2016 Aug 29 - CC PACKET SPCSPECIAL MEETING AGENDA
EL SEGUNDO CITY COUNCIL
WEST CONFERENCE ROOM AND
COUNCIL CHAMBER
350 MAIN STREET EL SEGUNDO CA 90245
The City Council, with certain statutory exceptions, can only take action upon properly posted and listed agenda items.
Unless otherwise noted in the Agenda, the Public can only comment on City - related businesses that are within the
jurisdiction of the City Council and /or items listed on the Agenda during the Public Communications portion of this
Meeting. The time limit for comments is five (5) minutes per person.
Before speaking to the City Council, please come to the podium and state: Your name, residence, and the
organization you represent, if desired. Please respect the time limits.
In compliance with the Americans and Disabilities Act, if you need special assistance to participate in this
meeting, please contact the City Clerk, 524 -2305. Please notify 48 hours prior to the meeting, which will
enable the City to make reasonable arrangements to ensure accessibility to this meeting.
SPECIAL MEETING OF THE EL SEGUNDO CITY COUNCIL
MONDAY, AUGUST 29, 2016 — 4:00 PM
(Committees, Commissions and Board Interviews and Budget Workshop)
4:00 P.M. SESSION
CALL TO ORDER
PLEDGE OF ALLEGIANCE
ROLL CALL
PUBLIC COMMUNICATIONS — (Related to City Business Only ) — 5 minute limit per person,
30 minute limit total) Pursuant to Government Code § 54954.3(a), the only public comment that will be
permitted during this Special Meeting is that pertaining to the agenda item listed below. Individuals who have
received value of $50 or more to communicate to the City Council on behalf of another, and employees speaking on
their behalf of their employer, must so identify themselves prior to addressing the City Council. Failure to do so shall
be a misdemeanor and punishable by a fine of $250. While all comments are welcome, the Brown Act does not allow
Council to take action on any item not on the agenda. The Council will respond to comments after Public
Communications is closed.
SPECIAL ORDERS OF BUSINESS:
1. Consideration and possible action to interview candidates for the Planning
Commission, Environmental Committee, Library Board of Trustees and Senior Citizen
Housing Corporation Board.
Fiscal Impact: None).
Recommendation — 1) Interview candidates; 2) Announce appointments at the 7:00 PM,
September 6, 2016 City Council Meeting, if any; 3) Alternatively, discuss and take other
action related to this item.
CLOSED SESSION:
The City Council may move into a closed session pursuant to applicable law, including the Brown
Act (Government Code Section §54960, et sue.) for the purposes of conferring with the City's Real
Property Negotiator; and /or conferring with the City Attorney on potential and /or existing litigation;
and /or discussing matters covered under Government Code Section §54957 (Personnel); and /or
conferring with the City's Labor Negotiators; as follows:
CONFERENCE WITH CITY'S LABOR NEGOTIATOR (Gov't Code §54957.6): -6- matters
1. Employee Organizations: Police Management Association; Police Officers Association;
Police Support Services Employees Association; Fire Fighters Association; Supervisory and
Professional Employees Association; City Employees Association; Executive Management
Group (unrepresented group); Management/Confidential (unrepresented employees).
Agency Designated Representative: Steve Filarsky and City Manager
BUDGET WORKSHOP — OPEN SESSION
2. Consideration and possible action regarding adoption of a Resolution authorizing the
City Manager to execute a contract, accepting $47,674.00 in grant funding from the
Department of Alcoholic Beverage Control (ABC).
(Fiscal Impact: $0.00)._
Recommendation — 1) Adopt Resolution authorizing the City Manager to execute an
agreement with ABC, accepting $47,674.00 in grant funding; 2) Alternatively, discuss and
take other action related to this item.
3. Consideration and possible action regarding City Council guidance to staff for
preparing the Fiscal Year 2016 -2017 Proposed Budget. Staff will present Fiscal Year
2015 -2016 third quarter updates, challenges /limitations, assumptions associated with
preparation and planning of the upcoming fiscal year budget.
(Fiscal Impact: None).
Recommendation — 1) Receive and file FY 2015 -2016 3rd Quarter General Fund financial
review; 2) Budget Study Session: Discuss and provide direction on Fiscal Year 2016 -2017
Proposed Operating Budget, as well as discuss and provide direction on various policy
options to fund City Manager priorities; 3) Council may raise other developments, fiscal
policy, capital projects and other related topics as part of staff's preparation for the Fiscal
Year 2016 -2017 Proposed Budget; 4) Alternatively, discuss and take other action related to
this item.
