environmental review, design, site preparation ,
land acquisition and equipment purchases.
It is generally preferred that public art b e
incorporated directly into the project, but this i s
not practical or desirable for all projects ; in thi s
case, an in-lieu contribution to public art will b e
made . To ensure that funds are adequatel y
budgeted for this purpose regardless of whether
public art will be directly incorporated into th e
project, funds for public art will be identifie d
separately in the CIP.
Given the City's fiscal situation for 2011-13 ,
public art will be funded at the same level
required by the private sector : 0 .5% rather than
1%.
J.General Plan Consistency Review .The
Planning Commission will review th e
Preliminary CIP for consistency with th e
General Plan and provide is findings to th e
Council prior to adoption.
CAPITAL FINANCIN G
AND DEBT MANAGEMENT
A . Capital Financin g
1 . The City will consider the use of deb t
financing only for one-time capita l
improvement projects and only under th e
following circumstances :
a.When the project's useful life wil l
exceed the term of the financing .
b.When project revenues or specific
resources will be sufficient to servic e
the long-term debt .
2 . Debt financing will not be considere d
appropriate for any recurring purpose suc h
as current operating and maintenance
expenditures . The issuance of short-term
instruments such as revenue, tax or bon d
anticipation notes is excluded from thi s
limitation . (See Investment Policy )
3 . Capital improvements will be finance d
primarily through user fees, service charges ,
assessments, special taxes or develope r
agreements when benefits can b e
specifically attributed to users of the
facility . Accordingly, development impac t
fees should be created and implemented a t
levels sufficient to ensure that new
development pays its fair share of the cos t
of constructing necessary communit y
facilities .
4. Transportation impact fees are a majo r
funding source in financing transportatio n
system improvements . However, revenue s
from these fees are subject to significan t
fluctuation based on the rate of ne w
development . Accordingly, the followin g
guidelines will be followed in designing an d
building projects funded with transportatio n
impact fees :
a . The availability of transportation impac t
fees in funding a specific project will b e
analyzed on a case-by-case basis a s
plans and specification or contrac t
awards are submitted for City Manage r
or Council approval .
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BUDGET AND FISCAL POLICIE S
b . If adequate funds are not available at
that time, the Council will make one o f
two determinations :
•Defer the project until funds are
available .
•Based on the high-priority of th e
project, advance funds from th e
General Fund, which will b e
reimbursed as soon as funds become
available . Repayment of Genera l
Fund advances will be the first us e
of transportation impact fee fund s
when they become available .
5 . The City will use the following criteria t o
evaluate pay-as-you-go versus long-term
financing in funding capital improvements :
a. Factors Favoring
Pay-As-You-Go Financing
•1 . Current revenues and adequate fun d
balances are available or project phasin g
can be accomplished .
2.Existing debt levels adversely affect th e
City's credit rating .
3.Market conditions are unstable o r
present difficulties in marketing .
b. Factors Favoring Long Term
Financing
1.Revenues available for debt service ar e
deemed sufficient and reliable so tha t
long-term financings can be markete d
with investment grade credit ratings .
2.The project securing the financing is o f
the type, which will support an
investment grade credit rating .
3.Market conditions present favorabl e
interest rates and demand for Cit y
financings .
4.A project is mandated by state or federa l
•requirements, and resources ar e
insufficient or unavailable .
6.The project is immediately required t o
meet or relieve capacity needs an d
current resources are insufficient o r
unavailable .
7.The life of the project or asset to b e
financed is 10 years or longer .
8.Vehicle leasing when market conditions
and operational circumstances present
favorable opportunities .
B. Debt Managemen t
1.The City will not obligate the General Fund
to secure long-term financings except whe n
marketability can be significantly enhanced .
2.An internal feasibility analysis will b e
prepared for each long-term financing whic h
analyzes the impact on current and futur e
budgets for debt service and operations .
This analysis will also address the reliabilit y
of revenues to support debt service .
