City Council Meeting: June 21, 2011
Agenda Item: 8-B
To: Mayor and City Council
Chairperson and Housing Authority Members
Chairperson and Redevelopment Agency Members
Chairperson and Parking Authority Members
Subject: Adoption of the First Year and Approval of the Second Year of the Fiscal Year 2011-13 Biennial Budget, Approval of FY 2010-11 Budget Changes, Approval of Personnel Changes, Adoption of Resolutions Adjusting and Establishing Various Rates and Fees, Adoption of Resolution Establishing the City’s GANN Appropriations Limit for FY2011-12, Adopt the Proposed Human Services Grants Program for FY 2011-15 and the Organizational Support Program (OSP) Grants for Arts and Culture Nonprofits for FY 2011‑13, Authorize the City Manager to Negotiate and Execute Contracts with Human Service and Cultural Arts Grantees
Staff recommends that the City Council, Housing Authority, Redevelopment Agency and Parking Authority:
Staff also recommends that the City Council:
1) adopt a resolution of the City of Santa Monica establishing new classifications and adopting salary rates for various listed positions (Attachment D1) and approve the Position and Classification Changes (Attachment D2);
2) adopt a resolution of the City of Santa Monica setting various fees in the Public Work Department (Attachment F1);
3) adopt a resolution of the City of Santa Monica setting licensing fees for Outdoor Dining Establishments (Attachment F2);
4) adopt a resolution of the City of Santa Monica setting permit and user fees for discretionary permits requiring public hearing radius notification in the Planning and Community Development Department (Attachment F3);
5) adopt a resolution of the City of Santa Monica establishing the GANN appropriations limit for Fiscal Year 2011-12 (to be continued to June 28, 2011);
6) approve the Final Proposed FY 2011-15 Human Services Grants Program (HSGP) (Attachment G1) and the FY 2011-13 Organizational Support Program (OSP) Grants for Arts and Culture Nonprofits (Attachment G2);
7) authorize the City Manager to negotiate and execute contracts for grantees of the HSGP and OSP, and grant parking permits to HSGP organizations providing outreach and in-home services in Santa Monica, as shown in Attachments G1 and G2;
8) authorize the City Manager to negotiate and execute lease agreements with human service organizations using City facilities to provide social services under the HSGP, as shown in Attachment G1;
9) accept Federal Supportive Housing Program (SHP) Renewal Grant funds from the Los Angeles Homeless Services Authority (LAHSA) in the amount of $381,941 for Coordinated Case Management;
10) accept Federal Supportive Housing Program (SHP) Renewal Grant funds from the U.S. Department of Housing and Urban Development (HUD) in the amount of $491,791 for the Serial Inebriate Program; and
11) appropriate all or a portion of $300,000 in available one-time funds.
This report presents information and requests actions necessary to adopt the first year of the Fiscal Year 2011-13 biennial budget for the City of Santa Monica, the Santa Monica Housing Authority, the Santa Monica Redevelopment Agency and the Santa Monica Parking Authority. It also requests approval of the second year of the budget. Since the City Charter requires Council to adopt a budget annually, the second year will be submitted to Council for formal adoption, with any necessary revisions, in June 2012.
The City released its Proposed Budget for FY 2011-13 on May 13, 2011. New information received and changes approved by Council since release of the Proposed Budget have resulted in adjustments to the Proposed Budget for FY 2011-13 as well as the current year (FY 2010-11) budget, which are recommended for adoption as part of this report.
A summary of the final proposed budget totals is shown below and the impact of these adjustments on the General Fund is shown in a chart on the following page:
The revenue increases of $3.3 million in FY 2011-12 and $3.4 million in FY 2012-13 includes reimbursements of $2.7 million in FY2011-12 and $2.9 million in FY2012-13 from the Redevelopment Agency for administrative expenses that were not originally included in the Proposed Budget. Due to the Governor’s proposal to end redevelopment, staff considers these funds at risk on an on-going basis and recommends that the amount be left in fund balance rather than appropriated until there is more certainty regarding the long term future of redevelopment.
The expenditure decreases of $123.4 million in FY 2011-12 and $53.4 million in FY 2012-13 mostly reflect timing changes for Redevelopment Agency (RDA) capital projects. On May 24, 2011, Council appropriated $76.5 million in the FY 2010-11 budget for certain RDA projects that are sufficiently developed to enter into contractual obligations in the near future. These expenditures had been included in the original Proposed FY 2011-13 budget and the funding is now moved up to the current fiscal year. The remainder of the decrease primarily relates to RDA projects included in the Proposed Budget, which now are not expected to occur during the FY 2011-13 period and for which required funding amounts could change significantly. Staff will return to Council at a later date when project timing is known and financing options have been re-evaluated.