E
ADJOURNMENT
POSTED: DATE:
TIME:
NAME:
EL SEGUNDO CITY COUNCIL MEETING DATE: August 29, 2016
AGENDA STATEMENT AGENDA HEADING: Committees, Commissions and Boards
AGENDA DESCRIPTION:
Consideration and Possible action to interview candidates for the Planning Commission,
Environmental Committee, Library Board of Trustees and Senior Citizen Housing
Corporation Board. (Fiscal Impact: None)
RECOMMENDED COUNCIL ACTION:
1. Interview candidates.
2. Announce appointments at the 7:00 p.m., September 6, 2016 City Council meeting, if
any
3. Alternatively, discuss and take other action related to this item.
ATTACHED SUPPORTING DOCUMENTS:
Application of candidates
FISCAL IMPACT: Included in Adopted Budget
Amount Budgeted: $ None
Additional Appropriation: N/A
Account Number(s):
ORIGINATED BY: Mishia Jennings, Executive Assistant I13—
REVIEWED BY:
APPROVED BY: Greg Carpenter, City Manager
BACKGROUND AND DISCUSSION:
Planning Commission — Two positions
Library Board of Trustees — One position
Sr. Housing Corp. Board — Two positions
Environment Committee — Two positions
Candidate
Applying to: CCBs
1. Michael Kreski (4:00)
Planning Commission— 1St
choice
2. Jay Hoeschler (4:10)
Planning Commission — 1St
and only choice
3. Michael Earley (4:20)
Planning Commission— 1St and only choice
4. Kenneth Chancey (4:30)
Planning Commission — 1St
choice, Sr. Housing 2nd choice
5. B Gribbon (4:45)
Environmental Committee
— 1St , Sr. Housing 2nd choice
6. Kristi Zeman (5:00)
Environmental Committee
— 1St and only choice
7. Mar olein Oakley (5:15)
Planning Commission
8. Janice Merva (5:30)
Library Board of Trustees
— 1St and only choice
9. Stephanie Rasmussen (5:45)
Library Board of Trustees 1St and only choice
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CITY COUNCIL PACKET
August 29, 2016 - 4:00 PM
INTERVIEWS of CANDIDATES
Planning Commission,
Environmental Committee, Library
Board of Trustees, Senior Citizen
Housing Corn. Board
Distribution:
• Mayor Suzanne Fuentes
• Mayor Pro Tern Drew Boyles
• Council Member Mike Dugan
• Council Member Carol Prisztuk
• Council Member Don Brann
• City Clerk Tracy Weaver
* City Treasurer Crista Binder
• Greg Carpenter, City Manager
• Mark Hensley, City Attorney
• Joseph Lillio, Director of Finance
• Martha Dijkstra, Human Resources
• Chris Donovan, Fire Chief
• Mitch Tavera, Police Chief
• Debra Brighton, Director of Library Services
• Sam Lee, Director of Planning and Building Safety
• Stephanie Katsouleas, Director of Public Works
• Meredith Petit, Director of Recreation and Parks
• Mona Shilling, Deputy City Clerk
• Mishia Jennings, Executive Assistant
• Mickie Tagle, Executive Assistant
• Public Copy
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EL SEGUNDO CITY COUNCIL MEETING DATE: August 29, 2016
AGENDA STATEMENT AGENDA HEADING: Consent Agenda
AGENDA DESCRIPTION:
Consideration and possible action regarding adoption of a Resolution authorizing the City
Manager to execute a contract, accepting $47,674.00 in grant funding from the
Department of Alcoholic Beverage Control (ABC). (Fiscal Impact: $0.00)
RECOMMENDED COUNCIL ACTION:
Adopt Resolution authorizing the City Manager to execute an agreement with ABC,
accepting $47,674.00 in grant funding; and/or
2. Alternatively, discuss and take other action related to this item.
ATTACHED SUPPORTING DOCUMENTS:
Resolution
FISCAL IMPACT: $
Amount Budgeted: N/A
Additional Appropriation: N/A
Account Number(s):
ORIGINATED BY: Dan Kim, Police Lieutenanw,
REVIEWED BY: Mitch Tavera, Chief of Police qwk
APPROVED BY: Greg Carpenter, City Manager
BACKGROUND AND DISCUSSION:
Earlier this year, the Police Department applied for a grant from the Department of Alcoholic
Beverage Control (ABC) for a multi- agency alcohol enforcement and education campaign.
The Police Department received notification in a letter from ABC, dated May 16, 2016, that El
Segundo was awarded the grant in the amount of $47,674.00. The other agencies participating in
this campaign are the Hermosa Beach and Manhattan Beach Police Departments.
The funds will be used to enhance current levels of enforcement and education in ABC licensed
establishments within the three applicable Cities. Agencies will work together to address issues
associated with alcohol consumption and sales that impact quality of life issues including the sale
of alcohol to minors. The City of El Segundo is the "host" agency for this grant and a designated
individual from the police department will be the point of contact for ABC.
The City Council accepted this Grant during the June 21, 2016, Council meeting, but the
Resolution required by ABC was inadvertently not included with the staff report. Staff now
requests that City Council adopt the attached Resolution, authorizing the City Manager to execute
an agreement with ABC in order to accept the funds.
C:
RESOLUTION NO.
A RESOLUTION AUTHORIZING THE CITY MANAGER TO EXECUTE AN
AGREEMENT WITH THE STATE DEPARTMENT OF ALCOHOLIC
BEVERAGE CONTROL WITH REGARD TO THE ABC 2016/2017 GRANT
ASSISTANCE PROGRAM GRANT
The City Council of the City of El Segundo does resolve as follows:
SECTION 1: The City Council of the City of El Segundo desires to undertake a certain
project designated as ABC 2016/2017 GAP grant to be funded in part from funds made
available through the Grant Assistance Program (GAP) administered by the Department
of Alcoholic Beverage Control (hereafter referred to as ABC).
