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2005-02-01 Packet - Budget Workshop
CITY OF UKIAH CITY COUNCIL AGENDA SPECIAL MEETING FOR THE PURPOSE OF A BUDGET WORKSHOP AND DISCUSSION OF PROPOSED SALES TAX BALLOT MEASURE UKIAH VALLEY CONFERENCE CENTER 200 S. School St. Ukiah, CA 95482 FEBRUARY 1, 2005 4:00 P.M. 1. ROLL CALL 2. AUDIENCE COMMENTS ON NON-AGENDA ITEMS The City Council welcomes input from the audience. If there is a matter of business on the agenda that you are interested in, you may address the Council when this matter is considered. If you wish to speak on a matter that is not on this agenda, you may do so at this time. In order for everyone to be heard, please limit your comments to three (3) minutes per person and not more than ten (10) minutes per subject. The Brown Act regulations do not allow action to be taken on audience comments in which the subject is not listed on the agenda. 3. BUDGET WORKSHOP 4. DISCUSSION OF PROPOSED SALES TAX BALLOT MEASURE 5. ADJOURNMENT AGENDA ITEM NO: MEETING DATE: February 1, 2005 SUMMARY REPORT SUBJECT: PRE-BUDGET WORKSHOP Budget shortfalls at all levels of government are causing great concern and making headlines. Local government officials in cities are responding in a variety of ways, most usually, with large budget cuts and sales tax measures. The state of California's fiscal crisis is one of the worst in the nation and the cities and counties are collectively and anxiously waiting for the legislature to act later this year. The downturn in the economy, state take-aways, and increases to the City's employer's portion of the Public Employees Retirement System due to poor investment performance hit the City of Ukiah hard last year. The budget went from being balanced for the last nine years to a projected $1.2 million in the red. During the previous two years, the City had weathered through ERAF shifts where the state took additional City property taxes, Vehicle License Fee (VLF) losses to the state, and reductions in public safety and road tax funding. Last year, the total effect of the various outside forces was realized. In April, 2004 the Council and staff held a pre-budget workshop to discuss the deficit and determine a direction for the June budget hearings. Various options were provided by staff as methods for reducing the deficit position including the elimination of staff positions, program reductions and facility closures. RECOHMENDED ACTION: Discussion and direction to Staff. ALTERNATIVE COUNCIL POLICY OPTIONS: Requested by: Prepared by: Coordinated with: Attachments: City Council Candace Horsley, City Manager Department Directors 1. General Fund Summary 2. Finance Directors Overview 3. April 2004 Budget Workshop 4. Directors Additional Notes 5. Tax Swap of 2004 Candace Horsley,'~ Manager Non-public safety budgets were slashed including the loss of personnel, training, equipment and project funding. These actions plus a slight revenue increase reduced the deficit by approximately $600,000 with the remaining $660,000 coming out of General Fund reserves. These funds were available as previous City Councils had recognized the importance of maintaining a healthy reserve for capital project funding, emergency purchases, liability costs, and to cover unforeseen deficits. At the 2004 workshop, the Council decided to return to the voters in November 2004 for a Public Safety sales tax measure that required a 67% voter approval. Facility closures were not approved nor were Public Safety budgets cut significantly in order to keep providing the high level of service provided to the community and in anticipation of the November election. As a result, the shortfall was absorbed and did not greatly impact the public because the City continued to provide the same level of service, even with reduced personnel levels, and used reserve funds to balance the remaining deficit. The voters demonstrated their strong support for the police and fire departments by voting 66% for the sales tax measure. Unfortunately, 67% was needed to pass. (~ENERAL FUND (~VERVZEW The General Fund Summary provided as Attachment 1, shows that 60% of the General Fund expenses are allocated to public safety, with approximately 76% of the Police and Fire budgets being personnel costs. That leaves 0nly 40% of General Fund revenues ($3.6 million) tO cover all administration, public works, engineering, planning, building, parks, risk management, personnel and financial services that the City provides to the public. Comparing the approved 2004/2005 expenditures against the budgeted figures for 2003/04, general administration reduced expenses by-7%, public works by-14%, community services increased by 2% and public safety by 14%. Staff is now returning to the Council with an updated overview of the budget finances to discuss strategy and to receive direction from the Council. The adopted June budget projected a deficit of $663,000 for the 2004/05 fiscal year. The Finance Director is estimating an additional $325,000 expense and $200,000 increase in revenue for a projected deficit of $788,000 in 2005/06. The details of state takings and the effects of the slow down in the economy are explained in the attached Finance Director document. In addition, the state has already informed the City that they will be taking $326,834 of Redevelopment revenue for this year and for 2005/06. Staff has provided as attachments, the budget expenditure, projection revisions and financial projections for fiscal year 2005/06 as provided by the Finance Director, the April 2004 pre-budget workshop agenda item, and updates from the Directors for possible further reductions. Staff is requesting Council direction so that we may begin budget preparations at the departmental level. Major General Fund cuts over the last two years: 1. Personnel Positions Eliminated ($365,000) City Manager/Administration ! Assistant City Manager 2 Administrative Secretaries (served Community Services, Public Works, Finance) Police 1 Administrative Secretary Fire I Battalion Chief Street Maintenance ! Public Works Maintenance ! Community Services ! Parks Leadworker 2. Reduction in operating budgets for training, capital purchases, and projects 3. Closing Civic Center on alternate Fridays to save on utility costs 4. Museum Guild committed to paying for Museum expenses over $200,000 to stabilize City costs 5. Personnel positions frozen--two police officers and two firefighters iii U. / ,~ luewqoo#v . · · ~.. · .. · · . Attachment # FINANCE DIRECTOR'S OVERVIEW Governor's 2005-06 Budget Proposals: The governor's initial FY2005-2006 budget proposal was released on January l0th and the analysis began immediately on all fronts. The thrust of his remarks and the initial comments from the League of California Cities appear to indicate that he does not plan to make further inroads into the funding streams of major impact to the City of Ukiah. However, staff would add the caveat that with an estimated $9.1 billon shortfall in the proposed budget, serious impact on schools statewide, and six months of lobbying ahead of us, we would be prudent to recognize the possibility of serious cuts in our funding and last minute State-level decisions that might give us little time to react. Four areas of the proposed budget are of particular interest to the City: 1) $189,412 is being taken by the State from City property taxes again this year. This local government ERAF contribution was implemented last year with $189,412 being taken by the State from City property taxes and another $326,834 taken from redevelopment. These amounts will be taken from both FY04-05 and FY05-06. This is a total loss of $1,032,492 from the local economy over two years for the use of the State's General Fund. This is not a loan and will not be repaid to the City or RDA. 2) Transportation-Traffic Congestion Relief, Fund 342, Proposition 42 grants. For the second year, the State will borrow from this voter mandated transportation fund. After receiving $201,096 over the previous three years, the City budgeted no revenue in FY04-05 and will not in FY05-06. STP funding which has also been cut in recent years was not discussed in the analysis. 3) Booking Fees will not be funded in FY2005-06 as they were in FY2004-05. However, counties will only be allowed to charge one-half of their administrative costs for these services, which have not yet been published For the last five years the City has received $65,000 to help defray this mandated cost. 4) COPS Funding remains unchanged from FY2004-05 at $100,000. Finance Director's Overview Page 1 of 3 Sales Tax Our single most important revenue base is sales taxes, which are collected by the State then allocated and distributed to local governments. Annual Growth Total Received FY2001-2002 9.56% $3,649,162 FY 2002-2003 4.95 % $3,829,762 FY 2003- 2004 0.16 % $3,835,809 FY 2004-2005 3.00% $3,950,883 FY 2005-2006 3.00% $4,069,410 As you can see the volatility of this revenue makes forecasting an interesting exercise. We use a consulting firm specializing in tax collections to help us. They monitor sales tax collections and reporting and routinely correct information in the State's database so that Ukiah gets the funds it should. On the reporting side, they give use sector data and forecasts each quarter. The latest forecast is for 3% growth this year and next. PERS In FY2002-03 the cost to the City for PERS employee retirement plans was zero. In 2003-04 the City paid $303,980. This year, 2004-05, we will pay $1,060,000 and next year $1,540,000. Roughly 12.5% of payroll this year and 17.5% next. General fund share is 61% or $647,000 this year and $939,000 next. That news is pretty ugly, but to add a little perspective: 1) In FY2002-03, and for years before that, the cost to the City for PERS employee retirement plans was zero. PERS forecasts repeatedly showed that no City contribution would be required for another 20 years. 2) Because PERS invests funds aggressively in the capital markets it routinely enjoyed gains well in excess of the market. 3) When the market collapsed in 2000 PERS losses were greater than the market as a whole. Recent investment returns were -7.2%, -5.9% and +3.9% in FY2000-01, 2001-02 and 2002-03, compared to their budgeted 8.25% rate of return 4) The latest PERS actuarial reports now disclose employer costs of about 11.5% for current benefit accruals, plus additional costs to makeup for the "unexpected financial results" of the last three years. 5) So while this is not a nice picture but we should note that a) Our current cost of 11.5% should be compared to the social security tax rate of 6.45%. b) For years we paid nothing, savings that were spent to fund on-going work. c) PERS seems to have captured the costs of the market decline and next year's preliminary rate is virtually unchanged. Finance Director's Overview Page 2 of 3 Current revenue and expense projections for the General Fund Our current projections are based on the approved FY2004-05 budget with several adjustments: · We are holding total revenue growth to the CPI at 2.6%. · Personnel costs are increased by known MOU and CalPERS increases. · Non-personnel costs are increased by the CPI at 2.6% The budgeted general fund deficit for FY2004-05 is $663,286 and with these assumptions the forecast general fund deficit for FY2005-06 it is another $788,353 Over the last few years the City's General Fund budget has suffered from the negative impact of events beyond the City's control: Prop. Tax Sales Tax PERS rate Diversions Slowdown Increases FY2003-2004 - 108,846 - 120,000 FY2004-2005 - 189,412 -3,266 -5 27,000 FY2005-2006 -189,412 -3,363 -292,000 To take these items one at a time: State property tax diversions: The state has committed to ending this practice after 2006, but with the continuing difficulty in balancing the state budget this remains a tempting target. Cities, counties, RDA's and schools are all vulnerable. Since the funds transactions are convoluted and involve many organizations there are many points were diversions can be created. Sales Tax: We are showing growth at less than 3% as a cumulative loss to the City. We are pleased that the current estimates are back on more normal track, but recognize that sales taxes may swing widely with changes in the overall national and state economies. PERS rates: Apparently the worst is over in terms for rate increases. After three years of market losses, PERS investments earned 16% last year and PERS is forecasting 7.75% for the future. Altogether the General Fund has been negatively impacted by more than $2.2 million in income reductions and cost increases in three years, out of an annual budget of less than $10 million. Finance Director's Overview Page 3 of 3 AGENDA Attachment # _~ ~,, ITEM NO: MEETING DATE: April 21~ 2004 SUMMARY REPORT SUBJECT: PRE-BUDGET WORKSHOP DISCUSSION AND COUNCIL DIRECTION The purpose of this workshop is to give the Council and staff an opportunity to discuss various options for balancing' the City's fiscal year 04-05 