3.The City will generally conduct financing s
on a competitive basis . However,
negotiated financings may be used due t o
market volatility or the use of an unusual o r
complex financing or security structure .
4.The City will seek an investment grade
rating (Baa/BBB or greater) on any direc t
debt and will seek credit enhancements suc h
as letters of credit or insurance whe n
necessary for marketing purposes ,
availability and cost-effectiveness .
5.The City will monitor all forms of deb t
annually coincident with the City's Financia l
Plan preparation and review process an d
report concerns and remedies, if needed, to
the Council .
6.The City will diligently monitor it s
compliance with bond covenants and ensur e
its adherence to federal arbitrage
regulations.
7.The City will maintain good, ongoin g
communications with bond rating agencie s
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BUDGET AND FISCAL POLICIES
•
about its financial condition . The City wil l
follow a policy of full disclosure on every
financial report and bond prospectu s
(Official Statement).
C .Debt Capacit y
1 .General Purpose Debt Capacity .The City
will carefully monitor its levels of general -
purpose debt. Because our general purpos e
debt capacity is limited, it is important that
we only use general purpose debt financing
for high-priority projects where we canno t
reasonably use other financing methods fo r
two key reasons :
1.Funds borrowed for a project today ar e
not available to fund other project s
tomorrow .
2.Funds committed for debt repaymen t
today are not available to fun d
operations in the future .
In evaluating debt capacity, general-purpose
annual debt service payments should
generally not exceed 10% of General Fun d
revenues ; and in no case should they excee d
15%. Further, direct debt will not excee d
2% of assessed valuation; and no more than
60% of capital improvement outlays will b e
funded from long-term financings .
2 .Enterprise Fund Debt Capacity .The City
will set enterprise fund rates at level s
needed to fully cover debt servic e
requirements as well as operations,
maintenance, administration and capita l
improvement costs . The ability to affor d
new debt for enterprise operations will be
evaluated as an integral part of the City's
rate review and setting process .
D .Independent Disclosure Counse l
The following criteria will be used on a case-by-
case basis in determining whether the Cit y
should retain the services of an independen t
disclosure counsel in conjunction with specifi c
project financings :
1 . The City will generally not retain th e
services of an independent disclosur e
counsel when all of the followin g
circumstances are present :
1.The revenue source for repayment is
under the management or control of th e
City, such as general obligation bonds ,
revenue bonds, lease-revenue bonds o r
certificates of participation .
2.The bonds will be rated or insured .
2 . The City will consider retaining the service s
of an independent disclosure counsel whe n
one or more of following circumstances are
present :
1.The financing will be negotiated, and
the underwriter has not separatel y
engaged an underwriter's counsel fo r
disclosure purposes .
2.The revenue source for repayment is no t
under the management or control of th e
City, such as land-based assessmen t
districts, tax allocation bonds or condui t
financings .
3.The bonds will not be rated or insured .
4.The City's financial advisor, bon d
counsel or underwriter recommends that
the City retain an independent
disclosure counsel based on the
circumstances of the financing .
E .Land-Based Financing s
1.Public Purpose .There will be a clearl y
articulated public purpose in forming a n
assessment or special tax district i n
financing
public
infrastructure
improvements . This should include a
finding by the Council as to why this for m
of financing is preferred over other fundin g
options such as impact fees, reimbursement
agreements
or
direct
develope r
responsibility for the improvements .
2.Eligible Improvements .Except as
otherwise determined by the Council whe n
proceedings for district formation ar e
commenced, preference in financing publi c
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BUDGET AND FISCAL POLICIE S
•
improvements through a special tax distric t
shall be given for those publi c
improvements that help achieve clearl y
identified community facility an d
infrastructure goals in accordance wit h
adopted facility and infrastructure plans a s
set forth in key policy documents such a s
the General Plan, Specific Plan, Facility o r
Infrastructure Master Plans, or Capita l
Improvement Plan .
Such improvements include study, design ,
construction and/or acquisition of:
1.Public safety facilities .