SECTION 2: Authorization. The City Council authorizes the City Manager to execute on
behalf of the City Council of the City of El Segundo the agreement between the City and
ABC, numbered 16G -LA13 and attached as an Exhibit to this resolution. The City
Manager is further authorized to execute any extensions or amendments to such
agreement and any subsequent contract with ABC in relation to the ABC 2016/2017 GAP
grant, in a form approved by the City Attorney.
SECTION 3: The City acknowledges and agrees that:
A. Any liability arising out of the performance of this contract, including civil court
actions for damages, is the responsibility of the City as the grant recipient and the
authorizing agency.
B. The State of California and ABC disclaim responsibility for any such liability.
C. Grant funds received may not be used to supplant expenditures controlled by
the City Council.
D. This award is not subject to local hiring freezes.
SECTION 4: This Resolution will become effective immediately upon adoption and remain
effective unless superseded by a subsequent resolution.
PASSED, APPROVED AND ADOPTED this ^_ day of August, 2016.
Suzanne Fuentes, Mayor
ATTEST:
STATE OF CALIFORNIA )
COUNTY OF LOS ANGELES ) SS
CITY OF EL SEGUNDO )
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I, Tracy Weaver, City Clerk of the City of El Segundo, California, do hereby certify that
the whole number of members of the City Council of said City is five; that the foregoing
Resolution No. was duly passed, approved and adopted by said City Council at a
regular meeting held on the day of August, 2016, approved and signed by the
Mayor, and attested to by the City Clerk, by the following vote:
AYES:
NOES:
ABSENT:
ABSTAIN:
Tracy Weaver, City Clerk
APPROVED AS TO FORM:
Mark D. Hensley, City Attorney
2
PQ
EL SEGUNDO CITY COUNCIL MEETING DATE: August 29, 2016
AGENDA STATEMENT AGENDA HEADING: Special Orders of Business
AGENDA DESCRIPTION:
Consideration and possible action regarding City Council guidance to staff for preparing the
Fiscal Year 2016 -2017 Proposed Budget. Staff will present Fiscal Year 2015 -2016 third quarter
updates, challenges /limitations, assumptions associated with preparation and planning of the
upcoming fiscal year budget. (Fiscal Impact: none)
RECOMMENDED COUNCIL ACTION:
1. Receive and file FY 2015 -16 3rd Quarter General Fund financial review;
2. Budget Study Session: Discuss and provide direction on Fiscal Year 2016 -2017
Proposed Operating Budget, as well as discuss and provide direction on various
policy options to fund City Manager priorities;
3. Council may raise other developments, fiscal policy, capital projects and other related
topics as part of staff's preparation for the Fiscal Year 2016 -2017 Proposed
Budget;
4. Alternatively, take such additional, related, action that may be desirable.
ATTACHED SUPPORTING DOCUMENTS:
Proposed FY 2016 -17 Budget document
FISCAL IMPACT: None
Amount Budgeted: $0
Additional Appropriation: N/A
Account Number(s): None
ORIGINATED BY: Joseph Lillio, Director of Finance
REVIEWED BY: Greg Carpenter, City Manager
APPROVED BY: Greg Carpenter, City Manager
BACKGROUND AND DISCUSSION:
Third (Marten Financial Review Fiscal Year 2015 -2016
Staff has reviewed all revenues and expenditures for the 3rd Quarter of Fiscal Year 2015 -2016,
with an emphasis on the General Fund, to determine if all sources and uses are on target with the
originally adopted budget and to highlight any areas that may end the fiscal year significantly
above or below budget. As we review the third quarter results and begin the budgeting process
for FY 2016 -2017, the City continues to recover from the previous years' financial challenges.
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General Fund Revenues: The following is a review of major General Fund revenues and the
performance through the third quarter plus estimates for year -end:
Table 1: General Fund Revenues
GENERAL
REVENUES
011-rent
Year
FY 2015-
2016
F Y2015-
% of' 2016 Year-
Oivrl
(t,Tndei) FY
Through
Adopted
Budget end
2015-2016
Revenue Source 613012016
Budgel
Recehed Estintate
Budget
Business License
11,230,508
11,319,890
99.21%
11,950,324
630,434
Sales & Use Tax
7,120,557
10,916,100
65.23%
10,473,295
- 442,805
Sales Tax in Lieu
924,079
2,209,300
41.83%
2,235,342
26,042
Property Tax
6,642,482
6,700,350
99.14%
6,709,000
8,650
Transient Occupancy (TOT)
4,167,870
6,109,400
68.22%
7,200,000
1,090,600
Charges for Services
3,627,923
4,776,750
75.95%
4,776.750
0
Utility Taxes (UUT)
4,234,622
6,808,000
62.20%
5,388,904
- 1,419,096
Franchise Tax
2,944,016
2,450,000
120.16%
3,101,000
651,000
Cogeneration Electric
681,654
1,290,000
52.84%
910,000
- 380,000
License & Permits
1,544,498
1,671,400
92.41%
1,805,502
134,102
Fines & Forfeitures
267,614
385,200
69.47%
385,875
675
Interest /Rentals
640,834
533,200
120.19%
711,028
177,828
Tax Resolution Agreement
5,381,035
5,500,000
97.84%
5,381,035
- 118,965
Other Revenues
3,159,726
2,518,540
125.46%
3,601,112
1,082,572
Total General Fund Revenues
Net of Transfers
52,567,418
63,188,130
83.19%
64,629,167
1,441,0371
Transfers In 0
Total General Fund Revenues 52,567,418
50,000
6').238.130
0.00%
83.130//0
0
64,629.167
- 50,000
1.391.037
Discussion on Year -end estimates for General Fund Revenues
Overall, the City is trending higher in General Fund revenue than what was anticipated in the
original adopted budget. As of the end of the 3rd quarter, the City received $52,567,418 in
General Fund revenues. This is approximately 83% of the anticipated annual budget received
through June 30, 2016. This overall trend in higher revenues is anticipated to continue through
the end of the fiscal year. Staff is estimating a total of $64,629,167 in revenues by year -end.