budget and for the Council to provide direction regarding the development of the draft budget, which will be presented to the Council in June. The attached information is to assist the Council in its discussion of the various options provided by staff to balance the upcoming budget. The proposed measures are being recommended to address the immediate deficit issue that will adversely impact our ability to deliver the quality services the community has become accustomed to. There is a clear need for the public to understand the depth of the problem we are facing and the fact that sacrifices and hard decisions, no matter how unpopular, must be made. The reductions in budget expenditures reflect the percentages of increased deficit between public safety and non-public safety departments. Input was received from Directors, supervisors, and line staff. Suggestions from the employees for balancing the budget have also been included in this report for Council's review. (Continued on page 2) RECOMMENDED ACTION: Discuss and provide direction to staff. ALTERNATIVE COUNCIL POLICY OPTIONS: N/A Citizens Advised: Requested by: Prepared by: Coordinated with: Attachments: N/A Candace Horsley, City Manager Candace Horsley, City Manager Finance Director, Department Heads 1. Summary of proposed budget cuts 2. Revenue/Expense Changes 3. Planning and Community Development Budget Reductions and Impacts Public Works Budget Savings Engineering Revenue Enhancements , Approved: Candace Horsley, City'l¥1anager 4:CAN/ASR.PreBdgtWkshp.0404 Backqround Estimated Deficit--Attachment A delineates the estimated deficit impact to the City's General Fund budget for fiscal year 04-05. The estimated total of $1.2 million includes increases to the retirement system, which are due to the state's downturn in investment returns, salary and benefit contracts with employee units, workers compensation insurance increases, state takeaways and revenue reductions (Attachment 2). There are still unknown factors as a result of the state's budget and therefore assumptions have been made regarding various revenue sources and state take-aways. Staff has included full Vehicle License Fee (VLF) revenue backfill to cities but has eliminated the booking fee reimbursement, as we did last year. May revisions to the Governor's budget will most likely require revisions to our current estimates as Educational Revenue Augmentation Fund (ERAF) and the 'Triple Flip' impacts are still in flux. The Govemor's initial proposal would take another $54,000 in property tax from the City, equaling a total loss over the last ten year of $305,000 in ERAF property tax from the City of Ukiah. The City Manager and Directors have met several times to discuss the potential expenditure cuts as well as revenue enhancements to meet this fiscal shortfall. The obvious cuts, including capital expenditures, training, and deferred projects were made last year. We are now facing the much more difficult decisions with resultant community impacts such as program reductions, facility closures, and additional employee position layoffs and therefore resultant reductions in service levels. Council may choose to direct Staff to proceed with the options discussed below, modify the options or investigate other areas of expenditure reductions and/or revenue enhancements. DISCUSSION The following is a discussion of options, as presented by staff for Council consideration and direction. Vacant positions In anticipation of the looming deficit, in December 2003, the City Manager initiated a freeze on vacant positions to prevent future layoffs of existing employees. Each vacant position was reviewed to determine whether it was an essential position that must be filled or could be left vacant to reduce the deficit in the current and next fiscal year. The eight resultant vacant positions span all but one of the departments within the General Fund, so that no single division will bear the full burden of proposed cost reductions. The vacant positions consist of two firefighters, one police officer, one police records clerk, two public works maintenance I, one parks lead worker, and one part-time planning code enforcement officer. Cost savings: $437,663 Community Services A. Close aquatics facility or operate on a limited basis Staff has presented three different scenarios for Council's consideration. If the facility was closed, the net savings would be $50,000. If day camp participants were allowed to use the pool for afternoon swim, the savings would be $28,184. If the facility was open to day camp swim and group swim lessons, which brings in revenue of approximately $19,200, the savings would be $23,279. The savings total in Attachment 1 uses the full $50,000 in cost savings for the pool closure. B. Anton Stadium With the closure of Anton Stadium, there is an associated savings of $47,000. Closure of the stadium will affect the shared facility use arrangement with the Ukiah High School and the Ukiah Unified School District. C. Grace Hudson Museum Eliminating the Museum Curator position and limiting the number of open public hours will save approximately $62,142. Staff initiated discussions with the Sun House Guild in February regarding the anticipated General Fund deficit and the potential impacts from these deficits. Continued discussions with the Guild and Endowment Board for possible financial participation in the museum operations are continuing. Staff is also developing other strategies for assisting the Endowment Board in being able to meet these goals. D. Conference Center Staff is also analyzing potential cost-cutting measures to be implemented at the Conference Center to be presented during the budget sessions. Cost savings: $159,142 Planning and Community Development A. Fee Increases The Council approved new building permit fees in January 2004. Staff is analyzing the establishment of a fee for projects requiring a re-inspection because the required work was not completed and ready when an inspection was requested. In addition, staff is initiating a fee schedule for code enforcement, and will return to the Council with a planning permit schedule to cover 100% of the costs, rather than the current 75% recovery. Due to the potential increase in revenues, Staff is requesting Council's approval to work on a schedule of potential fees for Council's consideration. B. Meetings with Business Community In addition, staff would like to initiate several workshops with the business community to discuss permit processing, regulations, ways to better support the business community, and stimulate economic development. In addition, the department could prepare and distribute a planning/building department newsletter, describing activities and providing general information to assist the public in better dealing with the department and its processes. C. Charge Mendocino County Tax Assessor's Offices for Services Rendered The Department has proposed that they evaluate and possibly charge the Mendocino County Tax Assessor's Office for services rendered. The Building Division prepares a monthly building permit report at the request of the Tax Assessor's office at no charge. The City is currently charged a fee by the County for collection and distribution of property taxes. D. Operating Budget The Department has evaluated the 2003-04 fiscal year budget and is prepared to reduce their budget, mainly be reduction in consultant services, by $55,000 for fiscal year 2004-05. (Attachment 3). Cost savings' $55,000; revenue enhancement projections pending Fire Department Chief Latipow has been very creative in developing his recommendations. He has been in discussions with the Water Department and offered to provide hydrant-flushing services for $40,000 per year. The Water Department has agreed to pay the Fire Department for this much needed service. The Department has also sent out an offer to all departments for CPR and Hazardous Materials training. The Chief estimates that this could bring in an additional $5,000 to the General Fund. The Department is also reviewing ambulance fees that have not been adjusted for several years to determine if they are competitive with the regional market. There are already two vacant positions in the Fire Department, with those positions being frozen. An additional reduction in force above the two frozen positions would cover the three shifts and would be an additional $64,238 in savings. Cost savings: $109,238; fee analysis pending Police Department The Department has reviewed their individual budget line items, and is recommending a budget expenditure reduction of $15,000. In addition, there is currently one vacant police officer position in the Department that has been frozen. To equalize to the other two shifts, two additional police officer positions not being filled would equate to $144,676. The City Manager is in discussions with the Police Unit representatives regarding the potential of two early retirements that would negate the need for layoffs within the department. Cost savings: $159,676 *It should be noted that if the Council chooses to include a sales tax ballot measure for public safety on the November 2004 election, any layoffs in the Fire and Police Departments should be delayed until after the election results. Public Works The Director has identified potential savings in the Engineering and Streets Divisions totaling $100,046 (Attachment 4). Additionally, there are revenue enhancements through fees for service that are being analyzed for Council's review before the June budget sessions (Attachment 5). Cost savings: $100,046; revenue enhancement projections pending Miscellaneous A. Redevelopment Shifts in staff salaries due to increased activity in the Redevelopment Agency equates to a savings to the General Fund of $57,438. B. C/vic Center Closure Council previously approved the closure of the Civic Center every other Friday to save $10,000 in utility expense. Total savings: $67,438 Total of all recommended savinq;; $1,088,203 Proiected deficit: $1,200,000 Net difference: $ 111,797 Revenue enhancements as proposed by the Departments should reduce this net difference significanUy. 'Staff will report the change in revenue during the June budget sessions. It should be noted that if the three public safety positions recommended for reduction in force are held over until the November election, additional costs will be incurred. Other options for consid~r~tiQn; a. Furloughs and fifOU reopeners: Since employee costs are one of the largest expense factors in the General Fund, a discussion of possible furloughs and employee contract reopeners should be included in this report. Savings for one day of a General Fund employee furlough, excluding public safety, would equate to $10,145. Public Safety furloughs are very difficult to accomplish due to the 24 hour nature of the operations. Exchanges of CTO or other such plans, have had minimal success in the past. Other considerations regarding implementation of furloughs include employee morale issues and further reductions in service due to the elimination of positions in most General Fund departments, compared to the value in savings. b. /Jbrary Landscape IVla/'ntenance: Several years ago the City offered to take over the landscape maintenance for the public library when the County was experiencing budget reductions. The Council may want to consider if it is now Ume to allow the County to take back this responsibility as our Parks division will experience reduced staffing in the coming year and other City park faciliUes will suffer. ¢. Park C/osures: There are several parks that are in the final stages of completion, including Observatory and Orchard Parks. Though park bond funding and CCC participation assisted in constructing these parks, annual maintenance requirements would normally necessitate an additional staff person. With the proposed reduction of parks staff, the City may need to keep these parks closed until the budget allows for additional maintenance staff. Further Znformation, ZmDacts of Departmen~l Savinos pnd Other Suooestions From the Director~ The following is a synopsis from each Director regarding the impacts the above cost reductions will have on their departments and service levels. Communi~ Services a. Closure of Anton Stadium--reduced workload will help offset loss of staff positions. Will jeopardize the facility use arrangement with the Ukiah High School and possible use of their gyms for Youth Basketball. b. Possible sale of parks--Giorno, Orchard, Oak Street (next to Ruelle property)- one time revenues that would also further reduce workload. Also would reduce parklands and open space. c. Suspend negotiations at Depot property and develop skatepark at one of the City's parks. This will relieve the City of land purchase costs and move the project ahead. d. Aquatics Program--closure would have negative impact to Summer Day Camp program and day users. e. Elimination of Curator will impact Museums activities. Staff has been working with the Guild