2.Water supply, distribution and treatmen t
systems.
3.Waste collection and treatment systems .
4.Major transportation syste m
improvements, such as freewa y
interchanges; bridges ; intersectio n
improvements ; construction of new o r
•widened arterial or collector street s
(including related landscaping an d
lighting); sidewalks and othe r
pedestrian paths ; transit facilities ; and
bike paths .
5.Storm drainage, creek protection and
flood protection improvements .
6.Parks, trails, community centers and
other recreational facilities .
7.Open space .
8.Cultural and social service facilities .
9.Other governmental facilities an d
improvements such as offices ,
information technology systems and
telecommunication systems .
School facilities will not be financed excep t
under appropriate joint community facilitie s
agreements or joint exercise of power s
agreements between the City and schoo l
districts .
3 .Active Role.Even though land-base d
• financings may be a limited obligation o f
the City, we will play an active role i n
managing the district . This means that the
City will select and retain the fmancing
team, including the financial advisor, bond
counsel, trustee, appraiser, disclosure
counsel, assessment engineer an d
underwriter . Any costs incurred by the Cit y
in retaining these services will generally b e
the responsibility of the property owners or
developer, and will be advanced via a
deposit when an application is filed ; or will
be paid on a contingency fee basis from the
proceeds from the bonds .
4.Credit Quality.When a developer request s
a district, the City will carefully evaluate th e
applicant's financial plan and ability t o
carry the project, including the payment o f
assessments and special taxes during build -
out. This may include detailed background ,
credit and lender checks, and th e
preparation of independent appraisal report s
and market absorption studies . For district s
where one property owner accounts fo r
more than 25% of the annual debt servic e
obligation, a letter of credit further securing
the financing may be required .
5.Reserve Fund A reserve fund should b e
established in the lesser amount of: the
maximum annual debt service ; 125% of the
annual average debt service ; or 10% of the
bond proceeds .
6.Value-to-Debt Ratios.The minimum value-
to-debt ratio should generally be 4 :1 . This
means the value of the property in th e
district, with the public improvements ,
should be at least four times the amount o f
the assessment or special tax debt. In
special circumstances, after conferring an d
receiving the concurrence of the City's
financial advisor and bond counsel that a
lower value-to-debt ratio is financiall y
prudent under the circumstances, the Cit y
may consider allowing a value-to-debt rati o
of 3 :1 . The Council should make specia l
findings in this case.
7.Appraisal Methodology.Determination o f
value of property in the district shall b e
based upon the full cash value as shown o n
the ad valorem assessment roll or upon a n
appraisal by an independent Membe r
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BUDGET AND FISCAL POLICIES
•
Appraisal Institute (MAI). The definitions,
standards and assumptions to be used fo r
appraisals shall be determined by the City
on a case-by-case basis, with input fro m
City consultants and district applicants, an d
by reference to relevant materials an d
information promulgated by the State of
California, including the Appraisa l
Standards for Land-Secured Financings
prepared by the California Debt an d
Investment Advisory Commission .
8.Capitalized Interest During Construction .
Decisions to capitalize interest will be mad e
on case-by-case basis, with the intent that i f
allowed, it should improve the credit qualit y
of the bonds and reduce borrowing costs ,
benefiting both current and future property
owners .
9.Maximum Burden .Annual assessments (o r
special taxes in the case of Mello-Roos o r
similar districts) should generally no t
exceed 1% of the sales price of the property ;
and total property taxes, special assessments
and special taxes payments collected on th e
tax roll should generally not exceed 2%.
10.Benefit Apportionment.Assessments and
special taxes will be apportioned according
to a formula that is clear, understandable ,
equitable and reasonably related to th e
benefit received by—or burden attribute d
to—each parcel with respect to its finance d
improvement . Any annual escalation facto r
should generally not exceed 2%.
11.Special Tax District Administration .In the
case of Mello-Roos or similar special ta x
districts, the total maximum annual ta x
should not exceed 110% of annual debt
service . The rate and method o f
apportionment should include a back-up ta x
in the event of significant changes from th e
initial development plan, and should include
procedures for prepayments .