This is about $1.4 million over the adopted budget. Below is a discussion on the larger variances.
The business license tax is anticipated to be $630,434 above budget due to a late payment
penalty and interest from one large corporation, half of this will be credited to this company's
business license tax next year. Also, there was a slight increase in film permit revenue.
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Sales and Use Tax is anticipated to be $442,805 below budget due to lower revenue from fuel
stations as a result of fuel prices being lower than anticipated for the year.
Transient Occupancy Tax (T.O.T.) is anticipated to be higher than budget by $1,090,600 due to
the passage of Measure B. Measure B was passed by the voters in April and increased the T.O.T.
from 8% to 12% effective June 1, 2016.
Utility User Tax (UUT) and Cogeneration Electric are anticipated to be below budget by $1.4M
and $380,000 respectively, due to a decline in natural gas commodity prices.
Other Revenues are anticipated to be higher than budget by $1.1M due to receipt of developer
fee revenue that was not budgeted and higher revenue in real property transfer tax.
General Fund Expenditures
The following is an update from midyear review of General Fund expenditures through third
quarter plus estimates to year -end:
Table 2 — General Fund Expenditures by Department
•i � e
Fariance
FY 2015- overl
Current Year 2016 F)'2015- (Undei) FY
D•p: :
Elected Officials
786,376
1,040,700
75.56%
1,029,700
- 11,000
Administrative Support
3,136,614
4,216,900
74.38%
4,106,000
- 110,900
Police
13,191,849
20,129,100
65.54%
19,747,100
- 382,000
Fire
10,167,873
14,533,000
69.96%
14,497,800
- 35,200
Communication Centers
1,036,703
1,457,700
71.12%
1,440,400
- 17,300
Planning & Building Safety
1,612,153
2,842,500
56.72%
2,789,600
- 52,900
Public Works
5,150,301
6,911,300
74.52%
6,903,300
-8,000
Rec and Parks
3,845,750
5,328,000
72.18%
5,313,900
- 14,100
Library
1,364,579
2,095,000
65.14%
2,046,900
- 48,100
Non - department
5,112,080
5,122,860
99.79%
5,107,484
- 15,376
Transfers out
525,006
700,000
75.00%
700,000
0
Total Geiieral Ftnicl
Expendittires
45,,929,284
64,377.060
71.34'Vo
63.682,184
-6,94,876
Year -end estimates for General Fund Expenditures
Administrative Support is estimated to be $110,900 below budget primarily due to vacancies in
the Finance Department resulting in budgetary savings in salaries and benefits.
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Police is estimated to be $382,000 below budget primarily due to vacancies, resulting in
budgetary savings in salaries and benefits.
Planning and Building Safety is estimated to be $52,900 below budget primarily due to
vacancies, resulting in budgetary savings in salaries and benefits.
Library is estimated to be $48,100 below budget primarily due to vacancies, resulting in
budgetary savings in salaries and benefits.
Estimated General Fund Balance at September 30, 2016
Beginning Fund Balance at October 1, 2015
Plus revised estimated revenues for FY 2015 -16
Less revised estimated
for FY 2015 -16
13,154,589
64,629,167
(63,682,184)
Fiscal Year 2016 -2017 General Fund
Finance has met with staff from each department to develop the proposed FY 2016 -17 Budget.
The City Manager has instructed departments to control costs to previous levels and to justify
any increases, such as inflationary increases built into existing multi -year contracts. The Finance
Department also analyzed the historic trends in each department. The adopted budget and year-
end projections for FY 2015 -2016 are used as the base for building the preliminary estimates for
the FY 2016 -2017 budget. The following assumptions were used to forecast the FY 2016/2017
proposed revenues and expenditures:
Estimated fund balances: When the City adopted the budget for fiscal year 2015 -2016, staff
projected the ending fund balance at September 30, 2016 at $12.1 million. Based on staffs
recent analysis, that amount is now projected at $14.1 million, a net increase of approximately $2
million. The increase is attributed to an additional $1 million from the Transient Occupancy Tax
(TOT) as a result of Measure B, which raised the TOT rate from 8% to 12 %; $900,000 from
unanticipated developer fees; and $600,000 business license penalties and interest from one of
the larger businesses in El Segundo. Based on the estimated revenues and proposed expenditures
for the coming fiscal year, staff projects the ending fund balance at September 30, 2017 will be
$15.3 million, as illustrated on Table 3:
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Table 3:
General Fund Summary
Estimated Beginning Balance 10/01/16
Estimated Revenues FY 16 -17
Total Estimated Resources
Less: Proposed Budget FY16 -17
Transfers Out
Estimated Ending Balance 09/30/17
$ 14,101,572
67,796,559
$ 81,898,131
66,042,418
600,000
$ 15,255,713
General Fund Revenues: In preparing for Strategic Planning for next year's budget, staff
analyzes the performance of all General Fund revenues with additional emphasis on the City's
core tax revenues and fees for services. Staff utilizes historical data and information from
outside consultants as well as industry experts to predict future revenues for this sector.