The net excess of expenditures over revenues for all other funds in FY 2012-13 is due to differences in timing between receipt of revenues and expenditures for capital projects, which in some instances are funded with revenue received in a prior fiscal year. Therefore, while it appears that expenditures exceed revenues, sufficient one-time revenues are available to fund the expected projects.
The budget includes $300,000 of undesignated one-time funds that Council could consider appropriating for one-time priorities. Any unappropriated portion of the $300,000 will remain in the General Fund available fund balance. In addition, $102,988 of FY 2010-11 Council contingency remains available for one-time uses. The unspent balance remaining from this contingency will be reappropriated to the FY 2011-12 Budget for Council’s use at a later time. Due to the State budget deficit, State funding for many early childhood programs are at risk. Staff recommends Council consider holding back a portion of the $300,000 for potential one-time uses related to early childhood development and care.
The impact of these final proposed budget adjustments to the FY2011-13 General Fund are shown below:
While the two year General Fund budget has a surplus, without the reimbursements from the Redevelopment Agency the General Fund would have shortfalls in both years. Since these funds are at risk on an on-going basis due to potential State action, staff recommends that the amount be left in fund balance rather than appropriated until there is more certainty regarding the long term future of redevelopment.
It is also important to remember that the Five Year Forecast projects growth rates in expenditures, particularly for compensation costs, which will outstrip rates of revenue growth in future years, and deficits are projected beginning in FY 2013-14 without further corrective action. The City will need to continue to implement strategies that will correct this imbalance over the long term.
Attachment A details the recommended revisions to the current year (FY 2010-11) budget. Attachments B, and C detail revisions to the Proposed budget for fiscal years 2011-12 and 2012-13. Also included in the changes above and presented for City Council review and approval are identified changes to compensation and position classifications for FY 2011-12 (Attachments D1 and D2), changes to fees and charges, with resolutions for their implementation (Attachments F1-F3), the Proposed Human Services Grants Program for FY 2011-15 and the Organizational Support Program (OSP) Grants for Arts and Culture Nonprofits for FY 2011‑13 (Attachments G1 and G2).
The City Charter requires that the City Council adopt an annual budget, following a public hearing, on or before June 30 for the ensuing fiscal year. The budget to be adopted is presented to City Council by the City Manager at least 35 days prior to the start of the fiscal year in the form of a Proposed Budget. The FY 2011-13 Biennial Budget was sent to Council and released to the public on May 13, 2011. The Budget was discussed with Council at study sessions on May 24-26 2011.
The two year budget is balanced and maintains core City services, enhances emergency preparedness, addresses emerging community needs, promotes civic advancement, and reinvests in critical infrastructure while avoiding new tax proposals and the need for staff layoffs or furloughs. The budget also rectifies historical under-budgeting in certain areas. In addition, the Budget continues to promote the key City values of sustainability, livability, education, human capital, economic development, mobility, and fiscal stability. However, it is important to note that the Five Year Forecast projects growth rates in expenditures, particularly for compensation costs, which will outstrip rates of revenue growth in future years. The City will need to continue to implement strategies that will correct this imbalance over the long term. The budget also includes a listing of emerging issues representing community views on needs to be addressed.
During the City Council budget study sessions on May 24-26, Council heard presentations on the Proposed Budget by the City Manager and each department. On May 24, 2011, Council appropriated a total of $76,553,000 in currently available RDA funds to the FY 2010-11 budget for projects that are sufficiently developed to enter into contractual obligations in the near future. Additionally other redevelopment projects that are not expected to occur during the two year budget period, and for which project costs may change substantially, have been removed from the FY 2011-12 and FY 2012-13 Proposed Budget. Staff will return to Council at a later date to request funding for these projects. Impacts of these decisions are included in the Final Changes to the Proposed Budget included with this staff report. At that time, Council was also presented with the Proposed Human Services Grants Program for FY 2011-15 and the Organizational Support Program (OSP) Grants for Arts and Culture Nonprofits for FY 2011‑13.