12.Foreclosure Covenants.In managing
administrative costs, the City will establis h
minimum delinquency amounts per owner ,
and for the district as a whole, on a case-by -
case basis before initiating foreclosure
proceedings .
13.Disclosure to Bondholders .In general ,
each property owner who accounts for mor e
than 10% of the annual debt service o r
bonded indebtedness must provide ongoin g
disclosure information annually as described
under SEC Rule 15(c)-12 .
14.Disclosure to Prospective Purchasers .Ful l
disclosure about outstanding balances an d
annual payments should be made by the
seller to prospective buyers at the time that
the buyer bids on the property . It should no t
be deferred to after the buyer has made th e
decision to purchase . When appropriate ,
applicants or property owners may be
required to provide the City with a
disclosure plan .
F .Conduit Financings
1 . The City will consider requests for condui t
financing on a case-by-case basis using th e
following criteria :
a.The City's bond counsel will review th e
terms of the financing, and render an
opinion that there will be no liability t o
the City in issuing the bonds on behal f
of the applicant .
b.There is a clearly articulated public
purpose in providing the condui t
financing .
c.The applicant is capable of achievin g
this public purpose .
2 . This means that the review of requests for
conduit financing will generally be a two -
step process :
a.First asking the Council if they ar e
interested in considering the request ,
and establishing the ground rules fo r
evaluating it.
b.And then returning with the results of
this evaluation, and recommendin g
approval of appropriate financin g
documents if warranted .
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BUDGET AND FISCAL POLICIE S
•
•
•
This two-step approach ensures that th e
issues are clear for both the City and
applicant, and that key policy questions ar e
answered.
3 . The workscope necessary to address thes e
issues will vary from request to request, an d
will have to be determined on a case-by-
case basis . Additionally, the City shoul d
generally be fully reimbursed for our cost s
in evaluating the request ; however, thi s
should also be determined on a case-by-cas e
basis .
B .Refinancing s
1 .General Guidelines.Periodic reviews of al l
outstanding debt will be undertaken to
determine refinancing opportunities .
Refinancings will be considered (withi n
federal tax law constraints) under th e
following conditions :
a.There is a net economic benefit .
b.It is needed to modernize covenants tha t
are adversely affecting the City's
financial position or operations .
c.The City wants to reduce the principa l
outstanding in order to achieve futur e
debt service savings, and it has availabl e
working capital to do so from othe r
sources .
2 .Standards for Economic Savings .In
general, refinancings for economic saving s
will be undertaken whenever net present
value savings of at least five percent (5%) o f
the refunded debt can be achieved.
a.Refinancings that produce net presen t
value savings of less than five percent
will be considered on a case-by-cas e
basis, provided that the present value
savings are at least three percent (3%)
of the refunded debt .
b.Refinancings with savings of less tha n
three percent (3%), or with negativ e
savings, will not be considered unless
there is a compelling public polic y
objective .
HUMAN RESOURCE MANAGEMEN T
A.Regular Staffin g
1 . The budget will fully appropriate th e
resources needed for authorized regula r
staffing and will limit programs to th e
regular staffing authorized .
2 . Regular employees will be the core wor k
force and the preferred means of staffin g
ongoing, year-round program activities tha t
should be performed by full-time Cit y
employees rather than independen t
contractors. The City will strive to provid e
competitive compensation and benefi t
schedules for its authorized regular wor k
force. Each regular employee will :
a.Fill an authorized regular position .
b.Be assigned to an appropriat e
bargaining unit
c.Receive salary and benefits consisten t
with labor agreements or other
compensation plans .
3 . To manage the growth of the regular work
force and overall staffing costs, the City wil l
follow these procedures :
a.The Council will authorize all regula r
positions .
b.The Human Resources Department wil l
coordinate and approve the hiring of al l
regular and temporary employees .
c.All requests for additional regula r
positions will include evaluations of :
•The necessity, term and expected
results of the proposed activity .