to determine if the position could be covered by the Guild over a three year phase in period. Plannina and Community Development The impacts of funding reductions in this department are delineated in Attachment 3. a. Consider a fee for code enforcement inspections and re-inspections by the Building ]:nspector when a contractor calls for an inspection but the work has not yet been completed. b. Reexamine planning permit fees for a 100% cost recovery strategy rather than the current 75% recovery and .consider establishing 'new' fees for services previously provided at no cost. c. Consider establishing a 'surcharge' fee on all planning and building permits for the future cost of updating the General Plan. d. Charge a fee for extending building and planning permits that are due to expire. Fire Deoartm~nt a. Staffing--the staffing level in the fire department has not kept pace with service demand. We must maintain a minimum of four personnel to staff the engine and the ambulance. ]:f the department drops below the OSHA mandated '2 in 2 out' requirements for interior fire attack we will have to delay aggressive firefighting. This delay could result in additional property loss and the potential for a fire to spread to other structures. After numerous years of cuts and an ever increasing demand for service we have nothing left to cut but programs. The elimination of the ambulance would save little if any money as the revenue pays for the additional firefighters hired for the ambulance service. If we reduce each shift by one position for a total of three, the department will need to go from a 4 minimum staffing to a 3 minimum staffing level. b. Operations--The department has delayed replacing hose, nozzles, protective equipment, breathing apparatus, critical communications equipment and numerous pieces of fire apparatus. This continued cycle of trying to make due is at a point where we can no longer place these types of purchases on the back burner. The supply of fire hose is grossly inadequate and 50% of what we do have has exceeded its recommended life span. Unfortunately this is just the tip of the iceberg. c. As it is almost impossible to cut positions and maintain a safe fire service, we may need to explore contracting out for service. d. Contracting with CDF for fire dispatch services would save the Fire Department $50,000 per year, but the City still has costs unless the Police Department can contract with the Sheriffs Department for dispatch services. e. Improve revenue tracking of cost and reimbursement for Mutual Aid related overtime. This could lower the actual General Fund impact of department overtime. Police Der~artmen~; a. Over the last several years the police department has been operating on a minimal budget. All furniture and most equipment possessed by the department have been purchased with grant monies or through asset forfeiture. While it may be possible to reduce some of the operating budget, any substantial savings will only be realized through reductions in personnel. Any such reduction will have a severe negative impact on the ability of the department to provide quality law enforcement for the community and will result in a less safe environment. As the area continues to grow, demands on law enforcement will increase. Even at current staffing levels it will be difficult if not impossible to maintain our current service standards. Staff reductions will inevitably lead to diminished services. b. Possible reductions in service include: 1) Response to traffic accidents may be limited to injury collisions only. 2) Victims reporting crimes against property or misdemeanors with no suspects will be mailed a report form and directed to complete and return the completed form to the Police Department. 3) The School Resource Officer will need to be returned to patrol duties. 4) Only cases with a high solvability rating will receive attention. Other cases that would normally be classified and investigated as criminal matters will be referred back to the victims for them to pursue civilly. 5) After hour animal control response will be for dangerous animal calls only. 6) The Police department's ability to assist with special events will be limited. Costs for these activities will have to be borne by the event organizers including traffic control and event security.. Parades cost the department approximately $1,500 to $2,000 per event. Public Works a. Hire temporary help during the summer months to water State Street trees or work out agreements with property owners to water the trees in front of their businesses b. Charge for trenching impacts to pavement c. Charge encroachment fees for outdoor dining d. Increase fees for services by Public Works/Engineering (Attachment 5) e. Establish a cost recovery mechanism to pay for street sweeping, required by NPDES, and leaf and tree cleanup through refuse collection surcharge f. Reduction of two positions will result in less street sweeping, few to no large- scale paving projects, and smaller road projects and repairs Employee Submitted Suqqestions for General Fund Cost-Savina Measures , 2. 3. 4. 5. 6. 7. 8. 9. 10. Reduce housekeeping duties to only three days per week. Close the pool. Reduce the Grace Hudson Museum hours and days open to the public. Conduct an auction for any excess equipment. Reopen employee contracts. Determine if new equipment purchases are necessary. Close City Hall every Friday. Require annual encroachment permits for all awnings in the public right-of-way. Require annual encroachment permits for newspaper racks. Increase all encroachment permit fees to more closely cover the cost and time of doing inspections. ! 1. Drop the City Hall ceiling down and insulate to save energy costs. 12. Contract with CDF for fire dispatch and contract with Mendocino County Sheriff's Office for police dispatch. 13. Allow for standby time to be converted to comp time. 14. Review purchasing contracts to make sure that we're getting the best discount possible. 15. Implement a special event permit fee for all special event applications to cover the cost of street closure, cleanup, and public safety. 16. Charge a re-inspection fee for the Building Inspector for clients who are not ready, even through they have made an appointment. 17. Develop an electric-tampering detection program. 18. Develop a five-year budget model. 19. Establish a break-even cost for various City services. 20. Determine cost-savings for Conference Center operation. 21. Conduct meetings with City and public to explore service provision, budget, and cutbacks. 22. Do not increase demand for services when cutting back on employee numbers and ability to serve. Public perception may be negative. 23. Require all City-travel to be taken in City vehicles, rather than reimbursed for personal vehicles. 24. Read utility meters once every two months and bill bi-monthly. 25. Raise electric and water/sewer rates to fund increase franchise and right-of-way fees to General Fund. CONCLUSION The City is facing a significant deficit for the 04/05 fiscal year. The easy cuts have already been made to where we are now facing elimination of staff positions, program reductions and facility closures. Each one of these options has related impacts that will affect the level of service to the community and strain City resources. These decisions are very difficult to make, as every option chosen will have a corresponding advocate with very good reasons why we should not cut that particular program or position. Staff is presenting the Council with a list of oPtions, which combined, provide an across the board reduction in expense to match the estimated $1.2 million deficit for next year. We are asking for Council's direction on the appropriate course to take so that each department may finalize their draft budget reports in time for the June budget hearings. I have discussed these budget reduction measures with the various department Directors and employees during open meetings so that there will be no surprises from the presentation. Many of the items included in the report are products of employee recommendations that were made and supported by the staff. I recognize the hardship approving the recommendations in this report or other reductions in service will place upon the Council and public. However, I also believe it is essential that the Council take the necessary actions to bring clear understanding to the public of the depth and magnitude of this financial crisis. As City Council, your discussion of the issues and direction you provide to staff is cdtical in delivering the message to the public. Attachment One Proposed Budget Cuts Estimated Fiscal Year 2004-05 Deficit before cuts: $1.2 million Frozen Positions: 8 2 Firefighters $128,476 1 Police Officer $72,338 1 Police Records Clerk $52,851 2 Public Works Maintenance I $112,726 1 Parks Leadworker $53,850 1 Code Enforcement Officer $17,422 Subtotal $437,663 Municipal Pool Museum (Curator Position) Anton Stadium Planning Dept. Changes $50,0OO $62,142 $47,000 $55,000 Subtotal $651,805 Police Department Changes Flushing Hydrants (Fire) Fire Training Redevelopment Percentage Changes Public Works/Engineering Closinq Civic Center (Alternate Fridays) $15,000 $40,000 $5,000 $57,438 $100,046 $~o,ooo Subtotal $879,289 Elimination of 2 Police Officer positions Elimination of 1 FirefiRhter position $144,676 $64,238 TOTAL $1,088,203 General Fund Revenue/Expense Changes for FY 04~05 as of April 14, 2004 Impact No Change from FY 03-04 1 Workers' Compensation -$120,000 2 Vehicle License Fees (VLF) +$600,000 3 Booking Fees -$65,000 4 Sales Tax +$100,000 5 Interest -$94,000 6 COPS Grant +$100,000 7 PERS -$818,827 8 MOU's -$281,774 9 ERAF -$38,000 Total $1,252~600 State Funding Received FY 03~04: Booking Fees: COPS Grant: Local Law Enforcement: TOTAL: $65,000 $100,000 $29,048 $195,048 4:CAN/RevExpChngs0405.04 1404 DEPARTMENT OF PLANNING AND COMMUNITY DEVELOPMENT 2004-2005 PROPOSED BUDGET REDUCTIONS' DIVISION Planning Planning Planning Planning Planning Building Building Building Building ACCOUNT NUMBER 100.1501.160 (Conference & Training) 100.1501.250 (Contractual Services) 100.1501.262 (Meetings and Memberships) 100.1501.690 (Supplies) 100.1501.800 (Machinery and Equipment) 100.2201.160 (Conference & Training) 100.2201.262 (Meeting and Memberships) 100.2201.690 (Supplies) 100.2201.800 (Machinery and Equipment) 2003-2004 $3,000 $57,628 $150 $2,000 $2,000 $2,000 $400 $1,000 $1,000 PROPOSED 2004-2005 $0 $8,000 (includes no PC stipend) $0 $1,000 $0 $1,500 (state mandated training) $0 $5OO $0 THE EFFECTS OF THE PROPOSED BUDGET REDUCTIONS Planning Division Conference and Training: For many years, the budget for Planning Division conference and training was set at $8,000. This amounted to approximately $1,000 per Planning Commissioner and Staff person to attend classes, conferences, and other training venues. Last year it was reduced to $3,000. We've been reluctant to spend the funds because of the emerging budget crises, but a portion has been used by both the Commission and Staff. This year, we are proposing to eliminate any funding for conferences and training. The affect of this will not be disastrous. We have an experienced Planning Commission and a veteran Staff. We can do without conferences and training in 2004-05. To replace 1his loss, we are planning to conduct more internal training with the Planning Commission on such topics as CEQA, the importance of findings, community design issues, etc. Building Division Conference and Training: We are proposing to reduce the Building Division conference and training budget from $2,000 to $1,500. The $1,500 is necessary for the Building Inspector to comply with AB 717, which a certain amount requires continuing education. While ideally, more funds would be allocated to enable the Associate Planner/Building Inspector to continue his Building Code education and certifications, we can do without during 2004-05, and plan to fund it in 2005-06. Planning Division Contractual Services: The 2003-04 budget included $57,628 for contractual services. This was earmarked for the preparation of the General Housing Element, application to LAFCO to amend the Sphere of Influence, bicycle and pedestrian plan implementation, and Planning Commission stipend. This year we are recommending $8,000 for consultant services (LAFCO filing fee and Orrs Creek Bridge EIR work). The Housing Element will be completed before the end of the fiscal year, so no funds will be needed for that project. While implementing the Bicycle and Pedestrian Master Plan remains a high priority, we can perform this task in house during 2004-05. While online services such as the League of California Cities Grant Station Insider, as well as our internal knowledge of certain grant opportunities, we hope to team with the Department of Public Works to prepare and submit a grant application for bicycle or pedestrian facility improvements during the 2004-05 fiscal year. It is not believed that elimination of the Planning