Over the past year, the City has experienced a modest recovery in the business to business tax
base and overall this sector appears to be recovering. This recovery will help to stabilize and add
confidence to the forecasted revenues going forward for this tax base.
The most vulnerable revenues are those affected by the fluctuations for the price of natural gas.
Currently, natural gas is down approximately 20% to date when compared to the 2015 calendar
year. Franchise Tax, Gas Utility User Tax, Cogenerated Electric and Utility User Tax are the
main categories affected by natural gas pricing. Other revenue categories, appear to be
stabilizing as well with moderate growth predicted.
Estimated revenues: Staff projects General Fund revenues at $67.8 million, of which, $57.5
million comes from various taxes. The biggest single source of tax revenue is Sales & Use Tax,
estimated at $12.2 million, followed by Business Licenses at $11.5 million; Transient Occupancy
Tax (TOT) $9.6 million; Utility Users' Tax $7.2 million; and Property Tax at $7.1 million.
Other taxes include Franchises $3.2 million and the Tax Resolution Agreement (TRA) with
Chevron for $6.3 million. Other sources come from Charges for Services $4.8 million; Other
Licenses & Permits $1.7 million. The balance is made up of miscellaneous sources.
Revenue highlights: The estimated General Fund revenue (excluding transfers in) for the
coming fiscal year represents an increase of $4.6 million or 7.3% over the adopted budget for the
current year. Below are some of the major revenue increases (decreases):
Transient Occupancy Tax (TOT) increase of $3.5 million is the result of the approved rate
change from 8% to 12 %, in addition to the two new /remodeled hotels coming into the City.
Sales & Use Tax increase of $1.2 million is based on consumer spending, as provided by HDL
Companies, the City's tax revenue consultant. This amount does not consider the cessation of
the "triple flip" which used to be accounted for under a separate account called "Sales Tax in-
Lieu." The Sales Tax in -Lieu was budgeted at $2.2M for FY 2015 -16 and will be $0 for FY
2016 -17. This tax comes to an end in July 2016. The "triple flip" was a backfill from the State
which was approved by the voters in 2003 under Proposition 57, to finance the State's Fiscal
Recovery Bonds. Under this Proposition, the State took 1/4 of local agencies' sales tax revenue
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and backfilled it with like amount in property taxes. The "triple flip" continued for almost 15
years until the bonds were paid off in fiscal year 2015 -2016 by the State.
Franchise Tax is expected to increase by $750,000 or 30.6% due to a recent change of
calculating the municipal surcharge from the sale of natural gas which considers not only the
gross receipts from the sale but also from the annual receipts arising from the use, operation, or
possession of the franchise within the municipality.
Business License Tax increase of $214,520 or 1.9% is based on business license tax rates being
adjusted by the annual CPI change. In addition, a new business discovery project identifies non-
compliant businesses throughout the City coupled with inter - departmental effort to cross
reference databases to ensure permits and licenses are current.
Property Tax increase of approximately $394,000 is attributed to continued high property values,
as determined by HDL Companies.
Utility Users' Tax (UUT) combines all the utility users' taxes from gas, water,
telecommunications, cogenerated electric, and electricity and has a projected net decrease of
$888,000 or 11% under the current year's estimated resources. The most significant change is
due to a projected decrease of $800,000 in Gas and Cogenerated Utility Users' Tax revenue.
These revenue categories are susceptible to dramatic increases or decreases due to the fluctuation
of the price of natural gas which continue to decline throughout 2016. Table 4 on the following
page illustrates the City's major revenue sources.
Intergovernmental revenues including VLF (Vehicle License Fees) Swap is expected to increase
$190,658 or 14.1 %. VLF, a fee charged by the State for operating vehicles on public streets, is
based on 2% of the market value of motor vehicles based on an 11 -year depreciation schedule.
In 1998, legislation was passed to reduce the VLF 25% and 35% by 2001. As a result of these
reductions, cities and counties would have experienced a significant revenue loss; however,
legislation was also passed to backfill this loss as long as the State General Fund revenues come
within certain targets; hence, the title VLF Swap. Initially, this revenue was called Motor
Vehicle License Fees.
Building Permits and Plan Check Fees are projected to increase $250,000 total, to reflect
development activities in the City.
Table 4 on the following page illustrates the estimated General Fund revenues by major
categories.
