Title
Budget Workshop for Fiscal Years 2017-18 and 2018-19 to Provide Direction on Funding Requests for Budget Adoption on June 6, 2017. (Finance 2410)
Body
To: Honorable Mayor and Members of the City Council
From: Jill Keimach, City Manager
Re: Budget Workshop for Fiscal Years 2017-18 and 2018-19 to Provider Direction on Funding Requests for Budget Adoption on June 6, 2017
BACKGROUND
Staff is pleased to present comprehensive budget information in a workshop format to provide information to the City Council and community at large and seek direction from the City Council.
Our City is committed to strong fiscal stewardship, transparency and accountability. Working together, the City Council and City staff ensure our budget and financial policies reflect spending consistent with the community’s priorities.
In tandem with our work towards adopting the upcoming two year budget, the City has launched the Budget Challenge, an interactive online tool that allows Alamedans an opportunity to designate how their priorities should be reflected, in a hypothetical budget scenario. This year’s Budget Challenge will allow users to experience firsthand the difficult choices in developing a responsible balanced budget with a variety of service priorities in mind. We look forward to presenting the perspectives of Alamedans at June’s budget adoption meeting.
The purpose of the Budget Workshop is to provide the City Council an understanding of the City’s fiscal position at the end of Fiscal Year 2016 and project out into Fiscal Years 17-18 and 18-19 and beyond. With that as a backdrop, we will be informing the public and City Council about departmental requests prior to incorporating them into the final two-year budget. Based upon input provided by the City Council at this meeting and after presentations made by those departments requesting additional funds tonight, staff will bring the Proposed Budget to the City Council for presentation and consideration at the June 6, 2017 Council meeting.
DISCUSSION
This report is an informational item only. Staff requests that the City Council provide direction regarding preparation of the City budget for Fiscal Years 2017-18 and 2018-19 in anticipation of the budget hearing on June 6, 2017.
The staff prepared a preliminary base line General Fund and other funds budget and forecast for the Fiscal Years 2017-18 and 2018-19. Based on the current needs of the departments, there were number of additional funding requests identified and are presented to the City Council for consideration and direction whether these requests fall within the Council priorities and as such should be incorporated into the Budget to be presented for adoption in June 2017.
Economic Outlook
The U.S. economy continues to show improvement. The national economy grew 2.1% in the fourth quarter 2016. At the state level, the Legislative Analyst Office, too, forecasts continuation of the economic growth for the next couple of years. However, there is no certainty as the possibility exists that a slowdown or a recession could occur in the short term. The East Bay economic outlook remains positive, according to Beacon Economics. The employment rate in the region is projected to grow around 2% to 2.5% during 2017, but will slow down going forward. The unemployment rate fell to 4.1% in January 2017, which is considerably lower than the statewide rate of 5.1%. These are positive indicators; however, there may be a potential slow down as a result of the current political dynamics, policy changes and other unknowns.
General Fund Reserves
It is the City Council’s current policy to maintain General Fund reserves, also referred to as available fund balance, at 20% of annual operating expenditures and transfers out. However, over the past several years, staff has recommended increasing that number to 25% due to additional economic uncertainties, such as Public Employee Retirement System (PERS) rate increases, discussed later in this staff report, Staff estimates the General Fund available fund balance will be at 38% by the end of Fiscal Year 2016-17. Without consideration of additional funding requests, the General Fund available Fund balance would grow to 39% in FY 2017-18 and go down slightly to 37% in FY 2018-19.
Budget Assumptions
The largest portion of the city budget is attributed to the labor costs of maintaining a full service city and serving our public. In preparing the base line budget, the current MOU provisions have been incorporated in estimating the labor costs. The most significant assumptions relate to salary increases, health and pension costs increases. Effective January 2018, the salary increases are projected to be 3% and 2% for miscellaneous and safety employees, respectively, although the safety MOUs allow up to a maximum of 5% increase in 2018 based on Balanced Revenue Index (BRI) calculations. Effective January 2019, the safety salary increases will be 0% as provided for in the MOUs. The miscellaneous groups contracts will expire at the end of 2018 and the potential changes resulting from the future negotiations may have additional impact on the budget, but are unknown at this time.
Health rate increases are estimated at 3% per year in the next two year budget. Based on the MOU provisions, the increases at the Kaiser rate will be equally shared between the City and the employees.