Commission stipend will affect the performance of the Commission. Two of the Commissioners actually suggested that if it would help the budget picture, they could easily do without the $50.00 per meeting allocation. Building Division Contractual Services: It is necessary to budget these funds for structural engineering and energy conservation plan checking assistance with Building Permits, because we do not have the expertise to perform these mandated services in house. The cost of this service is actually paid for by building permit applicants, and does not come from the General Fund. We do budget for consultant assistance with substitute building inspection services. This is necessary when the Building Inspector is on mandatory military leave or vacation. However, with the emergence of the Associate Planner/Building Inspector (Keefer), we have consistently reduced reliance on this expensive service over the past two years. In fact, very little funds were spent on substitute building inspection services during 2003-04. Planning/Building Divisions Meetings and Memberships: these minor funds be eliminated for the 2004-05 budget. significant hardship for either division. It is recommended that This will not present a Planning/Building Divisions Supplies: It is recommended that these funds be reduced to half the amount budgeted in 2003-04. Both Divisions will take the necessary steps to reduce any waste of supply materials, and only purchase essential items. Planning/Building Divisions Machinery and Equipment: It is recommended that no money be allocated for machinery and equipment for the 2004-05 budget year. No large purchases of machinery and equipment are needed for the 2004-05 budget year. GENERAL FUND BUDGET RECOMMENDATION AND RELATED SAVINGS 100.3001 Engineering Description Proposed Estimated Budget Savings .110 Salaries - No staffing changes recommended, based on Gordon's $264,785 $ 0 estimate (2) .111 Salaries, Non Regular Any non-regular time will be charged to 0 15,000 projects or non-General Fund accounts .115 OT & Holiday Minimal savings in OT, no other changes (2) 2,900 500 .119-.156 Payroll Adders (2) 55,605 0 .160 Training Reduce to mandated or absolutely necessary 3,000 8,600 .210 Utilities (1) 2,922 0 .220 Telephone Eliminate one cell phone, minimal savings 1,500 0 .231 Printing & Publishing No change 1000 0 .232 Legal Advertising No change 500 0 .250 Contractual Services Reduce to minimum levels $30,000, no special 60,000 18,000 projects, also include speed zone surveys at $30,000 with potential for reimbursement from MCOG. Update fees through Council to maximize cost recovery on developer projects. .260 Dues & Subscriptions ($450- 1 PE registration, $200 updated 650 510 estimating books) .302 Equipment Repair No change 500 0 .303 Vehicle Repair Minor increase 2350 -736 .305 Building Maintenance (1) 9465 0 .330 Buildings & Land (1) 6840 0 .340 General Insurance (1) 5933 0 .411 Postage- Minimum reduction 500 500 .450 Fuels and Lubricants - No Change 700 0 .690 Special Supplies- Belt tightening 4,000 1,000 .699 Reimbursable Credit (3) 0 0 .711 Contribution to Capital Fund - Continue to Not put funds away 0 0 .800 Machinery - Limit expenditures to minimal capital expenditures to 10,000 12,920 GIS, only basic maintenance and minor software upgrades TOTAL ESTIMATED $433,150 $ 56,294 COMPARED TO 04-05 INITIAL 100.3110 Street Department .110 Salaries Freeze 2 - PW 1 positions - with assumptions: 310,000 94,056 Do no/less Street Sweeping Do no large scale paving projects Do not water new street trees ' Do not plant additional or replacement street trees Do more smaller projects and repairs (2) .111 Salaries, Non Regular No temporary help 0 10,400 .115 CT & Holiday No changes (2) 6,748 0 118 Standby Pay 0 0 .119- .156 Payroll Adders Savings based on above $ (2) 65,100 19,752 .160 Training Reduce to mandated or absolutely necessary 1,500 0 .210 Utilities (1) 1449 0 .220 Telephone No change 750 0 .250- Contractual Services 35,000 2,400 Striping $30,000 Tree trimming $5,000 .260 Dues & Subscriptions Public Works 50 0 .280 Burglar Alarm (1) 345 0 .300 City Owned Equipment As needed 0 500 .302 Equipment Repair No change 0 0 .303 Vehicle Repair Avoid repairs to old sweeper 50,000 12,000 .305 Building Maintenance (1) 567 0 .310 Equipment Rental 1,000 1,000 .330 Buildings & Land 6,455 0 .332 Corp Yard Charges (3) 0 0 .340 General Insurance (1) 22,766 0 .411 Postage Minimum reduction 200 0 .425 Emergency Costs- As needed 0 0 .440 Small Tools 2,000 0 .450 Fuels and Lubricants No Change 19,650 0 .690 Special Supplies 134,000 6,200 .699 Reimbursable Credit (3) 0 0 .711 Contribution to Capital Fund 35,000 0 Continue to not put recommended level of funds away TOTAL BEFORE SWEEPER PURCHASE 559,193 146,308 I, LI m o o o 0 iii_mo IJJ< ._ ~ ~ 0 0 ~ ~~ ~ ~ o o o Z LLI ~"- m 'O,C C ~ CITY OF UKIAH Attachment Department of Planning and Community Development BUDGET NOTES 2005-2008 Revenue Generation The following text lists a number of potential ways for the Department of Planning and Community Development (Community Planning and Building Divisions) to generate additional revenue. 1. Reexamine the Planning Permit fee schedule and propose a 100% cost recovery strategy rather than the current 75% recovery, and consider establishing "new" fees for services previously provided at no cost. 100% Cost Recoverv: Many jurisdictions in California have adopted a 100% cost recovery planning permit fee program. The justification for a full recovery program is that the service is being provided to a private party rather than benefiting the community as a whole. However, it can be argued that that residential and commercial development do provide benefits to the community as a whole in terms of providing housing stock, property and sales taxes, jobs, and overall economic development. Many communities in California continue to partially subsidize development by not establishing a full cost recovery fee schedule. The following is a partial list of communities that have adopted a full cost recovery program: Fort Bragg: The City of Fort Bragg Fort Bragg in 2004, have adopted a 100% cost recovery approach for the "non-measurable" larger planning permit projects and services such as rezonings, General Plan amendments, annexations, planned development permits, and large subdivisions. For smaller administrative review type projects that are generable "measurable" in terms of time, Fort Bragg charges a fiat fee. These permits do not require a public hearing and include Minor Use Permits, Minor Variances, Minor Design Reviews, etc. The fiat fee for these types of permits is $300.00. For the 100% cost recovery large projects, applicants pay an initial minimum deposit of $1500.00 and a "deposit account" is established. All costs of associated with processing the permit (staff time, postage, legal notices, copies, etc.) are charged against the account. ]:n the event that the initial $1500.00 deposit is used up, the applicant is required to submit an additional deposit to cover the remaining cost to process the application. Santa Rosa: The City of Santa Rosa adopted a full cost recovery development review fee schedule in late 2004. They established a formula based on the number of various types of permits, the hours used by various staff persons to process the applications, and the hourly cost of each involved staff person. As a result, they established a fiat fee for each type of permit, l~n some cases, fees increased substantially, while in other cases there was only a moderate increase. For example, the fee for a major Site Development Permit (Design Review) increased from $2,216.00 to $6,300, while the fee for a Home Occupation Permit only increased from $65.00 to $82.00. Novato: In 2000, the City of Novato adopted a "Full Cost Recovery Program" application processing and inspection services. Project applicants must enter into an agreement to "pay the City all reimbursable costs, both direct and indirect, including State-mandated costs, associated review and processing of the accompanying application for land use and/or encroachment or grading permit for land use approval(s) and inspections(s) with respect to the subject property." One or more deposits are made to ensure full cost recovery. If the application/owner fails to pay the required deposits during review of the application, all processing and inspections are halted until payment is made. Applicants are required to pay a $1,000.00 deposit for Major Use Permits, and an additional deposit of $600.00 for an Initial Environmental Study. The final total fee for the Major Use Permit may exceed the total deposit fee of $1,600.00 depending upon the Staff time and materials used to process from start to finish. Similar to other jurisdictions with full cost recovery programs, fiat fees are charged for minor permits such as sign permits, minor design review, certificates of compliance, etc. Petaluma: The City of Petaluma charges a fiat fee for minor permits and "Deposits + Staff Time and Haterials" for major permits. "Deposit + Staff Time and Materials means that applicants will be billed for the full cost of processing the application based on Staff time and materials used over and above the amount of the deposit. For a Major Us Permit, applicants are required to pay a deposit of $3,750.00, and an additional deposit of $2,500.00 for an Initial Environmental Study. The final total fee for the Major Use Permit may exceed the total deposit fee of $6,250.00 depending upon the Staff time and materials used to process from start to finish. 100% cost recovery: actual time, energy costs, and all budget charges against the Department. It is estimated that the total revenue generated from a City of Ukiah 100% cost recovery fee schedule for major planning permits would be approximately $50,000 - perhaps as much as $75,000. Other Trees of Fees: Many jurisdictions have also adopted "surcharge" fees on planning and/or building permits for contributing to the cost updating and maintaining the General Plan, and to the cost of State-mandated training/certification of the City Building Inspector. In addition, many jurisdictions charge of services that the City of Ukiah has traditionally provided at no cost to the development community and general public. Most notable of these is a fee for appealing a Zoning Administrator or Planning Commission decision to the City Council. The City of Fort Bragg charges $750.00; Novato charges $100.00; Santa Rosa charges $350.00; and Petaluma charges the applicant a deposit fee of $170.00 and then full cost recovery. If a member of the public files the appeal, they are charged $170.00, and the applicant must pay any additional fee to ensure full cost recovery. General Plan Update Surcharge Fee: Many communities across California have established a "surcharge" on all Building Permits to help fund the 10 or 15 year revision to their local General Plans. Some communities charge a flat rate per dwelling unit or square foot of commercial space, but most charge 5% to 15% of the Building Permit fee. The rationale for the fee is that the issuance of Building Permits is dependent upon the community having a legally defensible General Plan. Tf a community has an inadequate, internally inconsistent, and/or outdated General Plan, it could be legally challenged. Tf such a challenge is successful, a court could direct a community to withhold the issuance of permits until their General Plan is updated. An additional rationalization for the creation of the fee is that it is a part of an overall service whereby the jurisdiction must update and adopt a current General Plan, and that new development must pay its fair share of covering the cost of this overall service along with funding from the general fund. Some jurisdictions, the Town of Paradise for example, levies the fee on all planning entiUements as well because they must be legally processed based upon adoption of a "General Plan consistency finding." The City of Fort Bragg charges an additional 1.5% surcharge on all Building Permits for long-range planning activities such as maintaining the City General Plan. This type of fee is authorized at the State level by AB 2936. For the City of Fort Bragg, the fee generates approximately $62,000 per year. The City of Novato charges a 10% surcharge on all Building Permits for long-range planning activities such as maintaining the City General Plan. This amounts to a fee of $1,000.00 on a $10,000.00 Building Permit. Tt is unknown how much revenue is generated by this surcharge, but it is assumed to be substantial. Novato also charges a 10% surcharge on Building Permits exceeding $2,000.00 for managing and maintaining the database software for permit tracking and issuance, and a 1% surcharge for the contributing to the cost of State-mandated training/certification of the Building Inspector. San Rafael charges a 15% surcharge that generates $100,000 annually. Oakland collects 10 cents for every $100 Building Permit valuation, which