Title
Adoption of Resolution Amending the Fiscal Year 2015-16 Operating and Capital Improvement Program Budget and Approving Workforce Changes in the City Manager’s Office and Public Works Departments. (Finance 2410)
Body
To: Honorable Mayor and Members of the City Council
From: Jill Keimach, City Manager
Re: 1) Adopt a Resolution Amending the Fiscal Year 2015-16 Operating and Capital Improvement Program Budget; and
2) Approving Workforce Changes in the City Manager’s Office and Public Works Departments
BACKGROUND
This report updates Fiscal Year (FY) 2015-16 financial projections for the General Fund and proposes current year budget amendments for various City funds to reflect and react to the City’s evolving financial condition.
The discussion below is presented in the following sections:
I. General Fund Available Fund Balance Projection
II. General Fund Revenues
III. General Fund Expenditures
IV. Non-General Fund Programs
V. Workforce Changes
DISCUSSION
The City Council adopted FY 2015-16 Budget on June 2, 2015. Subsequently, the City Council approved amendments to the FY 2015-16 Budget to various funds in the City. The most significant change was approved in September 2015 when Council allocated the General Fund available fund balance in excess of the 20% reserve internal policy requirement.
At this time, staff is bringing forward an update on the General Fund performance and forecast through the end of the current Fiscal Year. Staff recommends approving adjustments to the FY 2015-16 Budget based on the updated projections. In addition, staff reviewed non-General Fund programs and recommends approval of budget amendments for those programs as well.
I. General Fund Available Fund Balance Projection
The originally budgeted General Fund ending available balance for FY 2015-16 was projected to be 38%. Subsequently, the City Council took several actions, with the most significant one on September 15, 2015, to allocate available General Fund balance to various one-time uses and additional reserves. With the approval of those budget changes, the General Fund available balance was reduced to 19%. As part of the mid-year review, staff evaluated revenues and expenditures for the Fund, which are discussed below. As reflected in Exhibit 1, if the Council approves changes proposed by staff, the updated projection for the General Fund available fund balance at the end of FY 2015-16 is estimated to grow from 19% to 24% in the Revised Budget in this Mid-Year Budget estimate.
II. General Fund Revenues
As shown in Exhibit 1, General Fund revenue collections in FY 2015-16 are projected to increase by $4.3 million to $86.2 million in total. This is 5.2% higher than budgeted. Changes are occurring in the following revenue types:
• Property tax is projected to be $1.3 million higher than anticipated primarily due to an increase in supplemental assessments and residual property tax distribution (“waterfall funds”) as a result of redevelopment dissolution. The median home sales prices in the City went up to $900,000 in the fourth quarter of 2015 compared to $800,000 for the same quarter of 2014.
• Motor Vehicle License Fee in-Lieu is $250,000 greater than expected. This revenue is allocated through property taxes and as such have a similar growth pattern.
• Property transfer tax is expected to increase $2.0 million in a direct correlation to the appreciating home prices as well as change in ownership.
• Utility User Tax is expected to decline by $150,000. This is in addition to the previously reduced budget. This tax is generated on cable television, telephone services, natural gas and electricity. The decrease is attributable to the telecommunication services, and the City’s outdated ordinance that governs the collection of this tax.
• Transient Occupancy Tax collections are expected to be $220,000 higher than budgeted. According to Beacon Economics, the average daily rate for hotel rooms in the East Bay was $150 as of September 2015, a 13.9% increase over the same month last year. Occupancy rates were up 3.2% over the same time period.
• Investment Income revenue is projected to be $30,000 greater than budgeted based on the revenue received to date.
• Departmental Revenues collections in total are expected to be $635,000 greater than budgeted. Most of the increases are in the Fire Department with the largest amount of $300,000 attributed to the Ground Emergency Medical Transport (GEMT) program. This is a voluntary program that provides additional funding to governmental entities providing GEMT services to Medi-Cal beneficiaries. In addition, the Department is getting $183,000 in reimbursement from the State’s mutual aid program; $95,000 from increased activity in plan check inspections; $30,000 from revised Prop 172 sales tax projection; and $47,000 from outstanding billings for the Basic Life Support (BLS) program that was discontinued in June 2015.