Fiscal Year 2017-18 is the third year of the CalPERS’ amortization and smoothing policy. When presenting the prior biennial budget for Council’s approval, the CalPERS employer contribution rates were expected to be more volatile with greater increases in the short term rates and flat or lower long term rates. However, based on the December 2016 action taken by CalPERS to lower the implied rate of return on its investments, the employer contribution rates are expected to double in the five year period. These rate increases will be in effect starting FY 2018-19.
The base line budget does not provide for automatic increases in the services and supplies budget line items unless contract provisions stipulate such increases.
Departmental Funding Requests
A detailed listing of the funding recommendations and needs from departments is included in the presentation. Overall, departmental requests could be divided into three categories: workforce changes, services and supplies, and capital projects or upgrades and vehicle acquisition funding.
Ø Workforce Changes
Across all departments and funds in the City the requests include the addition of nine positions for the biennial budget.
|
FTE |
Department/Position |
Funding Source |
|
1.0 |
Comm. Development - Combination Building Inspector |
CDD Fund |
|
1.0 |
Community Development - Permit Technician III |
CDD Fund |
|
1.0 |
Fire Department - Deputy Fire Chief |
General Fund |
|
1.0 |
Recreation and Parks - Maintenance Supervisor |
General Fund |
|
1.0 |
Recreation and Parks - Maintenance Worker II |
General Fund |
|
1.0 |
Information Technology - Systems Analyst |
CDD/IT Fund |
|
1.0 |
Information Technology - Office Assistant |
IT Fund |
|
1.0 |
Public Works - Maintenance Foreperson |
General Fund |
|
1.0 |
Public Works - Intermediate Clerk |
General Fund |
|
|
|
|
|
9.0 |
Total |
|
In addition, the City Manager’s Office is requesting funding for an Assistant City Manager position that has been previously authorized, but is currently vacant. The Fire Department Division Chief position is proposed to be added and funded in the second year of the Budget.
Ø Capital Program Funding
|
Department |
Project |
Funding Source |
|
Information Technology |
Citywide Wi-Fi |
General Fund |
|
Information Technology |
System and IT infrastructure Replacement |
General Fund |
|
Information Technology |
Electronic Document Management/GIS |
General Fund |
|
Public Works |
Building maintenance |
General Fund |
|
Public Works |
Sidewalk repair |
General Fund |
|
Police |
Fixed License Plate Readers |
General Fund |
Ø Vehicle Acquisitions
|
Department |
Count |
Funding Source |
|
Police |
8 |
Vehicle Replacement Fund |
|
Fire |
5 |
General Fund and Vehicle Replacement Fund |
|
Public Works |
21 |
Sewer and Vehicle Replacement Fund |
|
Recreation and Parks |
4 |
Vehicle Replacement Fund |
|
Community Development |
1 |
CDD Fund and Vehicle Replacement Fund |
|
Total |
39 |
|
Ø Other Items
The City has a number of unfunded needs that are not limited to the departmental funding requests identified above and are not attributed to a specific department.
o CalPERS Unfunded Liability Obligations
o OPEB Unfunded Liability Obligations
o Purchase of UP Remnant Parcels within Jean Sweeney Open Space Park
o Investment in Historic Civic Buildings to open to public (includes Carnegie and Veteran’s Memorial)
o Homeless assistance
o Housing Trust Fund
A presentation of the proposed additional funding requests for General Fund and non-General Fund programs budget for Fiscal Years 2017-18 and 2018-19 by Department is attached. Staff requests that the City Council provide general input regarding preparation of the General Fund budget for Fiscal Years 2017-18 and 2018-19 in anticipation of the budget hearing on June 6, 2017.
FINANCIAL IMPACT
There is no impact to the General Fund or other funds as a result of this action. The draft Proposed Budget provides detailed revenue and expenditures information regarding the General Fund.
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
Conduct a budget workshop for Fiscal Years 2017-18 and 2018-19 to provide direction on funding requests for Budget adoption on June 6, 2017.
Respectfully submitted,
Elena Adair, Finance Director
Exhibits:
1. General Fund Draft Proposed Fiscal Years 2017-18 and 2018-19 Budget
2. General Fund 5-Year Forecast without Additional Funding Requests
3. General Fund 5-Year Forecast with Additional Funding Requests