generates $500,000 per year. If the City of Ukiah had a 15% surcharge fee on Building Permits, Les Schwab Tires would have contributed $7,330. A typical 3000 square foot home project would contribute about $800, and a 200 square foot kitchen addition would generate $68. Many communities exempt certain types of development from the fee. The Town of Paradise does not collect it on building expansion projects because the building is already there and accounted for in the General Plan. Other communities do not collect it on affordable housing projects to provide an incentive, and because the affordable housing project is fulfilling crucial policies of the General Plan Housing Element. EXAHPLES OF WHAT SOI~IE 3URZSDI'CTZONS CHARGE FOR THE UPDATE AND HAZNTENANCE OF THEZR GENERAL PLANS Riverside San Rafael Paradise Morgan Hill Sacramento Pleasanton Oakland Fairfield Truckee Tiburon 3URZSDXC'TZON FEE 10% of Building Permit Fee 15% of Building Permit Fee 10% of Building Permit / Planning Permit Fee 5% of Building Permit Fee 4% of Building Permit Fee $250 per Building Permit 10 cents for every $100 Building Permit valuation $73 per SFD / $45 per MFD / $.032 per square foot for commercial development $3.10 per Building Permit 10% of Building Permit Fee It is estimated that if a 10% General Plan surcharge fee is instituted, and the economy remains as it has been over the past 3-years, we would accumulate approximately $60,000 in revenue over the next 3-years. Establish a $50.00 "m-inspection" fee for building projects requiring a re- inspection, because the required work was not completed and ready when an inspection was requested: Unnecessary "re-inspections" are a common occurrence for the Building Inspector. This is a situation where a contractor calls for an inspection, the inspector visits the project to conduct the inspection, and the work has not yet been completed and is not ready for the requested inspection. Estimated Annual Revenue: $1,000 Charge a $50.00 Planner "re-inspection" fee for situations where an applicant calls for a final inspection (landscaping and all conditions of approval), is not ready, and needs the planner to return again at a later date: Similar to the "re- inspection" process for the Building Inspector, planners should be compensated for the time it takes to perform "re-inspections" after an applicant prematurely calls for a final inspection. Planning Staff estimate that 80%-90% of the calls for final inspection result in a need to re-inspect. Estimated Revenue: $1,000 Establish a $50.00 Plan-Check revision fee: Currently, there is no fee to compensate the Plans Examiner for plan-checking revisions to issued building permit plans. We have provided this service at no cost. Estimated Annual Revenue: $500 Establish a Fee for filing appeals of Zoning Administrator and Planning Commission actions: Most jurisdictions charge a fee for filing an appeal to decisions made by the Zoning Administrator and Planning Commission. Some jurisdictions have adopted a 100% cost recovery for appeals, while others have established fiat rates. The City of Elk Grove charges $2,000, while the City of Lemon Grove charges $25. The following is a list of what nearby jurisdictions charge for appeals: Ukiah: $0 Fort Bragg: $750.00 Mendocino County: $750 Novato: $100.00 San Rafael: $1,400 Cloverdale: $75.00 Petaluma: $170.00 Deposit for applicant / $170.00 total if filed by the public Santa Rosa: $350.00 Davis: $200.00 While not many decisions of the Zoning Administrator or Planning Commission are appealed to the City Council, the cost to process one can be considerable. For example, the 200~ appeal of the Zoning Administrator's decision to grant relief to the height limit for a single family residence cost the City approximately $1,500 to $2,000 in Staff time, public noticing, etc. One option is to only charge for the cost of public noticing and other "hard" costs. This would result in a fee of approximately $:[00.00. Estimated Annual Revenue: Full cost recovery = approximately $500 for the average appeal. Hard Costs only = $100 to $200. MEMORANDUM DATE: December 9, 2004 TO: Candace Horsley, City Manager FROM: Larry W. DeKnoblough, Community Services Director SUBJECT: Budget Reduction Considerations Below are the proposed budget reduction measures within the divisions I am responsible for. I want to emphasize that these proposed measures will significantly impact our ability to conduct quality facility maintenance. I am most concerned that over the last five years the City has prepared to open or has either added or expanded facilities and programs, increasing the demand on staff time while at the same time reducing staff support. The addition of several new park facilities and expanded landscaping in parking lots, continued maintenance of the County Library, and expansion of programs such as Movies in the Plaza all require a significant amount of staff hours. This dichotomy between continuously expanding maintenance demands while reducing support has affected maintenance standards. In the short term, this does not impact the public, but like any deferred maintenance program it will ultimately increase costs. While the long range impact of deferred maintenance greatly concerns me, I am more concerned about the immediate effect on crew morale. It is difficult to ask staff to remain dedicated to quality and performance while at the same time denying them the proper tools and staffing to do an expanding job. Cleady cuts need to be made and I fully support this, but I believe we must also evaluate the full impact of that cut and make a correspondingly equal cut in maintenance. Even if that cut is temporary. Vice-versa, anytime we consider expanding facilities or programs, the costs to mitigate the impact on staff must be part of the consideration and added at the time of the project. Listed on the following pages are the budget reduction recommendations we have discussed and are being recommended. I should also state that Community Services has already increased all the recreation program fees. We are also meeting with the golf community to cooperatively create a proposal for revision of the golf fee schedule for presentation to the Council prior to the upcoming season. PARKS Budget Item Close, lease or find sponsorship for Anton Stadium. Budget Impact Could reduce parks operations budget by as much as $35,000 to $50,000. Consider the following parks for closure or sale: Giorno Park Riverside Park Orchard Park Oak Street next to Ruelle Lease Observatory house. Reductions in operations budget accounts 160,440, 690. Combine Paths, Open Space, and Creeks Commission (POSC) and Parks Commission. This could be accomplished at the end of June when terms of sitting members expire. Retum maintenance of County Library landscape to County General Services. One time revenues based on Market value Obtain full market value of property. Could reduce expenditures due to reduction in facilities and staffing. Immediate reduction in staff support time (15-20 hours monthly). Reduce workload for parks crew by approximately 3-5 hours per week. Ramification Reduced workload would help offset reduced staff. Will seriously jeopardize facility use arrangement with Ukiah High School and possibly end many Youth Sports programs for the City and schools. Loss of parklands and open space. Deferred maintenance will ultimately lead to degradation of facilities. Due to funding constraints, new capital projects and park property acquisitions should be static, which will reduce the need for two separate commissions and the costs required to provide staff support. With a clear definition of purpose and regular Council direction, a single commission could effectively meet the Council's goals. Approximately five years ago, City parks crews took over landscape maintenance of the library in lieu of community funding by the City to the County Library. The library had been paying county General Services approximately $400 per month for the service. RECREATION Although the City's recreation programs are increasingly self sufficient, one possible additional funding mechanism for equipment purchases is to utilize asset forfeiture funds for recreation equipment on the premise that recreation programs are a youth crime deterrent. These funds may also be accessible to support the aquatics center or skatepark. In many other communities, the Police work very closely with Parks and Recreation to provide programs that target at-risk youth. Budget Item Consider either suspending or reducing aquatics center operations. Staff has prepared a spreadsheet illustrating three closure scenarios. Increase Golf Fund portion of utilities at Todd Grove room. Budget Impact Immediate savings in operations of approximately $80,000 if facility totally closed. If facility to remain operational but closed, savings will be limited to salaries of $50,000. Nominal savings of approximately $2,000-3,000 Ramification Significant negative community reaction. Could significantly reduce Summer Day Camp program enrollment. Increase in golf fund expenses. MUSEUM The City owns two parcels fronting Cleveland Avenue, which were part of the original Hudson Carpenter estate. These parcels were included in the City's acquisition of the estate and were intended for future expansion. It may be possible to sell the property and place the funds in the care of the Endowment Board for the purpose supporting the Museum. These additional funds could greatly assist the Endowment Fund in reaching its goal of achieving self-sufficiency for the Museum. CONFERENCE CENTER Budget Item Eliminate Conference Center Manager's position and reorganize management of facility and staff to Recreation Division. (See narrative below) Budget Impact Reduction in salaries will reduce or eliminate General Fund transfers to Conference Center Enterprise Fund. Ramification Additional part time staff will be required. Conference Center operations could be reorganized by eliminating the on-site manager's position and shifting management over to the Recreation Division. The Recreation staff has expertise in developing marketing strategies and materials as demonstrated by the growth and financial success of our recreation programs and increasing sophistication of our published materials. The staff has experience in managing facilities and facility rentals. GOLF COURSE Because the Golf fund is an enterprise fund, it is essential that it first and foremost remain totally self-sufficient. I believe the Golf Course can be profitable, even to the point of contributing to other recreational assets such as the aquatics center. Sage and I are currently meeting with representatives of the Men's club to establish a revised fee structure to achieve this goal. The fee proposal should be ready for Council consideration in March. REVENUE ENHANCEMENT CONSIDERATIONS 1. Increase Transient Occupancy Tax to 10% and apply a portion of increased funds to support aquatics and recreation programs. The increase could generate approximately $100,000. 2. Lease naming rights to Anton Stadium and softball complex could raise between $10,000 and $15,000 to support maintenance of these facilities. 