•Staffing and materials cost s
including
salary,
benefits,
equipment,
uniforms,
clerical
support and facilities .
Page 17
BUDGET AND FISCAL POLICIE S
•The ability of private industry to
provide the proposed service .
•Additional revenues or cost savings ,
which may be realized .
4.Periodically, and before any request fo r
additional regular positions, programs wil l
be evaluated to determine if they can b e
accomplished with fewer regular employees.
(See Productivity Review Policy )
5.Staffing and contract service cost ceiling s
will limit total expenditures for regula r
employees, temporary employees, an d
independent contractors hired to provid e
operating and maintenance services .
B . Temporary Staffin g
1.The hiring of temporary employees will no t
be used as an incremental method fo r
expanding the City's regular work force .
2.Temporary employees include all employee s
other than regular employees, electe d
officials and volunteers . Temporary
employees will generally augment regula r
City staffing as extra-help employees ,
seasonal employees, contract employees ,
interns and work-study assistants .
3.The City Manager and Department Head s
will encourage the use of temporary rathe r
than regular employees to meet peak
workload requirements, fill interi m
vacancies, and accomplish tasks where les s
than full-time, year-round staffing i s
required.
Under this guideline, temporary employe e
hours will generally not exceed 50% of a
regular, full-time position (1,000 hours
annually). There may be limite d
circumstances where the use of temporar y
employees on an ongoing basis in excess o f
this target may be appropriate due to uniqu e
programming or staffing requirements .
However, any such exceptions must b e
approved by the City Manager based on th e
review and recommendation of the Huma n
Resources Director .
4.Contract employees are defined as
temporary employees with written contracts
approved by the City Manager who may
receive approved benefits depending o n
hourly requirements and the length of thei r
contract . Contract employees will generall y
be used for medium-term (generally
between six months and two years) projects ,
programs or activities requiring specialized
or augmented levels of staffing for a
specific period .
The services of contract employees will b e
discontinued upon completion of the assigne d
project, program or activity . Accordingly ,
contract employees will not be used for service s
that are anticipated to be delivered on a n
ongoing basis .
C.Overtime Managemen t
1.Overtime should be used only whe n
necessary and when other alternatives ar e
not feasible or cost effective .
2.All overtime must be pre-authorized by a
department head or delegate unless it i s
assumed pre-approved by its nature. For
example, overtime that results when a n
employee is assigned to standby and/or mus t
respond to an emergency or complete a n
emergency response .
3.Departmental operating budgets should
reflect anticipated annual overtime costs an d
departments will regularly monitor overtime
use and expenditures .
4.When considering the addition of regular o r
temporary staffing, the use of overtime as a n
alternative will be considered . The
department will take into account :
a.The duration that additional staff
resources may be needed .
b.The cost of overtime versus the cost of
additional staff.
c.The skills and abilities of current staff.
d.Training costs associated with hirin g
additional staff .
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BUDGET AND FISCAL POLICIE S
e . The impact of overtime on existin g
staff.
D.Independent Contractors
Independent contractors are not City employees .
They may be used in two situations :
1.Short-term, peak workload assignments t o
be accomplished using personnel contracte d
through an outside temporary employmen t
agency (OEA). In this situation, it i s
anticipated that City staff will closel y
monitor the work of OEA employees an d
minimal training will be required .
However, they will always be considere d
the employees of the OEA and not the City .
All placements through an OEA will b e
coordinated through the Human Resource s
Department and subject to the approval o f
the Human Resources Director .
2.Construction of public works projects and
• delivery of operating, maintenance o r
specialized professional services not
routinely performed by City employees .
Such services will be provided without clos e
supervision by City staff, and the require d
methods, skills and equipment wil l
generally be determined and provided by th e
contractor. Contract awards will be guide d
by the City's purchasing policies an d
procedures. (See Contracting for Service s
Policy)
PRODUCTIVIT Y
Ensuring the "delivery of service with value fo r
cost" is one of the key concepts embodied in th e
City's Mission Statement (San Luis Obispo Style —
Quality With Vision). To this end, the City will
constantly monitor and review our methods o f
operation to ensure that services continue to b e
delivered in the most cost-effective manner possible .
