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Agenda Packet 2001-05-31 SP ~ CITY COUNCIL (5& if AGENDA ~/7~ Michael A. Lady Mayor Tony M. Ferrara Mayor Pro Tem Steven Adams City Manager Thomas A. Runels Council Member Timothy J. Carmel City Attorney Jim Dickens Council Member Kelly Wetmore Director, Administrative Services Sandy Lubin Council Member NOTICE OF SPECIAL MEETING CITY COUNCIUREDEVELOPMENT AGENCY AGENDA SUMMARY THURSDAY, MAY 31, 2001 6:30 P.M. Arroyo Grande City Council Chambers 215 East Branch Street, Arroyo Grande 1. CALL TO ORDER: 6:30 P.M. 2. ROLL CALL: COUNCIURDA 3. FLAG SALUTE 4. CITIZENS' INPUT, COMMENTS, AND SUGGESTIONS on Special Meeting Agenda Items. Members of the public wishing to address the Council/RDA on any item described in this Notice may do so when recognized by the Presiding Officer. 5. CONSIDERATION OF FISCAL YEAR 2001-02 PRELIMINARY ANNUAL BUDGET (ADAMS/SNODGRASS) The City Council/Redevelopment Agency will review the FY 2001-02 Preliminary Annual Budget. The City Council/RDA will consider adoption of the FY 2001-02 Budget at its Regular Meeting of June 12, 2001. 6. ADJOURNMENT to Regular City Council Meeting of Tuesday, June 12, 2001 at 7:00 p.m. in the Council Chambers, 215 East Branch Street. MEMORANDUM TO: CITY COUNCIL FROM: STEVEN ADAMS, CITY MANAGE~~ ,-. . SUBJECT: FY 2001-02 PRELIMINARY BUDGET DATE: MAY 31,2001 RECOMMENDATION: The FY 2001-02 Preliminary Budget is provided for review, discussion, public input and direction. No action is recommended at this time. The proposed budget will be placed on the City Council agenda on June 12, 2001 for formal consideration. FUNDING: The proposed General Fund budget is $9,685,455 and the total recommended City budget is $15,095,853. All funds are balanced. DISCUSSION: Please find attached the recommended Preliminary Budget for FY 2001-02. The document is important because it represents staffs recommendation, and ultimately City Council's direction, for the work plan for the upcoming year. All funds are balanced under the proposal. The recommendations address each of the budget priorities established by the City Council and make progress toward achieving the City's Fiscal Policy goals. We believe the draft budget presents a balanced and responsible approach to providing quality services and projects in the most cost effective manner. The proposed General Fund budget is $9,685,455, which includes an increase of 1.9% over the FY 2000-01 adjusted budget amount. This is well below the existing CPI rate of 3.8%, although inclusion of Huasna Road improvement funding in the FY 2000-01 budget is partially responsible for the small percentage adjustment. Costs for services and supplies are proposed to actually decrease by $150,661, or about 6.82%. The total recommended City budget is $15,095,853. This represents a decrease of 8.8% from the FY 2000-01 approved budget. The reduction is attributed primarily to a decrease in new funding for capital projects. The FY 2000-01 amount is higher due primarily to CIP funding budgeted the past year for replacement of Reservoir #1 and one-time STIP (State Transportation Improvement Program) funding for the Fair Oaks, Tally Ho and East Grand Avenue improvement projects. CITY COUNCIL FY 2001-02 PRELIMINARY BUDGET MAY 31, 2001 PAGE 2 While not dramatic, revenue projections continue to show favorable trends. General Fund revenues, excluding transfers, are forecasted to be approximately $146,500 over the estimated actual revenues for FY 2000-01. In addition, increases in reoccurring revenues, such as sales tax, are more than compensating for decreases in one-time revenues. Given current uncertainties regarding the State's budget and the economy, a conservative approach was utilized in forecasting revenues. No revenue was budgeted for ERAF reimbursements and only minor increases were included for the State's backfill funding for motor vehicle license fee revenue. FY 2000-01 actual revenues are now estimated to be greater, and expenditures less, than originally projected. This will increase the reserve by approximately $275,000 when comparing estimated actual to amended budget amounts. The process for preparing the budget was modified this year. The most significant change was beginning the process by establishing budget priorities, recommended by the department directors and approved by the City Council. Departments were directed to maintain their operating budgets within a maximum of a 2% increase. Items requiring expenditures above the 2% amount, new or expanded services, and staffing changes required submittal of a Service Level Change/Budget Amendment Request. Departments were also instructed that any increases would focus primarily on the priorities established. After a number of individual review meetings, overall recommendations were developed by the City Manager and Director of Financial Services and presented to the Department Director team. The final recommendations presented to the City Council for consideration are the consensus of all the department directors. Key items included in the proposed budget are as