3. All program and sports fees have been or are being adjusted. Message Page 1 of 1 Candace Horsley From: Sent: To: Cc: Diana Steele [dianas@cityofukiah.com] Friday, January 21,2005 6:27 PM berniez@cityofukiah.com candace@cityofu kiah.com; pa u lr@cityofu kiah.com; larryd @cityofu kiah.com Subject: Carp Yard BZ- As you know we need to do some minor rearrangement for CNG at the carp yard (possibly). However, also, the airport has an infrastructure grant. That grant triggered on awareness that the Airport Layout Plan needs to be updated and approved by the FAA. This brought to light that the existing service rood (which is scheduled to be surfaced os part of the grant) is in violation of FAA regulations because it is located within the Obstacle Free Area or the Runway Clear Zone, or some such restricted oreo. In order to bring it into compliance it is necessary to push it to the east. It appears it would encroach into the lumber yard (n of the carp yard) and into the Carp Yard. A suggestion that was made is to do as was stated, which would mean it would enter the Carp Yard due west of the Electric (?) office where I think a couple vehicles park. Then the fuel truck would drive through the carp yard to the bulk fuel facility and back. The fuel truck is not licensed for the road, and to do so has costly implications, so having an internal service road is preferred. As you con imagine, with CNG and the service rood issue, some significant reorganizing/straightening/etc. is needed in the Carp Yard. I would suggest to Paul that the realignment and surfacing of the service rood should be planned (and put in the ACIP) for next summer (which should still be within the grant timeframe) to allow for planning of the yard to incorporate CNG/bulk fuel access/and just plain give us time to go that way. Please let me know if this is something we can agree to commit to, or if we need to meet to discuss further, so that the Airport Layout Plan can proceed os quickly as it needs to. Diana Steele, PE Dir Publ Works/City Engr City of Ukioh 300 Seminary Avenue Ukioh, CA 95482 (p) 707-463-6280 (f) 707-463-6204 1/24/2005 Message Page 1 of 1 Candace Horsley From: Diana Steele [dianas@cityofukiah.com] Sent: Friday, January 21,2005 6:27 PM To: berniez@cityofukiah.com Cc: candace@cityofukiah.com; paulr@cityofukiah.com; larryd@cityofukiah.com Subject: Carp Yard BZ- As you know we need to do some minor rearrangement for CN~ at the carp yard (possibly). However, also, the airport has on infrastructure grant. That grant triggered on awareness that the Airport Layout Plan needs to be updated and approved by the FAA. This brought to light that the existing service road (which is scheduled to be surfaced as part of the grant) is in violation of FAA regulations because it is located within the Obstacle Free Area or the Runway Clear Zone, or some such restricted area. In order to bring it into compliance it is necessary to push it to the east. It appears it would encroach into the lumber yard (n of the carp yard) end into the Carp Yard. A suggestion that was made is to do as was stated, which would mean it would enter the Carp Yard due west of the Electric (?) office where I think a couple vehicles park. Then the fuel truck would drive through the carp yard to the bulk fuel facility and back. The fuel truck is not licensed for the road, and to do so has costly implications, so having an internal service road is preferred. As you can imagine, with CNC= and the service road issue, some significant reorganizing/straightening/etc. is needed in the Carp Yard. I would suggest to Paul that the realignment and surfacing of the service road should be planned (and put in the ACIP) for next summer (which should still be within the grant timeframe) to allow for planning of the yard to incorporate CNC=/bulk fuel access/and just plain give us time to go that way. Please let me know if this is something we con agree to commit to, or if we need to meet to discuss further, so that the Airport Layout Plan can proceed as quickly as it needs to. biana Steele, PE bit Publ Works/City Engr City of Ukiah 300 Seminary Avenue Ukiah, CA 95482 (p) 707-463-6280 (f) 707-463-6204 1/24/2005 Memo To: From: Date: Rm Candace Horsley, City Manager John D. Williams, Chief of Police 1/20/2005 Budget Reductions Per your request I have prepared this memo to address the potential budget reduction currently facing the Police Department. As you are aware, for the past several years the Department kept its operating budget to a bare minimum so as to lessen the burden on other City operations and the General Fund. As a result the Department has very little leeway in reducing operating expenses. We have avoided making equipment and supply requests except when absolutely necessary. Instead we have provided for the needs of the Department by using available grant monies that otherwise could have been used to supplement existing personnel. This leaves us with the choice of elimination of personnel as the only viable and significant option to substantially reduce the police budget. It has been widely recognized that our Department is understaffed for the mission it is currently called upon to perform. Any reduction to staffing will have a significant impact on the safety of our community. At a time when new and large businesses are coming into our jurisdiction, housing developments are being planned and built and traffic has increased dramatically, we should be planning for personnel expansion rather than reduction. Officers now spend the majority of their time responding to calls and preparing reports rather than in preventative patrol and enforcement programs. Reductions in staffing will not relieve us of our responsibility to provide basic law enforcement service. This being said, I have listed below potential savings for next budget year from staff and service reductions. 1. Salaries and Benefits: Each Peace Off~,er position eliminated will result in approximately $90,000.00 savings. Note: the Department has been operating for the past year with one full time peace officer and one full time front office staff person position vacant and frozen. This has resulted in a savings of approximately $150,000.00 to the General Fund. Unfilled front office staff position will result in savings of approximately $55,000.00. 2. Operations and Maintenance: Any reductions in operations and maintenance expenses will be minimal due to the reasons listed above. Potentially, the Department may realize approximately $8,000.00 in savings from our current expenses. Anticipated Reductions in Service: As mentioned above, reductions in service will be dependant upon what, if any, additional personnel cuts are made from our current staffing level. If additional cuts are implemented then the City and general public will have to come to gdps with the fact that the Police Department will no longer be able to perform some functions that they have come to rely on. Over the years the Police Department has been a convenient "catch-all" for various community problems. With any further staff reductions the Department will find it necessary to focus on the ability to provide basic law enforcement service. There will not be the luxury of responding to other needs. 1. Response to traffic accidents may be limited to injury collisions. We will no longer respond to property damage only accidents. . Victims reporting crimes against property or misdemeanors with no suspects will be mailed a report form and directed to complete and retum. These crimes will in all probability receive no follow-up investigation. 3. Officers will no longer respond to "keep the peace" civil matters. . As officer positions are eliminated it will become necessary to remove the school resource officer and return him to patrol duties. Investigators will also be eliminated and returned to patrol duties. This will mean that many criminal cases submitted for follow-up will be inactivated. Only cases with a high solvability rating will receive attention. Other cases that would normally be classified and investigated as criminal matters will be referred back to the victims for them to pursue civilly. The City will have to make other arrangements for "courtesy details" such as taking City Hall monies to the bank and opening City Hall during night hours for various scheduled functions. 6. Limit animal control response during after hours to dangerous animal calls. . Encourage the City to limit "special events". These activities, although valuable to the public, are a tremendous drain on our resources. Cost for these activities will have to be borne by the event organizers including traffic control and event security. Alternatives such as private security and volunteers for traffic control should be considered. Parades cost the department approximately $1,500 - $2,000. This list is not intended to reflect the only reductions that may be necessary We are continuing to explore vadous options to reduce services/costs and will make those suggestions as deemed appropriate. Respectfully submitted, John D. Williams Chief of Police T · Page 2 MEMORANDUM Date: 01/19/05 To: Candace Horsley From: Kurt Latipow Subject: Budget discussion Per your request I have prepared the following for discussion: Prior to listing possible revenue enhancements and budget cuts I believe it is important that we not let the council and the press forget that the Fire Department 04/05 budget has one less Fire Captain position then previous years and that the duties and responsibilities that were assigned to that position have added to the Emergency Services Battalion Chief's assignments. Revenue Enhancements; Increase ambulance fees from $360.00 per transport to $560.00 per transport = +$72,000 per year. Increase misc. fire prevention approx $10,000, Operational Changes; Leave Emergency Services Battalion Chief Job vacant for the balance of 04/05 = $56,000 savings.* Convert limited term FFPMs to regular, the department will still be one short Freeze the vacancy through June. I anticipate between now and June we will have lose at least two more FFPMs to other agencies. I would caution that running short during the summer when our overtime is traditionally high will result in an increase in people having to work multiple days in a row increasing fatigue, risk and concerns for safety. As vacancies occur and we freeze positions a majority of the salary savings will have to be reallocated to cover overtime costs. = $29,889 savings If we were to mn three FFPM short the annual savings would be Approx $132,314 Contract dispatch to CDF = $60,000 savings * Freezing the vacant Emergency Services BC position will force a redistribution of duties to people who's plates are already pretty full. Forcing more duties to our Volunteer BC Kevin Jennings is not an option as he has a full time job. Assigning more responsibility to the Captains who are already tasked with special projects is a recipe for failure. That leaves Chuck and me. I am willing to make this work through June, between now and then we must agree on a plan that will work for everyone. Page 1 of 1 Candace Horsley From: Kurt Latipow [klatipow@cityofukiah.com] Sent: Monday, November 29, 2004 8:39 AM To: candace@cityofukiah .com Subject: Budget stuff Candace, I thought I would get started on the budget stuff by getting these notes to you, Cost savings; Freeze positions as they come open is a potential gross savings of $180,000 per year. Due to min staffing needs we would need to add at least $ 60,000 to our OT budget. The toll this approach will take on the crews will increase the number of folks looking to leave and I predict that within 12 months we will lose a significant number of our seasoned FF Paramedics. Contracting dispatch services would generate approximately $60,000 in savings for the fire department. The savings for PD is unknown. While this is not a popular option, it should be explored. As I have stated before, if we are to run short we can not afford the luxury of having our own dispatch center. Revenue generation Increasing ambulance rates will generate approximately $72,000 per year. Needs for 05/06 budget Vehicle; replace high mileage command vehicle that is assigned to the Fire Marshal $45,000 Breathing Apparatus; we must replace our breathing apparatus and compressor, waiting for a grant is not working. Cost is approx. $256,000. That's it for now, I will continue to look for more. Kurt 1/19/2005 MEMORANDUM From: Date: Re: Candace Horsley Diana Steele January 21,2005 Possible Cost Savings Measures for Public Works Confirming items we have discussed regarding cost cutting measures: Street Department- As discussed during last year's budget preparations, it is estimated that a two person reduction in the street crew would result in approximately $100,000 in salary savings. The street crew has been working with a one person reduction for the last year, since a vacancy was not filled due to impending budget issues. This has proved very inefficient for the crew, making any significant pavement project impossible to undertake. The crew is often short-handed when illness or vacations occur, and the problem is further compounded with commitments for street sweeping, and responding to problems in the community such as spills, shopping cart accumulation, plugged storm drains and ditches, dumping of furniture along streets, preparing and picking up from parades, etc. The current staffing level reduces flexibility making it difficult to rotate people to provide relief from continuous strenuous activities. The further reduction of one person would further reduce flexibility as well as efficiency and could result in injuries. Engineering - Staff continues to look for opportunities to outsource tasks. Some cities outsource public works inspection to companies such as Coastland and charge higher fees to cover the actual costs. In our case it would be impractical to outsource this function as the individuals involved often work on other projects, such as developing or designing projects for Street Department or for public works contract. Whenever possible efforts of these two departments should be charged to projects where it is allowed in the funding source guidelines; such as projects funded by STIP, STP(d1), Capital Improvement Projects, etc. Both Streets and Engineering departments together with the Vehicle Maintenance Department have already reduced their training and attendance at professional associations to bare minimum, basically to what is absolutely necessary or mandated. Short term cost savings may be realized, but the true costs associated with losses in efficiency and staff development are real but difficult to quantify. 0 0 o c o c o >.- ~ © ~o .___ ~o 0 r~ 03 0 0 0 03 0 ~ 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 ~ I'-- ~ 0 0 ',-- 0 0 ~ _~ ._~ (~ =~'- ~ o · _c:-- = > ~ o %~'~ E~ x ~ ~ ~=mo.5 ~ ~ = . oL = _ - ~ =~ = ~ o~ .