This review process encompasses a wide range o f
productivity issues, including :
•A . Analyzing systems and procedures to identify
and remove unnecessary review requirements .
B.Evaluating the ability of new technologies an d
related capital investments to improv e
productivity .
C.Developing the skills and abilities of all Cit y
employees .
D.Developing and implementing appropriat e
methods of recognizing and rewardin g
exceptional employee performance .
E.Evaluating the ability of the private sector t o
perform the same level of service at a lowe r
cost.
F.Periodic formal reviews of operations on a
systematic, ongoing basis.
G.Maintaining a decentralized approach i n
managing the City's support service functions .
Although some level of centralization i s
necessary for review and control purposes ,
decentralization supports productivity by :
1.Encouraging accountability by delegatin g
responsibility to the lowest possible level .
2.Stimulating creativity, innovation and
individual initiative.
3.Reducing the administrative costs o f
operation by eliminating unnecessar y
review procedures.
4.Improving the organization's ability t o
respond to changing needs, and identify an d
implement cost-saving programs .
5.Assigning responsibility for effectiv e
operations and citizen responsiveness to th e
department .
CONTRACTING FOR SERVICE S
A .General Policy Guideline s
Contracting with the private sector for the
delivery of services provides the City with a
significant opportunity for cost containmen t
and productivity enhancements . As such ,
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BUDGET AND FISCAL POLICIES
•
the City is committed to using private secto r
resources in delivering municipal service s
as a key element in our continuing efforts t o
provide cost-effective programs .
2.Private sector contracting approaches under
this policy include construction projects ,
professional services, outside employment
agencies and ongoing operating and
maintenance services .
3.In evaluating the costs of private secto r
contracts compared with in-hous e
performance of the service, ind irect, direct,
and contract administration costs of the City
will be identified and considered .
4.Whenever private sector providers are
available and can meet established servic e
levels, they will be seriously considered as
viable service delivery alternatives using th e
evaluation criteria outlined below .
5.For programs and activities currentl y
provided by City employees, conversions t o
contract services will generally be mad e
through attrition, reassignment or absorption
by the contractor .
B . Evaluation Criteri a
Within the general policy guidelines state d
above, the cost-effectiveness of contrac t
services in meeting established service level s
will be determined on a case-by-case basis usin g
the following criteria :
1.Is a sufficient private sector marke t
available to competitively deliver thi s
service and assure a reasonable range of
alternative service providers ?
2.Can the contract be effectively an d
efficiently administered ?
3.What are the consequences if the contractor
fails to perform, and can the contrac t
reasonably be written to compensate the
City for any such damages ?
4.Can a private sector contractor bette r
respond to expansions, contractions o r
special requirements of the service?
5.Can the work scope be sufficiently define d
to ensure that competing proposals can b e
fairly and fully evaluated, as well as th e
contractor's performance after bid award ?
6.Does the use of contract services provide u s
with an opportunity to redefine service
levels ?
7.Will the contract limit our ability to delive r
emergency or other high priority services ?
8.Overall, can the City successfully delegate
the performance of the service but stil l
retain accountability and responsibility fo r
its delivery?
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Page 20
e city o fsanLuis onsp o
MEMORANDU M
October 3, 201 2
TO :
All Council Advisory Body Member s
FROM :
Katie Lichtig, City Manage r
Charles Bourbeau, Director of Finance & Information Technolog y
SUBJECT : 2013-15 FINANCIAL PLAN — AND YOUR IMPORTANT ROLE IN I T
It's time to begin preparing the City's next two-year Financial Plan and Budget for 2013-15 .
Council advisory body recommendations are an important part of this process . Many of the
advisory body recommendations received in the past as part of this process have been included i n
some way in subsequent budgets adopted by the Council .
