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CC 2018-02-13_12b PP_Budget Priorities Consideration of Budget Priorities 5/14/2019 1 Why are we here? 2/13/2018 2 Wait, What? How can this be? The economy has been growing since 2009, right? Other than last week, the stock market has been booming, right? The State is flush with revenue, right? 2/13/2018 3 Answer: Increased Costs of the CalPERS Pension System Defined benefit system Enhanced Benefits 1990’s-2000’s Started with the State Safety moved from 2.5% @ 55 to 3% @ 50 Non-safety from 2.0 @ 55 to 2.5% at 55 Retroactivity The vast majority of local governments followed Investments returns not meeting projections during the dotcom bust and the great recession ($100 Billion loss, 34.75% of fund value) Inability to change pension formulas (The California Rule) 2/13/2018 4 2/13/2018 5 Who is to Blame? No shortage of blame by commentators: CalPERS Board State Legislature Unions Local Governments The Courts – the “California Rule” 2/13/2018 6 We Can Just Get Out, Right? Theoretically, yes; Practically, No! To leave a city would have to fully pay its obligation. Safety $31 to $37 million Classic $37 to $46 million If you don’t pay CalPERS, your retirees get their pensions significantly reduced, which will most likely lead to law suits and your current employees looking for other opportunities. 2/13/2018 7 My Take This is real This isn’t going away in the next decade. “You (the cities) are just going to have to hang on for a decade…or two” 2/13/2018 8 Wage and Retirement Non-Safety Tier I 54¢ for each $1 in wages. Safety Tier I 84¢ for each $1 in wages. Safety Tier III 12¢ for each $1 in wages. Safety Tier II 18¢ for each $1 in wages. 9 My Take (Cont.) Someone may fix it somehow and sometime in the future, but we should continue to take our own actions to ensure that this Municipal Corporation survives this problem…others may not. This challenge will not be easy We are in a better position than most Cities It will take serious prioritization and soul searching about “our reason for being” as an organization, but it is not futile. 2/13/2018 10 2/13/2018 Current Year +1 +2 +3 +4 +5 +6 +7 +8 +9 +10 11 2/13/2018 12 Proposed Priorities for FY 2018-20 1. Within two years, reverse expense/revenue gap by: FY 2018-19: Reduce expenses by $450,000, resulting in a surplus of about $157,000 FY 2019-20: Further reduction of expenses by $450,000, resulting in a surplus of about $1.4M 2/13/2018 13 How Do We Do This? $900,000 in reductions probably won’t be found in efficiency efforts Two common actions: Across-the board-cuts of all departments (not recommended) Priority based reductions – Core and Essential vs Non-core and non-essential city services 2/13/2018 14 Advantages Setting a rational framework for decision-making that reaches beyond mere popularity of specific programs and ultimately aligning what services citizens expect with what their city can afford Gaining a better understanding of what services local governments are legally obligated to provide Fully understanding what services and to what extent residents expect specific services Clearly direction to staff as they build a proposed budget: what should be in a proposed budget; and what does not necessarily have to be in a proposed budget 2/13/2018 15 Core and Essential Focus on services identified as “Core and Essential” and fund these services to fully meet adopted City policies. Ensure that Core and Essential services are “Right Sized” based upon accepted metrics of service outcomes. Analyze “non-core and non-essential” services and make recommendations of how the City can more efficiently provide the service, find another entity to provide the service, or find additional revenues to support the service. 2/13/2018 16 Core and Essential Business of Government High level of stewardship of Public resources and money Transparency of Government (Open government practices, meetings, decision-making) Professional management of personnel Fair and open elections 2/13/2018 17 Core and Essential Public Health Provision of safe drinking water in amounts and sources that allows for reliable quantities during droughts Provision of a fire hydrant system to allow for adequate fire suppression Provision of sanitary sewer system and treatment of wastewater 2/13/2018 18 Core and Essential Public Safety First Preventers Engineering services to prevent flooding, landslides, and uncontrolled traffic and to limit future city expenses caused by development proposals Maintenance of drainage basins and storm water conveyances Building permits and inspections to ensure structures meet basic life safety standards Reasonable planning and zoning regulations and enforcement to avoid decreases in property values due to incompatible uses and substandard development Upkeep of public property to avoid injuries and cost from claims and lawsuits 2/13/2018 19 Core and Essential Public Safety  First Responders Police Police Administration 24/7 Patrol Services with 3 officers on patrol during most hours Records and Property and Evidence Traffic and parking enforcement during peak times and in key areas such as schools and highly traveled commercial areas Detective services School Resource Officer Fleet management 2/13/2018 20 Core and Essential Public Safety  First Responders Fire 24/7 Fire and emergency response services within 6 minutes of a call Fire prevention services (commercial safety inspections, weed and vegetation