- ~eo~ ~e .~~o = ~ o ~ o=o o~ . =~ ~~ ~~=~ ~ · =._ ~ o . ~8~ ,-~.~ ~ ~ E ~ ~ o~ ._ ~'~ ~ ~.~ ~ ~ = N ~ e_ o ~ ~ ~ o~ ~ -0 = ~ ~ ~ ~ =-'~ _ ~ E~=~ ~ o~ .= o 8 E~~ ~'= ~ ' '-- __ '- ~ '- ~ ~ m -- 0 8 ~~ ~~~~ . o ~= o~ ~ E '~ ~ ~ _~=~em~~~ ~ ~ ~o~ ~=~e · ~ ~ o o= o ~~oo~'~~~ 2 ~ =~ ~-= _~ o= ~ ~;=~ = =~._ o ~ : ~ ~=-- := = ~ ~-- ~ o '--'i -- -- ~ ~ ~ 0 :~:'-~ '~"=: m ~o -'- ~ E ~ ~~ .... ~ ~ ~ 0 ' ~ ~~ 'o-- ~ = ~>o ~ ~._~ ~ ~ ~o~ .~ ~o ~~ ~~Oo OEO 2 ~o 0 {~ Attachment # oleman Putvisor, 5ervi¢&e 0 6.alifornia it, Finance. om The VLF for Property Tax Swap of 2004 Facts for Local Officials Rev. Sept 13 2004 In May 2004, Governor Schwarzenegger proposed a VLF for property tax swap as a part of a state- local budget agreement. The legislature included its version of the swap in the 2004 budget package. This paper outlines the proposed swap in some detail. I. The VLF Prior to the 2004 Budget Act Prior to the 2004 budget act, VLF tax rate was 2% of the value of the vehicle. The state general fund "offset" 67.5% of this tax resulting in an effective tax rate of 0.65%. VLF taxpayer revenues were supplemented with a backfill from the state general fund to provide cities and counties with revenues equivalent to a full 2% VLF tax rate. Under Section 11001.5 of the Revenue and Taxation Code, 24.33% of VLF funds were allocated to the Local Revenues fund to pay for health and welfare programs largely provided by counties under a state-local program realignment in the early 1990s. Of the remaining amount, about $275 million went to reimburse state agencies for administrative costs of the program (Department of Motor Vehicles, Franchise Tax Board, and State Controller). Of the amount remaining after realignment and administrative charges are taken out, 18.75% was allocated for special payments including supplemental funds for cities that did not levy a property tax in 1977-78, eligible low property tax cities incorporated prior to 1987, and supplemental funds for counties. The 81.25% was allocated half to cities and half counties on a population basis.~ Figure 1-2 shows the revenues and allocations of the VLF under the prior law. Figure 1' VLF Allocation Prior Law $7' Figure 2: VLF Revenues and Allocation - Prior Law H&W Realignment Local Revenue Fund) $6 $5 $4 $3 $2 $1 VLF Backfill $0 II. VLF-Property Tax Swap of 2004, State General Fund Contribution and 18.75 O .o_ Local Fund 24.33% ~ For more information on the history and allocation of the VLF see "VLF Facts: A Primer on the Motor Vehicle In-Lieu Tax, the Car Tax Cut and Backfill" at xv~x~'.californiacityfinance.com/VI,Ffacts04.pdf and other resources at xvwxv, cali forniaci tTfi nance.com/#V LF ~.~.1'/ Isle F-olal& Lan~ * Davis, 'Phone: 5'ao.'/$'i?,.'~'iSZ · Fa~,' 2 rev Sept 13, 2004 Constitutional Amendment Soon after the LOCAL coalition qualified Proposition 65 for the November ballot, Governor Schwarzenegger proposed that cities, counties, special districts and redevelopment agencies make a two-year contribution to solving the state's budget deficit of $1.3 billion per year. In exchange, the Governor pledged to lead a campaign to secure legislative and voter support in November 2004 for Proposition IA, a constitutional amendment with important revenue and mandate protections for cities, counties and special districts. The agreement also includes the permanent elimination of the Vehicle License Fee backfill and replacement with a like amount of property tax revenue to cities and counties (except for the 2 year state budget contributions). Following negotiations, the legislature passed and the Governor signed a state budget containing these essential elements. A. Constitutional Amendment. The legislature placed Proposition lA on the November ballot. Proposition lA is a constitutional amendment that contains essentially the same revenue protection features as Proposition 65 as well as some new features that enhance the level of revenue and mandate protection.2 B. VLF Reduction Permanent/Additional Property Tax to Cities and Counties. The 2004 budget includes a permanent reduction of the VLF rate from 2% to 0.65% (its current effective rate). The VLF backfill (approximately $4 billion) is eliminated and replaced with a like amount of property taxes, dollar-for-dollar. Subsequent to the FY04-05 and FY05-06 base years, each city's (and county's) "property tax reimbursement amount" or "property taxes in lieu of VLF" will increase in proportion to the growth in gross assessed valuation in that jurisdiction. Figure 3: The ate General Fund~ ~ ............. ~~'.'__~7.-_'7_'" $4.3B / State GeneralFund ~ -' -' o /revenmto makeup tbr ~ , · . VLFrateto0.65¼ r:;~uced m'oDerty tax / _ .., , -' / ([K~D to schools ~;~ VLF Fee Propertytax shifted a/Schools/ from countywide ER~ / : .............. | Property tax ,~ Revenue · · in-lieu of , · -' VLF -' Prior property tax 2 For more info on the Proposition lA, see http://wwxv, yesonpropla.com ~.CaliforniaCibifinan~e.~om 3 rev Sept 13, 2004 C. Two Year State General Fund Contribution. In both 2004-05 and 2005-06 ciries and counties will make contributions to the state general fund of $700 mi/lion ($350 million for cities, $350 million for counties). These contributions will come from reductions to each agency's "property taxes in lieu of VLE" The $350 million state general fund contribution from cities will be allocated as follows: · One-Third in proportion to VLE One third of the $350million on the basis of cities' proportionate share of Vehicle License Fee revenues; · One-Third on Property Tax. One third of the $350 million on the basis of cities' proportionate share of property tax revenues; and · One-Third on Sales Tax. One third of the $350 million on the basis of cities' proportionate shares of the 1% Bradley Bums sales and use tax. · Minimum and Maximum. No city shall have a contribution of more than 4% or less than 2% of their FY01-02 general revenues. The fiscal impacts of the cap and floor will be allocated proportionately.3 The $350 million state fund contribution from counties will be allocated in proportion to VLE Revenue and Taxation Code Section 97.71 contains the specific amounts for each county. Redevelopment agencies and special districts would also make state general fund contributions in FY04-05 and FY05-06 in the amounts of $250 million and $350million respectively. Figure 4 diagrams the VLF for property tax swap taking into account the $700 million contribution from cities and counties in FY04-05 and FY05-06. Figure 41 ~~e ate General Fund~ · " .......... ~~'.~.~:::.'" $3.6B* / State GeneralFund ~ ."'.'.-' ~)~TF ~t~'.~'~0~0 .... /revenuetomakeup for ~ ~ , VLF Backfill _- ___v__,_.__.__._ tax° r::c~uced' VLF rateto 0.65 ¼ property ! E ..~ ' : / (ERAF) to schools ;~ ~ VLF Fee · l/ to ~ Revenue - Loca Propertytax shit~ed j/Schools/ ~ fr°m oountywide ERA~~'~7 / /~*c~ ...... ................ / \ · _, ~ -' Property tax ~ I cities -and ~"~ i in-lieu of ,' \ countiesin ~ m Prior property tax D. The New VLF Allocation. Under the new law, the VLF remaining after the repeal of the VLF backfill first goes to maintain full funding of health and welfare programs largely provided by counties under a state-local realignment shift in the early 1990s. In this way the VLF continues to provide the same level of funding for these programs. For more detail on these allocations see v~w~",,~:californiacit3,finance.com/Cit3,350calcs040913.pdf ~ ~. 6.alit:0 r nia(-.it,[Finan~.e.t.0 m 4 rev Sept 13, 2004 Remaining VLF revenue will be deposited in the Motor Vehicle License Fee Account. These funds, less administrative charges and $54 million in funding for Orange County's debt service, will be allocated to cities on a per capita basis. $? Figure 5: VLF Revenues and Allocation - New Law $6 $5 $4 VLF BaCkfill $3 $2 To be paid from tax in-lieu of VLF Cities $1 $0 Revenues Revenue After Allocation Allocation After Status Quo Proposed Swap Status Quo Proposed Swap Figure 5 shows the effect of the proposed reduction in VLF backfill and the allocations that would be swapped into "property tax in-lieu of VLF." Figure 6 shows the new VLF allocations and revenues under the proposal. Figure 6: VLF Allocation & Revenue - New Law $2.0 $1.5 $1.0 $0.5 III. $0.0 Revenue VLF Revenue Allocation Rem aining City Allocations of VLF and Property Tax In-Lieu of VLF Figure 7 shows the total VLF allocation to cities under the prior law and the new swap - before the state general fund contribution from cities. The remaining VLF to cities under the proposal amounts to less than 10% of city VLF revenue under current law. ~.CatiforniaCitlFinanc~.com $2.0 Figure 7: VLF to Cities rev Sept 13, 2004 $1.5 $1.0 $0.5 $0.0 Prior Law New Swap (assuming full funding Dollar for Dollar of VLF backfill) Per Capita MVLF to Cities $164M Figure 8 shows how city VLF and "property tax in-lieu of VLF" will grow in future years. VLF revenues will grow as taxpayer VLF revenue to the MVLF account grows. Allocations to individual cities will continue to be affected by each city's population growth relative to the populaiion growth in cities statewide. Cities will continue to have their population figures based on three-times-registered voters for the first seven years of their incorporation. "Property tax in-lieu of VLF" will grow in proportion to the growth in each jurisdictions gross assessed valuation. $2.5 Fi(~ure 8: VLF to Cities $2.0 $1.5 Grows annually with growth in jurisdictions gross Assessed Valuation of Taxable Property $1.0 $0.5 FY04-05 FY05-06 FY06-07 FY07-08 FY08-09 FY09-10 Grows annually with growth in VLF revenue and udsdictions ]rowth relative to population growth in cities (that's how VLF grows now) ~.(-alifo r niaCi~Finan~e.~om 6 rev Sept 13, 2004 Figure 9 shows the growth in city VLF and "property tax in-lieu of VLF" with the FY04-05 and FY05-06 state general fund contributions. $2.5 $2.0 $1.5 $1.0 $0.5 Fiaure 9: VLF to Citie~ -with $350m State General Fund Contributions $350 million State General Fund contibutions 7'~'- FY04-05 FY05-06 FY06-07 FY07-08 FY08-09 FY09-10 Figure 10 shows estimated allocations for FY04-05 for VLF and "property tax in-lieu of VLF" for cities and counties statewide and individual cities and the county in Sonoma County. Column A shows the estimated non- realignment (MVLF) allocations to cities and the county under current law, with the VLF backfill fully funded. Column B shows the MVLF allocations following the repeal of the VLF backfill and the property tax swap. Column C shows the amounts to be paid as property tax in-lieu of VLF - prior to state general fund contribution. Column D shows the FY04-05 reduction for state general fund contribution. Column E shows the property tax in-lieu of VLF net of the state general fund contribution. A complete listing of estimates for all cities and counties is available at ww-,x: califomiacityfinance.com/VLFestimatesFY05.pdf. ~.Catifo r niaCit,IFinanr, e.~,om 7 rev Sept 13, 2004 Figure 10 VLF Backfill for Property Tax Swap: City and County Estimates for FY04-05 A B C=A-B D E=C-D VLF with PropTax City/County PropTax in- I Backrfll MVLF lnLieu of State GenFund lieu of VLF netI FY 2004-05 Allocation MVLF Contribution of ContributionI Prior Law4 FY04-05s FY04-056 FY04-057 FY04-05 .J OITIES + 1,750,356,206 + 154,645,000 + 1,595,711,206 -350,000,000 + 1,245,711,206 COUNTIES + 2,533~604,794 + 54,000,000 + 2~479,604~794 - 350,000~000 + 2,129,604,794 STAT E TOTAL + 4,283,961,000 + 208,645,000 + 4,075,316,000 - 700,000,000 + 3,375,316,000 CLOVERDALE + 460,570 + 38,542 + 422,028 - 73,620 + 348,408 COTATI + 408,996 + 34,093 + 374,903 - 71 r594 + 303,309 HEALDSBURG + 674,686 + 56317 + 618,369 - 141,953 + 476,416 PETALUMA + 3,263,032 + 272390 + 2,990,642 - 692,709 + 2,297,933 ROHNERT PARK + 2,483,719 + 207,074 + 2,276,645 -470,889 + 1,805,756 SANTA ROSA + 8,981,212 + 750,110 + 8,231,102 - 1,942,437 + 6,288,665 SEBASTOPOL + 458,045 + 38,163 + 419,882 - 102,526 + 317,356 SONOMA + 564,063 + 47,041 + 517,022 - 133R.04 + 383,818 WINDSOR + 1,446,917 + 120,326 + 1,326,591 -271,873 + 1,054,718 County of $ONOMA + 32,502,963 + 0 + 32,502,963 -4,439,389 + 28,063,574 Fi,qure l Oa Example FY04-05 Comparison of Current Law to Swap With Contribution City of Windsor Prior Law I VLF-PropTax Swap of 2004 .-V-L--F--I-n-cl-u--dj-n-~L-bg.c--k-filJ----1-'-4--4-6-'--9-1-7--.