The purpose of this memorandum is to provide you with an overview of the City's goal-settin g
and budget process and your important role in this process .
The City's Budget Proces s
Stated simply, the purpose of the City's budget process is to link what we want to accomplish fo r
the community with the resources available to do so. The budget process does this by :
1.Clearly setting Major City Goals and Other Important Council Objectives .
2.Establishing reasonable time frames and organizational responsibility for achieving them .
3.Allocating the resources required for implementation .
In setting goals for the 2013-15 Financial Plan, the Council wants to meaningfully engage th e
community in surfacing the most important, highest priority things for the City to accomplis h
over the next two years . Receiving recommendations from Council advisory bodies is a n
important part of this process .
Attached are summaries of the City's goal-setting and budget process and the role that advisor y
bodies play . Also attached is a list of the current Major City Goals for 2011-13 .
Scope of Advisory Body Goal s
Council goals, by their nature, usually tend to be broader in scope than the work program s
developed by advisory bodies . In your recommendations to the Council, please consider wha t
you believe would be appropriate City goals, both from the perspective of your advisory body's
purpose, as well as any perceived community-wide concerns and needs .e
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2013-15 Financial Plan : Council Advisory Body Role Page 2
Importance of Goal-Setting in Good Times and Ba d
We will go into the 2013-15 Financial Plan process in better financial shape than we were i n
2011-13 . However, the City will still face potentially complex budget decisions particularl y
because of an ongoing need to reinvest in the City's infrastructure . Regardless of the specifi c
fiscal circumstances, it is a best practice to have an effective process for setting goals for th e
most important, highest priority things for the City to do in the next two years . Answering th e
following question is the foundation of the budget process : Of all the things we want to do tha t
make our community a great place to live, work and play, which are the most important and wha t
are the difficult resource trade-offs necessary to do them ?
The specific answers to these questions and the difficulty in arriving at these answers var y
depending upon the City's fiscal circumstances . However, the need to raise these questions an d
to use a process where the community and advisory body members meaningfully participate i n
providing input to the elected leadership as they craft answers to them is the same in both goo d
times and bad .
Next Step s
Recommended goals from each advisory body are due by November 8, 2012 . This date i s
necessary so that each advisory body can then receive a consolidated listing of all recommende d
advisory body goals by November 14, 2012 . This in turn provides advisory bodies with a n
opportunity to review what other advisory bodies see as high community priorities . While not
required, it is also an opportunity to revise goals in light of other advisory body goals if the y
want to do so . Any revised goals are due by December 14, 2012 . The Council will receive th e
final report with all advisory body recommendations before the Community Forum on January 8 ,
2013 .
Staff liaisons supporting your advisory body should soon begin scheduling goal settin g
recommendations as an agenda item on your upcoming meetings for you to discuss your goa l
recommendations to the Council . In the interim, please call Charles Bourbeau, Director o f
Finance and Information Technology, at 781-7125 or email him at cbourbea@slocitv .ore if yo u
have any questions concerning the 2013-15 Financial Plan process and your important role in it .
ATTACHMENT S
Advisory Bodies, Goal-Setting and the Budget Proces s
Summary of the City's Goal-Setting and Budget Proces s
2011-13 Major City Goals
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Page 22
•crty of san Luis obis •o
ADVISORY BODIES, GOAL-SETTING & THE BUDGET PROCES S
PURPOSE OF THE CITY'S BUDGE T
The City has adopted a number of long term goal s
and plans — General Plan, Water and Sewer Maste r
Plans, Source Reduction, Recycling & Hazardou s
Materials Plans, Pavement Management Plan, Shor t
Range Transit Plan, Downtown Access and Parkin g
Plan, Waterways Management Plan, Neighborhoo d
Traffic Management Program, Bicycle Plan, Publi c
Art Policy, Conceptual Physical Plan for the City's
Center and Facilities Master Plan .