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Table 4:
ESTIMATED GENERAL FUND REVENUES
Revenue Source
Property Taxes
Sales Tax
Transient Occupancy Tax
Franchise Tax
Utility Taxes
Other Taxes
TRA /Chevron
Business Licenses
Other Licenses & Permits
Fines & Forfeitures
Use of Money & Property
Intergovernmental
Charges for Services
Other Revenues
Total (excludes transfers)
Adopted Proposed Amount Percent
FY15 -16 FY16 -17 Inc (Dec) Inc (Dec)
$ 6,700,350 $
7,094,993
$ 394,643
5.89%
10,916,100
12,179,368
1,263,268
11.57%
6,109,400
9,600,000
3,490,600
57.13%
2,450,000
3,200,000
750,000
30.61%
8,098,000
7,210,000
(888,000)
- 10.97%
2,509,300
425,000
(2,084,300)
- 83.06%
5,500,000
6,250,000
750,000
13.64%
11,319,890
11,534,410
214,520
1.90%
1,671,400
1,745,900
74,500
4.46%
385,200
297,000
(88,200)
- 22.90%
533,200
407,000
(126,200)
- 23.67%
1,351,300
1,541,958
190,658
14.11%
4,776,750
4,833,259
56,509
1.18%
867,240
1,477, 671
610,431
70.39%
$ 63,188,130 $
67,796,559
$ 4,608,429
7.29%
Proposed General Fund Expenditures: The proposed expenditures, excluding inter -fund
transfers of $600,000, total $66.042 million; an increase of $2.3 million or 3.7% compared to the
current year's adopted budget. Major increases are attributed to: Workers' Compensation $1.4
million; Group Insurance $829,838; Retirement (Ca1PERS) Contribution $389,386; Leave
Payouts $182,700; FICA $109,927; Contractual Services $187,389; Software Maintenance
$62,374; Training Materials $54,100; Training & Education $39,850; In- Custody Medical
Charges $14,900; and Lease Payment $5,950. Some of these increases are offset by decreases in
the following categories: Regular Salaries ($188,782) due to attrition; 401(a) Contribution
($259,800) due to termination of this benefit.
• The proposed budget for Workers' Compensation is more in line with actual expenditures
for claims, increases to the City's annual premium through the risk pool (ICRMA),
administration costs, and the ongoing funding required to operate the fund in a fiscal
prudent approach. In prior years, the charges to the departments (which fund the
Worker's Compensation Fund) were less than the self- insured retention (SIR) being paid
from the Worker's Compensation Fund for claims payable. The City's SIR is $350,000
per claim. Over the past several years, the City has experienced a high volume of new
claims which has caused the expenditures to exceed the revenues in several of the prior
fiscal years. Charges to departments are based on an actuarial valuation as provided by
the City's risk pool administrator.
• Group Insurance increase is attributed to the new structure for the Executives / Directors
and Management Confidential salary group's health insurance benefit. Effective June
2016, the City's maximum contribution was increased from $125 to $782 per month and
$585 per month for Executives / Directors and Management Confidential, respectively.
The total fiscal impact is $372,400. The increase also includes the cost for additional
retirees and escalation in group health insurance premiums.
• Contributions for retirement benefits continue to increase as determined by CalPERS.
For safety employees, the employer contribution rate rose from 46.595% to 49.973 % or a
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7.25% increase; for miscellaneous employees, the rate rose from 17.73% to 19.07% or
7.56 %. These rates do not consider the employees' contribution which is paid by the
City for some of the labor groups.
+� Contractual Services include landscaping and custodial services, HVAC maintenance,
Siemen's (for buildings automation, which was inadvertently not appropriated in the
current year's budget), etc. Many of these contracts provide for cost escalation based on
CPI or new laws such as the new minimum wage requirements.
The City is still in negotiations with 5 labor groups therefore the forecast is being created based
on the continuation of the status quo of the current contracts. Any resolution that increases
salary and benefit costs will need to come from reserves. General Fund expenditure
assumptions for FY 2016 -2017 are as follows, as compared to the prior year adopted budget:
i anie o is a summary or
Description
All Salaries (including
overtime & other pays)
All Benefits
Sub -total
iture increases:
Summary of General 'Fund Expenditures
Maintenance & Operations
Total (less transfers out)
Adopted
Proposed
Amount
Percent
FY154
FYIF5I -17
Increase
Increase
$ 31,207,400
$31,277,217
$
69,817
0,22°1
19,348,870
21,114,562
1,765,692
9.13%
$ 50,555,270
$ 52,391,779
$
1,835,509
3,63%
13,157,760
13,650,639
492,879
3.750
* $ 63,714,030
$ 66,042,418
$
2,328,388
3.65010
*$36,970 in uniform allowance is reflected in FY 15 -16 adopted but was appropriated by Council after budget adoption.
Original adopted budget was $63,677,060 plus $700,000 for transfers out, totaling $64,377,060.
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Table 6— General Fund Expenditures by Department
The main drivers of the variances in table 6 are:
• City Clerk — elections were budgeted for in FY 2015 -16 and there are no elections in FY
2016 -17.
• City Council — an increase due to moving the budget for the League of CA Cities from
non - departmental to City Council.
• City Treasurer — an increase to salary (step increase) and benefit costs associated with the
management and confidential agreement.
• Finance — a reduction to salary and benefits due to multiple newly hired staff during the
latter part of FY 2015 -16 resulting in salary and benefit cost reductions.
• Fire — an increase to worker's compensation and pension costs.
• Human Resources — an increase to salary and benefit costs associated with the Executive
and Management and Confidential agreement, as well as an increase to contractual
services for the recruitment of a H.R. Director.
• Library — contractual services increase related to new fiber data line, new contract with
Encore, and increase in salary and benefits due to costs associated with the Executive and
Management and Confidential agreement.