follows: . Projected increase in the reserve ($102,700). . Cost of living increases for AGPOA, SEIU, management and part-time employees ($16,046). . Implementation of approved changes regarding the Redevelopment Agency budget to address the operating deficit ($87,000). . General Fund street improvement funding ($30,500). By budgeting the Huasna Road funding received from the Lopez Dam retrofit project over a two-year period, it can enable the City to meet the maintenance of effort requirement for FY 2000-01 State Traffic Congestion Relief funding, as well as a portion of the requirement for FY 2001-02. The additional proposed amount of $30,500 will make the City eligible for any Traffic Congestion Relief program funding approved by the State for FY 2001-02. It is not recommended to appropriate funding above this level this fiscal year in order to reduce the City's maintenance of effort requirement for future funding. CITY COUNCIL FY 2001-02 PRELIMINARY BUDGET MAY 31, 2001 PAGE 3 . Addition of one paid Fire Captain position ($74,000). . Increases in equipment replacement, particularly for Police and Parks, Recreation & Facilities Departments ($94,378). . Funding for development of a City-wide employee development program ($5,000) and disaster management training/exercises ($2,000). . Provision of access to the Municipal Code on the City's web site ($1,950). . Improvements to the City's computer network infrastructure ($28,100). . Development of a GIS (geographic information system) land use database ($5,000). . East Grand Avenue Master Plan ($6,000) - additional utilization of Cal Poly students or professional services for completion of the final plan, design guidelines and development code amendments. . Community Development special projects ($10,000) - funding that will be reserved for professional services for projects directed by City Council when staffing is not available to complete within the desired time frame. . Addition of intern for the Community Development Department ($10,000). . Funding for utility rate cost increases ($31,000). . Reclassification of a Public Works contract maintenance worker and part-time office assistant to permanent full-time employees ($18,705). . Increase in Public Works contractual services for John Wallace & Associates (20,000). . The City's obligation for funding the new structure of the Local Agency Formation Commission ($11,000). . Cost of the League of California Cities Grassroots Lobbying Effort, if approved by the City Council ($2,800). While the recommended budget should be viewed as a positive direction in meeting the City's needs, a number of issues and challenges remain. While the City has been extremely successful in obtaining grants, particularly for street improvement projects, the most serious concern is the lack of sufficient ongoing funding for infrastructure improvements or major capital projects. Reserves are increasing, but remain below the Fiscal Policy goals and would not enable the City to withstand fluctuations in the CITY COUNCIL FY 2001-02 PRELIMINARY BUDGET MAY 31, 2001 PAGE 4 economy without service level impacts. In addition, little progress has been made in establishing reserves for ongoing equipment replacement. Lastly, while implementation of a plan to address Redevelopment Agency operating deficits is now under way, the impacts of those shortfalls on the General Fund, Sewer Facility Fund and Water Facility Fund continue to be a concern. These issues will be addressed in the discussion and development of the Long-Range Financial Plan. Therefore, while a number of financial issues exist, staff believes the proposed budget provides an effective step in addressing community needs in a cost efficient manner and will serve as a solid foundation for initiation of the long-range financial planning process. We are proud to present to the City Council this proposed budget document. It is important to recognize some of the key efforts involved. First of all, the budget format and fiscal procedures in place in the City are outstanding, particularly given the size of the organization. As you know, they have received numerous well-deserved awards. The major extent of the work involved has been done by Lynda Snodgrass, the Director of Financial Services. Second, individually and as a team, each of the department directors has excelled in managing and preparing their budgets in a cost efficient and responsive manner. Last, but of course not least, the progress we are making with regard to the fiscal health of the City is largely attributed to the ongoing prudent fiscal approach of the City Council. Staff recognizes and appreciates the decisions and support involved in that approach. The budget recommendations will be presented in more detail at the special City Council Study Session. Please feel free to contact staff with any questions or requests for additional information in the meantime. ALTERNATIVES: The following alternatives are provided for the Council's consideration: - Receive and discuss recommendations; - Direct staff to provide additional information and/or make changes.