Police Department revenues are being adjusted to account for an $80,000 grant received to partially pay for the acquisition cost of a police boat approved by Council in June 2015.
Public Works Department lowered fleet revenue estimate by $100,000 due to reduced fuel prices.
III. General Fund Expenditures
Staff evaluated General Fund expenditures taking into account the newly approved contracts for the non-safety employees. Although labor costs increased, they are still expected to stay within FY 2015-16 budgeted amounts, with the exception of Fire Department overtime, as a result of the high level of vacancy savings. Some of the savings were a result of delayed hiring. These are one-time savings and cannot be relied on to re-occur. Outside of the costs related to the labor contracts, overall General Fund annual operating expenditures and transfers out are projected to decrease by $43,000.
The Fire Department is requesting a total increase of $1 million in the expenditures budget. The increase is offset with additional new revenue of $655,000, for a net increase in appropriations of $357,000. The Department is experiencing a number of unforeseen outside vehicle repair costs that are a result of an aging fleet. Additional funding is needed to cover the cost of a second fire academy in the current fiscal year. This academy will bring onboard fire personnel funded by the SAFER grant. Although the grant pays for the salaries and benefits of the new recruits, it does not cover the cost of training and outfitting them. An increase in the overtime budget is partially covered by the reimbursement from the state for the mutual aid activities incurred in late summer 2015. The Department is requesting to appropriate GEMT reimbursement to be used for one-time costs such as training and small equipment purchases for ambulances and fire apparatus.
The Police Department expenditures budget is proposed to be reduced by $450,000. This decrease is to recognize the labor savings due to difficulty in filling vacant positions created as a result of retirements in the Department.
The Community Development Department expenditures budget is proposed to be reduced by $70,000. This decrease is to recognize the labor savings materialized as a result of a delay in hiring of a new Economic Development Manager position.
The Recreation and Parks Department is requesting $25,000 for the Encinal dock replacement that was condemned due to safety concerns. Replacement is needed to give public an access to the facility.
The Library is requesting $15,000 to cover the cost of state-wide minimum wage increases that became effective on January 1, 2016. This increase was not included in the department’s adopted budget.
Staff is recommending to reduce the transfer out to the Base Reuse Fund by $575,000. The transfer out was originally approved by the City Council in September 2015 and was intended to cover the cost of demolition of 17 vacant apartment buildings at Alameda Point. The Base Reuse Fund had sufficient fund balance at June 30, 2015 to pay for the one-time cost of the project.
IV. Non-General Fund Programs
The focus of this mid-year report has been the City’s General Fund. The following programs, however, do propose budget amendments. The detail of the proposed adjustments are presented on Exhibit 2.
Ø Library - To recognize revenue for the adult literacy grant of $23,000 received from the California State Library and to appropriate these funds for the purchase of library materials. To budget $15,000 transfer in from the General Fund and to appropriate these funds for labor costs.
Ø Base Reuse Fund - To adjust the revenue budget by $871,000 to account for new leases the City entered into at Alameda Point and to increase appropriations by $783,000 to pay for port services, real estate commission increases due to increased lease activity and contractual services for Transportation Demand Management plan at Alameda Point.
To reduce the transfer in and expenditures budget by $575,000. The General Fund subsidy is no longer required as Base Reuse fund has adequate resources to pay for the demolition of 17 vacant apartment buildings.
Ø Rent Stabilization - To recognize transfer in of $300,000 from the General Fund used as a seed funding to get the newly established program off the ground. The appropriation of $300,000 is established to cover the costs of the program fee study, legal and finance expenses as well as program administration by the Housing Authority.
Ø Alameda Landing - To appropriate $34,000 to pay for utilities and contractual services in the assessment maintenance district. Appropriation was erroneously omitted at the time of FY 2015-16 budget adoption.
Ø Harbor Bay Assessment District - To appropriate $78,000 to pay Water Emergency Transportation Authority (WETA) a portion of ferry services provided at Harbor Bay ferry terminal.