• Police — an increase to worker's compensation, increase to pension costs and an increase
to purchase ammunition. The current year budget reflects $5,900 to purchase
ammunition, when the historical budget and actual costs have been approximately
$60,000 per year. The proposed FY 2016 -17 Budget reflects the historic trend.
• Public Works - an increase to salary and benefit costs associated with the Executive and
Management and Confidential agreement, HVAC maintenance which was inadvertently
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City Attorney
487,300
488,250
950
0.2%
City Clerk
473,500
374,731
- 98,769
-20.9%
City Council
264,700
286,368
21,668
8.2%
City Manager
1,082,500
1,102,970
20,470
1.9%
City Treasurer
302,500
319,302
16,802
5.6%
Finance
2,008,500
1,929,291
- 79,209
-3.9%
Fire
14,564,200
15,040,916
476,716
3.3%
Human Resources
788,600
817,765
29,165
3.7%
Library
2,095,000
2,315,461
220,461
10.5%
Planning & Building Safety
2,756,600
2,704,728
- 51,872
-1.9%
Police & Information Systems
21,586,800
21,989,427
402,627
1.9%
Public Works
6,911,300
7,250,300
339,000
4.9%
Recreation & Parks
5,413,900
5,697,119
283,219
5.2%
Non - department
4,978,630
5,725,790
747,160
15.0%
63,714,0301
66,042,4181
2,328,3881
3.7%
Total Operating Budget
700,000
600,000
- 100,000
-14.3%
Transfers out
The main drivers of the variances in table 6 are:
• City Clerk — elections were budgeted for in FY 2015 -16 and there are no elections in FY
2016 -17.
• City Council — an increase due to moving the budget for the League of CA Cities from
non - departmental to City Council.
• City Treasurer — an increase to salary (step increase) and benefit costs associated with the
management and confidential agreement.
• Finance — a reduction to salary and benefits due to multiple newly hired staff during the
latter part of FY 2015 -16 resulting in salary and benefit cost reductions.
• Fire — an increase to worker's compensation and pension costs.
• Human Resources — an increase to salary and benefit costs associated with the Executive
and Management and Confidential agreement, as well as an increase to contractual
services for the recruitment of a H.R. Director.
• Library — contractual services increase related to new fiber data line, new contract with
Encore, and increase in salary and benefits due to costs associated with the Executive and
Management and Confidential agreement.
• Police — an increase to worker's compensation, increase to pension costs and an increase
to purchase ammunition. The current year budget reflects $5,900 to purchase
ammunition, when the historical budget and actual costs have been approximately
$60,000 per year. The proposed FY 2016 -17 Budget reflects the historic trend.
• Public Works - an increase to salary and benefit costs associated with the Executive and
Management and Confidential agreement, HVAC maintenance which was inadvertently
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not appropriated in the current year's budget, and contractual agreements that had
automatic cost adjustments for CPI and new regulations such as the new minimum wage
and provisions of the Affordable Care Act.
• Recreation & Parks — an increase to the minimum wage from $10/hr to $10.50 /hr as of
January 1, 2017. Also, there were contractual agreements that had automatic cost
adjustments for CPI and new regulations such as the new minimum wage and provisions
of the Affordable Care Act.
• Non - Departmental — an increase in group insurance premiums and the accrued vacation
and sick leave pays.
Transfers from the General Fund: Consistent with the prior years, $350,000 will be
transferred from the General Fund to the Facilities Maintenance Fund to cover unforeseen or
emergency repairs throughout the City. This amount is on top of the $1.8 million allocated for
maintenance of government buildings under the Public Works Department. In addition, staff is
proposing a $250,000 transfer to the Economic Uncertainty Fund. This brings the total of the
Economic Uncertainty Fund reserve to $1.5 million.
OTHER SPECIAL REVENUE FUNDS:
All special revenue funds are dedicated for a specific purpose governed by laws and regulations.
For example, the Gas Tax Fund can be spent only on street - related expenditures; Prop A and
Prop C can be spent only on transportation; Asset Forfeiture and COPS funds can be spent only
on police - related activities — as a supplement, not to supplant current appropriations. Federal,
State, or County grants can be spent only for the specific grant that it is awarded for. The total
proposed budget for all special revenue funds is $3.6 million, including $1.1 million for capital
improvement such as street repairs or rehabilitation and parks facilities repairs and maintenance.
DEBT SERVICE FUND
Included in the proposed budget is an allocation of $545,000 for the payment of principal and
interest on the Douglas Street Gap Closure project. The source of funds to cover the debt
obligation comes from traffic impact fees.
CAPITAL IMPROVEMENT FUND
Depending on Council's direction on the additional departmental requests, some of which are
recommended for funding by the City Manager, $2.1 million could be transferred from the
General Fund to the Capital Improvement Fund.
ENTERPRISE FUNDS
The total proposed budget for the Water Fund is $29.8 million, including $3.3 million for capital
improvement projects. Compared to the current year's adopted budget, the proposed amount
represents an increase of $670,000 or a 2.3 %. The Sewer Fund's proposed budget is $6.5 million
including $2.9 million for capital improvement projects, a decrease of $2.1 million or 24.3%
based on the allocation for capital improvements on the wastewater system each year. The Golf
Course Fund's proposed budget remains at $1.9 million. Beginning fiscal year 2016 -2017,
Depreciation Expense is no longer included as a budgeted line item in the Enterprise Fund as it is
a non -cash expense. Depreciation Expense is reflected as an actual expense when presenting the
Financial Statements of each fund.