(^) I Veh Lic Fee Rev enue .......................................... I Pro. pe_rt.y Tax in-lieu of VLF 1,326,591 (C=A-B) .......................................... I State General Fund Contribution I _Pr_o_pe_rt.v Tax in-lieu of VLF -net p_ai..d_to_c_ity.. Total 1,446,917 120,326 (B) (271.8_73_) (D) 1,054,718 (E--C-D) Total 1,175,044 IV. The VLF - Property Tax Swap and the "Triple Flip." As a part of the Proposition 57 state fiscal recovery funding mechanism, cities and counties are currendy receiving property tax payments in lieu of 1/4 cent sales and use tax they would otherwise receive under the Bradley Burns local sales and Use tax. The California State Board of Equalization determines the compensation amounts for each city and county. County Auditors make the transfers to each jurisdiction from the countywide ERAF (Education Revenue Augmentation Fund). The state fully compensates school agencies for the reduced ERAF with higher payments from the state general fund. This mechanism is generally referred to as the "triple flip." This property tax in lieu o£ sales tax operates similar to the way in which the property tax in-lieu o£ VLFwould work. However, in the case of the in-lieu sales tax payments under the "triple flip," the property tax in lieu of sales tax increases each year in relation to the sales and use tax each jurisdiction would otherwise have received. Pursuant to Revenue and Taxation Code [ 97.70(c)(1)(A)(i) Pursuant to Revenue and Taxation Code [ 97.70(c)(1)(A)(ii) Also known as the "Vehicle License Fee Adjustment Amount" Pursuant to Revenue and Taxation Code [ 97.71 ~.Calif0r niaC. it,lFinance.c0m 8 rev Sept 13, 2004 In effect, year to year growth is in proportion to each jurisdiction's year-to-year growth in sales and use tax revenue. By contrast, the properO/taXil~ ~eu o£ VLFwould grow in subsequent years with each jurisdiction's change in the gross assessed value of taxable property.8 Because the growth formula is tied to sales tax and because it is temporary, property taxi. Reu oF sMes tax under the triple flip should be generally be considered a subset of "sales tax revenue". Because it would be permanent and because its growth would be tied to the assessed valuation of real property, property tax i. ~eu o£ VLF should be considered a subset of property tax. Figure 11 shows the combined interaction of these two revenue swaps. While they operate through similar mechanisms, these two "flips" do not affect each other. Figure 11' The VLF for Property Tax Swap and the Prop 57 "Triple Flip" ~lllllllllllllll -' 0.25ofthe ~ ~--[,~ : 1.00 localrate $1.2B ~ State Fiscal "~ ~;>' ~ .............. andVia reducing bcal sales tax rateincreasing special state rate. - ~Recovery FundJ ~ sales tax ~ate General Fu~ · " ............. q~~.~.~*_~'~ $4.8]3* /State GeneralFund ¢~ -' ~.~;~ o~o~ut~ ~ rev.enueto make up for ~ff~ i VLF Backfill .' wvratet°u'm~/° / r~_d~_cedpropettytax _ .~ · -' / (ERAD to schools :~ ;~ VLF Fee I / / ~ ~ Revenue Pr--err-tax oh~--~ ~.-~K-14 Local/ r $3. ~ ; Property tax !; Property tax ~ ~ ~ : in-lieu of :i in-lieu of : ~ ~', i sales tax il VLF i ~ ~;7o0;ii~im Cram ci*i .... a I ~: ~ .............. ,,, .............. , \ ~;;;:~;';2; / [ propertyta [ 8 In FY04-05 and FY05-06 the VLF adjustment amounts (property tax in lieu of VLF) are essentially determined by the California State Controller's office. In subsequent years, County Auditors calculate how the amounts grow based on each jurisdicfion's growth in Assessed Valuation. ~n.(..alifor niaCitll:inanc,.com 10 9 rev Sept 13, 2004 v. Frequently Asked Questions About The VLF for Property Tax Swap The formula allocating each d~y ~ share of the $350 milton state general fund contribution in I~04-05 and FY 05496 is based on property tax, saks tax, and NEE. IF/ill each of these sources be reduced? No. The city and county contributions will be taken from a reduction in "property tax in-lieu of VLF" How is annual growth in the '~topetty tax ia lieu o£ VLF" &termined? After the dollar-for dollar swap in FY04-05, county auditors will change property tax in lieu of VLF payments to cities and counties in proportion to each jurisdiction's annual change in gross Assessed Valuation. Our d~y has a redevelopment agen~ and that reduces ourproperly tax revenue growth because properly tax growth in the redevelopment project area goes to the agency. W/on 't redevelopment aho affect the growth of "l~topet(y tax in lieu o£ VLF?' No. The County Auditor will calculate your regular property tax allocation, the property tax increment allocation to your redevelopment agency and your AB8 shares first just as would be done absent the VLF for property tax swap. Then the County Auditor will look at the amount you are owed under the swap, which is your FY04-05 VLF loss due to the repeal of the VLF backfill with growth in proportion to the growth of gross assessed valuation (i.e. without netting out property tax increment growth going to redevelopment) in your jurisdiction. Thus, redevelopment's property tax revenue will not be affected, nor will redevelopment affect your property tax in lieu of VLF payments. How will annexations affect the '~topet(y tax in lieu o£ VLF"pqments? In a change from the Governor's agreement with local governments, the legislature, in AB2115, provided for no property tax in lieu of VLF to replace the lost VLF in annexation areas. This seriously impacts the fiscal viability of annexations and needs to be resolved with new legislation as soon as possible. M_y d~y has been getting a spedal I/LF allocation as a low properly tax d~y. W/hat happens to that? County VLF, and special VLF allocation will all be converted 100% into property tax in lieu of VLF. My d~y has aproperly tax shaffng agreement with the county. W/ill this "ptopet~y tax in lieu o£ VLF" be subject to revenue sharing? No. For the purposes of such agreements, the property tax in-lieu of VLF payments should be viewed as VLF revenue. Revenue and Taxation Code Section 97.70(g) provides that tax sharing agreements or revenue sharing agreements are deemed to be modified to account for the reduced VLF. The intention of this law is that these agreements not be affected by the swap of VLF for property tax. My city has used VLF to back a debt issuance. W/ith the loss of the I/LF backfill, what happens to our finandng? It should not be affected. For the purposes of such agreements, the property tax in-lieu of VLF payments should be viewed as VLF revenue. Our d~y is a lowproperly tax 0 ~ecause afire districtprovides us fire service). W/ill our lowproperly tax share affea what we get from the '~roperO, tax in lieu of VLF?' It will have no affect. The amount you receive in property tax in lieu of VLF depends on how much VLF you lose due to the repeal of the VLF backfill with subsequent annual growth tied to total gross assessed valuation in your jurisdiction. Whether low or high, a city or county's share of secured and unsecured property taxes will have no affect. How wi#this ITLE forproperty tax swap affect the Proposition 57 MpkJ~'p? It will have no affect. The two operate independently. How will this VLF forproperty tax swap affect our existing secured 0° unsecured propertj tax revenues? The VLF for property tax swap and the "property tax in lieu of VLF" payments will have no affect on a city or county's secured and unsecured property tax revenues including Tax Equity Allocations for "no and low property tax" cities. ~.~-alifornia~it,iFinan~.e.¢om 11 12 13 14 15 16 17 18 19 20 10 rev Sept 13, 2004 Should I reduce the I~f04-05 saks tax revenue estimate for m.y d~y 47 !/3 of our state general fund contribution? No. Sales tax revenues will not be affected by the VLF swap or by the state general fund contribution. Sales tax revenues are a component of the formula used for determining each city's share of the state contribution from cities, but the entire amount of each city's state contribution will come from property tax, specifically property tax in lieu of VLF. W/ill there be enough money in the countywide ERAF to cover the payments of both the "property tax in lieu o£ sales tax" under the Proposition 57 tripk ~'p and the "property tax in lieu o£ VLF' under this proposed swap? With $4.3 billion of property tax swapped for VLF backfill and $1.2 billion in property tax swapped for sales and use tax under the Proposition 57 triple flip, a number of counties will have insufficient money in ERAF to make the in-lieu property tax payments. In these counties, County Auditors will shift the necessary funds from school shares and (as in the case of the ERAF reductions) the school entities will be fully compensated from the state general fund. W/hen will my d{y receive the "ptope~'ty tax in lieu of VLF'payments? As with the property tax in lieu of sales tax payments under the triple flip, property tax in lieu of VLF payments will be issued in January and May W/ill County Auditor charge dries and counties Property Tax Administration Fees for the "property tax in lieu o£ VLF"payments? Revenue and Taxation Code Section 97.75 prohibits a county from imposing a fee, charge, or other le~,T in reimbursement for administering the VLF for property tax swap during the FY04-05 and FY05-06 years. In subsequent years a county may impose an administration fee or charge, limited to the actual cost of services. IF/ill the growth in the "property tax in lieu of VLF" be figured on the reduced amount (for the state general fund contributions) or on the total amount prior to the reduction? Year to year growth on the property tax in lieu of VLF payments in FY 05-06 and in FY06-07 will be determined on the prior year gross amount of property tax in lieu of VLF for each jurisdiction irrespective of the reduction for the state general fund contribution. Of the proposed $1.3 billion local government state general fund contribution in I~f 04-05 and ~ 05-06, $350 milton is from dties. Is this $350 milton in addition to the $1.3 billion new ERAF shiflproposed in the Governor3 Proposed Budget in January? No. There is only one $1.3 Billion contribution from local governments contained in the FY04-05 state budget. You said my d~y ~ "properly tax in ~eu of I/LF" will grow in proportion to the growth in assessed valuation in m~y d~y. W/ill our contribution to the state generalfundgrow also? No. The amount of contribution is $1.3 billion from local governments in FY04-05 and $1.3 billion in FY05-06. The amount for cities is $350million each in each year and each individual city's allocation will be the same amount in each year. W/hen will dties get repaid for their $350 milton contributions in FY04-05 and FY05-06? They will not. The local government contributions to the state in FY04-05 and FY05-06 are not loans. The amounts will not be repaid. W/hat about the $!.3 billion I/-LE backfill gap in FEY03-04? W/hen will we getpaid for that? The state is obligated by law to repay cities and counties for the VLF backfill gap from FY03-04 in August 2006. The local government agreement with the Governor includes a new provision in the constitutional amendment to reinforce this requirement. The EY06-07 I/LF backfill gap repayments for dties in my area seem to have no relation to the Q-3f04-05 and FY05-06 state general fund conedbutions. W/477 There is virtually no connection. The FY06-07 VLF backfill gap repayments are for VLF revenues cities and counties should have received in FY03-04. The FY04-05 and FY05-06 state general fund contributions are based on a formula that is only partly related to each city's VLE See Section II.C on page 3 of this report for a description of this formula. The funds to be repaid to cities and counties in FY06-07 have nothing to do with the amounts paid to the state in FY04-05 and FY05-06. The FY06-07 repayment is for the VLF backfill gap in the current FY03-04 year. This is money that cities and counties are losing due to the VLF backfill gap. It is proportional to each city's VLF revenues. The FY04-05 and FY05-06 contributions to the state general fund are based on a different formula. The FY06-07 repayment is not a repayment of any part of these amounts. It is a repayment of the FY03-04 loss due to the VLF backfill gap. ~.CatiforniaCitlFinan~e.¢om 11 rev Sept 13, 2004 21 ~f the VLF offset/backfillis 67.5%, ~vh~y would my d~y VLF be reduced ~y over 90%? After the repeal of the VLF backfill, funding health and welfare programs provided primarily by counties under a state-local realignment in the early 1990s will be maintained. Moreover, the VLF allocation includes certain fixed administrative charges which will not change, regardless of the amount of VLF revenue. This means that the impact of the loss of the VLF backfill will be visited on the remaining allocations, leaving only about $164 million in FY04-05 for per capita allocations to cities. All other allocations (including allocations to counties and special allocations including those to no and low property tax cities) will be swapped 100% for property tax. Over 90% of city VLF will be swapped for property tax. ~.Ca~ifor nia~..itiFinan¢~.com AGENDA ITEM NO: 4 MEETING DATE: February 1,2005 SUMMARY REPORT SUBJECT: DISCUSSION OF POSSIBLE SALES TAX BALLOT MEASUREm MAYOR ASHIKU Mayor Ashiku has asked for the Council's discussion regarding a possible sales tax ballot measure. RECOMMENDED ACTION' Discuss possibility of a future sales tax ballot measure and provide direction to staff. ALTERNATIVE COUNCIL POLICY OPTIONS: N/A Citizens Advised: Requested by: Prepared by: Coordinated with: Attachments: N/A Mayor Ashiku Candace Horsley, City Manager N/A None ' Candac~Horsley, City Manager 4:CAN/ASR.SalesTxBallotMeasDisc.020105