Ø Capital Improvement Projects - To budget $25,000 transfer in from General Fund and to appropriate these funds for the Encinal dock replacement in the Encinal Boat Ramp project.
A budget correction is needed to appropriately account for revenue and expenditures for paratransit project and various sewer system projects. This correction does not increase or decrease the budget for those projects, it simply changes the funds where revenues and expenditures are recorded. The paratransit project is being moved from the Capital Improvement Projects Fund to Paratransit Special Revenue Fund and Sewer Projects are being moved from the Capital Improvement Projects Fund to the Sewer Enterprise Fund.
Ø Vehicle Replacement Internal Service Fund:
Fire Department - To appropriate funds for an ambulance remount that was deemed necessary by the fleet staff. To help pay for this $130,000 expense, Fire Department staff recommends the City sell two BLS ambulances and use the proceeds from the sale of these vehicles estimated at $100,000 toward the remount work.
Recreation and Parks - To appropriate $30,000 for a purchase of a replacement vehicle and recognize insurance proceeds of $12,000 that will be used to offset the use of fund balance reserves.
Ø Sewer Enterprise Fund - Public Works Department staff reconciled the Sewer Fund’s FY 2015-16 revenue projection with the City’s approved 5-year sewer rate study. As a result of reconciliation, staff concluded that Sewer Fund current year revenue budget was overstated by $1.9 million and requires an adjustment. Despite the revenue overstatement, the City is on track to deliver on its 20-year sanitary sewer master plan.
In addition, budget adjustment is needed for $622,000 in sewer connection fee revenue projected to come in above current budget of $337,898.
V. Workforce Changes
At the time the FY 2015-16 budget adoption, the City Council approved the addition of an Information Technology Director position with a funding split 50%/50% between General Fund and Alameda Municipal Power (AMP). Staff later determined that 75%/25% allocation between General Fund and AMP is more appropriate based on the work demand. Staff is proposing a workforce change for the IT Director position. Sufficient General Fund budget is available within the existing department budget in FY 2015-16 to accommodate this change. FY 2016-17 Budget will be adjusted during the mid-cycle process and will be brought to the City Council for approval in June 2016.
The Urban Forrest capital project overseen by the Public Works department has a Project Manager I position to manage the project. The Department staff is requesting a Project Manager II classification as it is more suitable to handle responsibilities of this project requiring management with independence. Therefore, staff is proposing a workforce change to modify the City’s authorized positions in Public Works Department to replace the Project Manager I position with a Project Manager II position. Sufficient appropriations are available to accommodate this change in FY 2015-16. FY 2016-17 Budget will be adjusted during the mid-cycle process and will be brought to the City Council for approval in June 2016.
FINANCIAL IMPACT
The proposed budget amendments to the FY 2015-16 Budget, as detailed on Exhibit 2, will increase General Fund revenue and transfers in by $4.3 million to $86.2 million, decrease expenditures and transfers out by $43 thousand to $89.0 million. The General Fund available Fund balance is expected to grow to $20.9 million or 24% of total annual expenditures and transfers out by the end of the Fiscal Year.
The net impact of the proposed amendments on all other funds will decrease revenues by $0.5 million and increase expenditures by $0.8 million.
No additional appropriations are required for the proposed workforce changes in the Information Technology or Public Works Departments for FY 2015-16.
MUNICIPAL CODE/POLICY DOCUMENT CROSS REFERENCE
This action is in conformance with the Alameda Municipal Code and all policy documents.
ENVIRONMENTAL REVIEW
This activity is not a project and is exempt from the California Environmental Quality Act (CEQA) pursuant to section 15378(b)(4) of the CEQA guidelines, because it involves governmental fiscal activities which do not involve any commitment to any specific project which may result in a potentially significant physical impact on the environment.
RECOMMENDATION
Recommendation to Adopt a Resolution Amending the Fiscal Year 2015-16 Budget; and
Adopt a Resolution Approving Workforce Changes in the Information Technology and Public Works Departments.
Respectfully submitted,
Elena Adair, Finance Director
Exhibits:
1. FY 2015-16 Mid-Year General Fund Budget Summary
2. FY 2015-16 Mid-Year Budget Amendments