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INTERNAL SERVICE FUNDS
The City operates (albeit to a limited degree) three internal service funds. Basically, these funds
do not represent external funding sources. These funds are used to account for internal charges
to user - departments. For example, the Equipment Replacement Fund (ERF) is used only to
accumulate funds to replace various equipment throughout the City. Based on the estimated life
of the asset and the estimated replacement value after the asset is fully depreciated, the ERF
charges the departments a set amount each year until the asset is supposed to be replaced and
purchased. Per the established replacement schedule, the ERF proposed budget for the coming
fiscal year is $5.3 million even though not all of the equipment scheduled for replacement may
be actually purchased or replaced during the fiscal year.
The City operates two self - insurance programs, administered by third -party administrators, under
the management of the City's Risk Manager who is also the Director of Finance. The City
belongs to the Independent Cities Risk Management Authority ( ICRMA), a joint - powers
authority of 24 participating members for the purpose of pooling the City's risk for general
liability and workers' compensation losses with those of other member cities. ICRMA covers up
to $19,250,000 for general liability claims and up to $94,650,000 in workers' compensation
claims.
For the Liability Insurance Fund and the Workers' Compensation Fund, the proposed budget is
$1.6 million, and $2.2 million, respectively. Both these amounts are supposed to cover the
administration costs and estimated claims payments within the City's self - insured retention -
$750,000 for general liability and $350,000 for workers' compensation.
Reserves
Attached to this staff report is Exhibit A which outlines additional requests from various
departments that are prioritized and recommended for funding by the City Manager based on
different scenarios. Four options are presented for City Council's consideration in determining
the level of General Fund reserves. The additional General Fund requests range from a total of
$1.66 million to $3.23 million (includes $2.1 million for capital improvement projects).
Depending on Council's action, the General Fund reserve could be set from $11,995,635 up to
$13,559,312 for FY 2016 -17.
Policy Option discussion on reserve levels for the General Fund
The City Council's current reserve policy directs the General Fund reserve to increase from
current level of 19% to 20% of the greater of appropriated revenues or expenditures for FY
2016 -17. City Council has the discretion to slowdown the rate of achieving the 20% reserve by
setting the actual funding of the reserve to be less than 20% for FY 2016 -17 with the objective of
funding the 20% in future years.
Policy Option I will require a General Fund reserve of 20% or $13,559,312 (see table 7). This
will leave $1.7M as undesignated funds for Council's discretion.
Policy Option 2 - The City Council's FY 2015 -16 General Fund reserve is at 19% of the greater
of appropriated revenues or expenditures. Policy option 2 proposes to retain this same funding
policy for the FY 2016 -17 budget. This will require a General Fund reserve of $12,881,346 (see
table 7). This will leave $2.4M as undesignated funds for Council's discretion, approximately
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$700,000 over policy option 1.
Table 7:
Beginning Fund Balance @
101112016:
$14,101,572
$14,101,572
Projected Revenue
$67,796,559
$67,796,559
Projected Expenditures
$66,642,418
$66,642,418
Net + /( -)
$1,154,141
$1,154,141
Ending Fund Balance (Sept 30,
2017)
$15,255,713
$15,255,713
Less Designated Reserve
Requirement
$13,559,312
$12,881,346
Undesignated GF reserves
$1,696,401
$2,374,367
Economic Uncertainty Reserve $1,500,000 $1,500,000
Plus GF Reserve $13,559,312 $12,881,346
Total Gross GF Reserves $15,059,312 $14,381,346
Total Reserve as a % of policv 22.2% 21.2%
Policy Option 3 — This policy option proposes to change the funding from 19% of "the greater of
revenues or expenditures" to 19% of "expenditures ". With the proposed FY 2016 -17 budget,
going with policy option 3 will require a General Fund reserve of $12,662,059 (see table 8). This
will leave $2.6M as undesignated funds for Council's discretion: approximately $900,000 over
policy option 1 and $200,000 over policy option 2.
Policy Option 4 - This policy option proposes to change the funding level from 19% of "the
greater of revenues or expenditures" to 18% of "expenditures ". With the proposed FY 2016 -17
budget, going with policy option 4 will require a General Fund reserve of $11,995,635 (see table
8). This will leave $3.3M as undesignated funds for Council's discretion: approximately $1.55M
over policy option 1, $900,000 over policy option 2 and $700,000 over policy option 3.
Table 8:
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The Economic Uncertainty reserve is proposed to be set at $1,500,000 for FY 2016 -17. This is
an increase of $250,000 over the current year reserve balance. When the Economic Uncertainty
reserve is added to the General Fund reserve, the total reserve level increases. Policy option 1
results in a combined reserve level of 22.2 %. While policy option 4 will bring the combined
reserve level down to 20.3 %. Policy options 2 and 3 are 21.2% and 21.3% respectively.
Staffs' presentation will provide a prioritization of funding priorities as recommended by the
City Manager as it relates to each policy option. Staff will also present the departmental
expenditure requests that did not get recommended for funding. The funding priorities will be
tied to the Strategic Goals identified in the August 3, Strategic Planning meeting.
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