abatement and enforcement) Fire investigations Fleet management Public Works Maintenance and emergency repair of previous investments in vital public infrastructure Fleet management 2/13/2018 21 Core and Essential General Welfare Transportation Systems Maintenance of Roads at the Pavement Condition Index adopted by the Council Bike lanes Sidewalks Signals and striping Street lights Medians 2/13/2018 22 Core and Essential General Welfare Parks and Open Space Upkeep and maintenance (fire/fuel hazard reduction) of current passive parklands and open space Community Appearance General cleanliness Street sweeping Litter removal Public trashcans Graffiti removal and enforcement Street trees Mandated responsibilities from the State and other Governments 2/13/2018 23 Important but not Necessarily Essential Services Parks Playgrounds Sport Facilities Baseball and softball fields Soccer fields Football fields Pickleball courts Tennis courts Basketball courts Horse shoes Sport Facilities Support Services Scheduling of field use for sports leagues Arrangement for referees for sports leagues Lighting of fields for night use by sports leagues Specialty Parks Community garden Dog park Community Facilities Woman’s Center BBQ and picnic areas 2/13/2018 24 Important but not Necessarily Essential Services Recreation Child Care and Development Services Daycare Pre-school Summer camps Community Events Father Daughter Date Night Family Egg Hunt and Festival Halloween Maze Etc. 2/13/2018 25 Important but not Necessarily Essential Services Issues of Statewide or County Concern Human Services Sheltering of people Food service programs Mental health Legal services 2/13/2018 26 Proposed Priorities for FY 2018-20 2. Increase revenues by: Analyzing City costs to provide services and consider achieving full cost recovery for a wider range of services Encouraging economic development in order to achieve identified service outcomes for core and essential services This will require the addition of $180,000 in revenue above and beyond normal assumptions starting in year three growing to total new revenue of $390,000 by year 10. 2/13/2018 27 Proposed Priorities for FY 2018-20 3. Reduce exposure to volatility of pension payments by the end of year two by: Analyzing and making recommendations on tools such as pension prepayments and Section 115 Trusts. 4. Begin to study options to develop new revenue sources such as a future tax measure for new or expanded services 2/13/2018 28 Seeking Direction Does the Council wish to adopt the budget priorities with our without changes? Does the Council wish to adopt the list of essential and core and non-essential and non-core with our without changes? Does the Council wish to consider other options such as across-the-board reductions, other revenue strategies, etc? 2/13/2018 29 Next Steps and Key Dates Council discussion about priorities – February 13 Community Outreach Analysis and preliminary direction related to larger budget issues or impacts (115 Trust for pensions and FCFA request.) March 13 Council review of results of community outreach and preliminary budget balancing strategy – March 27 Departments begin developing first draft operating and CIP budgets Preliminary budget presentation – April 24 Budget Adoption – June 12 (June 26 if needed) 1/23/2018 30 Questions 2/13/2018 31 Existing Council Priorities Improve financial sustainability through economic development Support City infrastructure Improve cost-recovery on services Retain and attract employees Make decision about Brisco Interchange project Increase water security Enhance parking Maintain cost-effective fire service 2/13/2018 32 Council Input Core and essential vs non-core and non-essential What levels of service are acceptable/core and what are “extra” Needs vs. wants What MUST the budget contain 2/13/2018 33 2/13/2018 34 Background General Fund 10 Year Forecast – 1/23/2018 Expenditures exceed revenues Without intervention, all Fund Balance depleted within 5 years Major drivers: CalPERS costs, FCFA budget request Budget Process Ahead Identify most important services to provide Seek community input on these priorities Build a budget that most closely aligns priorities and available resources 5/14/2019 35 5/14/2019 36 Core and Essential vs Non-Core and Non-Essential Not across-the-board cuts Analysis allows expenditure reductions based on priorities Gain understanding of services the City is legally obligated to provide Understand services and service levels expected Define specific direct and indirect impacts 2/13/2018 37 Proposed Budget Concept #1 Correct and reverse the expenditure/revenue gap Make services more efficient More effectively recover true cost of services Reduce non-core and non-essential services Shift service providers to those better able to perform them 2/13/2018 38 Proposed Budget Concept #2 Increase Revenues Strategic economic development efforts Encourage development of underutilized or vacant parcels Fulfill desired retail and services needs Ensure fiscal benefits to community 2/13/2018 39 Proposed Budget Concept #3 Reduce exposure to volatility of pension payments 2/13/2018 40 Proposed Budget Concept #4 Once long-term economic and fiscal sustainability is achieved, start to build a community vision of future wants Identify new revenue sources to support these efforts 2/13/2018 41 2/13/2018 Alternative – No economic downturn, no FCFA request Current Year +1 +2 +3 +4 +5 +6 +7 +8 +9 +10 42