The two-year Financial Plan is the key tool fo r
programming implementation of these goals, plan s
and policies by allocating the resources necessary
to do so.
This requires a budget process that :
Clearly sets Major City Goals and Othe r
Important Objectives .
• Establishes reasonable timeframes an d
organizational responsibility for achieving them .
Allocates resources for programs and projects .
FINANCIAL PLAN FEATURE S
Goal-Driven
Policy-Based
Multi-Year
Highly-Automated, Rigorous, Technicall y
Soun d
COUNCIL GOAL-SETTIN G
First Step in the Budget Process.Linking goal s
with resources requires a budget process tha t
identifies key objectives at the very beginning of th e
process . Setting goals and priorities should driv e
the budget process, not follow it . The Council wil l
be involved in five major steps related to goa l
development .
FIVE-STEP PROCESS FOR 2013-1 5
O Setting the Table : November 13,2012. Review
the status of the General Plan programs, curren t
Major City Goals, long-term capital improvement
plan, and general fiscal outlook, including th e
results of the General Fund Five-Year Fisca l
Forecast .
q Budget Foundation : December 18, 2012 .
Finalize plans for the goal-setting process, revie w
fiscal policies, present audited financial results fo r
2011-12 .
q Community Forum : January 8, 2013 .
Consider candidate goals from Council advisor y
bodies, community groups and interested
individuals.
q Council Goal-Setting Workshop :January 26 ,
2013 . Discuss candidate goals presented at January
workshop ; discuss Council member goals ; and
prioritize and set Major City Goals for 2013-15 .
q Major City Goal Work Programs : April 9 ,
2013.Conceptually approve detailed wor k
programs for Major City Goals and set strategi c
budget direction for 2013-15 .
ADVISORY BODY ROLE
By providing the Council with their goa l
recommendations, advisory bodies play a ver y
important part in this process .
Council goals, by their nature, tend to be broader i n
scope than those developed by advisory bodies . I n
your recommendations to the Council, pleas e
consider what you believe would be appropriat e
City goals, both from the perspective of you r
advisory body's purpose, as well as any perceive d
community-wide concerns and needs .
Council advisory bodies will receive a consolidate d
listing of all recommended advisory body goals b y
November 14,2012 . This provides advisory bodie s
with an early opportunity to review what othe r
advisory bodies see as high community priorities .
While not required, it is also an opportunity t o
revise goals if desired . The Council will receive th e
final report with all advisory body recommendation s
before they begin the goal-setting process in Januar y
2013 .•
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Goal-Setting and the Budget Proces s
2013-15 Financial Pla n
Council Goal-Settin g
Worksho p
January 26,201 3
Staff Budget Preparatio n
Major City Goal Work Programs & Strategic Budget Direction : April 9
Preliminary Budget :May 2 4
Budget Workshops : June 10, 11, 1 2
Adopted Budget :June 18,201 3
city of san Luis osispo Page 24
** November 13, 201 2
"Setting the Table "
Workshop
* December 18, 201 2
"Budget Foundation "
Workshop
•
2011-13 MAJOR city goals
Economic Developmen t
Increase focus on economic development . Support
creation of head-of-household jobs throug h
developing strategies for infrastructure, focusing o n
promising growth sectors, and expediting desire d
economic activity. Expand collaboration with Ca l
Poly, Cuesta, business community and responsibl e
agencies .
Traffic Congestion Relie f
Continue efforts on projects and programs whic h
relieve traffic congestion (like street modifications ,
intersection improvements, pedestrian improvements ,
bicycle facilities, sidewalks, trip reduction programs ,
traffic signal operations, LOVR interchange, Prad o
Road and public transit).
Neighborhood Wellnes s
Embrace and implement pro-active code enforcemen t
and Neighborhood Wellness Policies .Preservation of Essentia l
Services and Fiscal Healt h
Adopt a budget that sustains the city's short an d
long-term fiscal health, preserves public health an d
safety and other essential services in line with
residents' priorities, and includes cost reductio n
strategies .
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