Proposed Budget Revisions
Modifications to the Proposed Budget are based on Council direction, new information and identified omissions. Staff recommends that Council adopt the changes to the FY 2010-11 Revised Budget and FY 2011-12 Proposed Budget, as well as approve changes to the FY 2012-13 Proposed Budget. A balanced budget is still maintained even with these identified changes. These changes are summarized below:
FY 2010-11 Budget Changes
Staff recommends changes to the FY 2010-11 Budget be made to pay down a portion of the City’s CalPERS liability, to record a contract payment for Santa Monica Place Attendant Parking, and to fund Police overtime at levels that align with historical spending. The CalPERS paydown will be funded through the release of designations in a number of City funds and the use of undesignated General Fund balance. The City will save an estimated $800,000 per year as a result of this pay down.
Further detail is provided below:
CalPERS Liability Pay Down
From Undesignated Fund Balance
All Other Funds
Total Pay Down
1) FY 2010-11 General Fund Expenditure Revisions from Proposed Budget – Increase of $12.4 million
The primary component of this increase is the $8.8 million to pay down a portion of the City’s CalPERS liability. Also, an appropriation of $2.5 million is requested to reflect a change in recording of contract payments for Santa Monica Place Attendant Parking as expenditures rather than as a net against revenues received. The offsetting revenue increase is already included in FY 2010-11 budgeted revenues. In addition, a $1.1 million appropriation is required for the estimated FY 2010-11 payment of Measure Y funds to the Santa Monica/Malibu Unified School District.
2) FY 2010-11 General Fund Balance Sheet Revisions from Proposed Budget – $6.3 million
As noted above, this item is the recommended release of a $6.3 million CalPERS designation for future pension liabilities used to pay down the City’s CalPERS obligation.
3) FY 2010-11 Non-General Fund Expenditure Revisions – Net increase of $6.2 million
The increase primarily represents a $5.0 million appropriation of Low/Moderate Income Funds for affordable housing uses. The remaining $1.2 million reflects the CalPERS liability pay down for funds other than the General Fund.
4) FY 2010-11 Non-General Fund Balance Sheet Revisions from Proposed Budget – $1.2 million
This item reflects the release of $1.2 million in CalPERS designations for future pension liabilities from non-General funds to be used to pay down the City’s CalPERS obligation.
A complete list of proposed changes to the FY 2010-11 budget is included in Attachment A.
Revisions to FY 2011-12 Proposed Budget
1) FY 2011-12 General Fund Revenue Revisions from Proposed Budget – Net Increase of $2.7 million
The increase primarily reflects the final FY 2011-12 reimbursement amount from the Redevelopment Agency to the General Fund for administrative costs ($2.7 million). As noted earlier, Redevelopment funding remains at risk from State action and staff therefore recommends that this amount not be appropriated until the RDA picture is more clear. Also included are revised Public Works fee rates for newsrack permits, blanket utility excavation permits, and offsite improvement work performed by City staff ($30,275).
2) Proposed FY 2011-12 General Fund Expenditure Revisions from Proposed Budget – Net increase of $0.9 million
The major component of this increase is the first year allocation of $1.0 million for the Early Childhood Education Center, which was previously included in the Redevelopment Agency budget. In addition, funding for the LUCE/Specific Plan Implementation is increased by $0.3 million. Also included is an increase of $0.1 million in funding for the Office of Emergency Management and $0.2 million in other adjustments. Partially offsetting these increases is a reduction in the General Fund subsidy to the Pier Fund ($0.7 million) reflecting the transfer funding of certain Pier-related CIP projects from the Pier Fund to the Redevelopment Agency.
3) FY 2011-12 Non-General Fund Revenue Revisions from Proposed Budget – Net Increase of $0.6 million
This increase primarily reflects increased Pier rental revenues due to changes in lease terms of $0.6 million, a net increase of $0.1 million from Miscellaneous Grants, and increased Big Blue Bus revenues from managing the Culver City transit system’s advertising program of $0.1 million. Partially offsetting the increase is a $0.2 million decrease in the City’s CDBG allocation from HUD.
4) Proposed FY 2011-12 Non-General Fund Expenditure Revisions from Proposed Budget – Net Decrease of $124.3 million
The decrease is primarily to due changes in Redevelopment Agency funding for capital projects Per Council actions of May 24, 2011, certain projects were funded in FY 2010-11 as indicated above instead of in later years as originally proposed ($76.6 million). In addition, a number of projects not expected to occur during the two year budget period have been removed from the Proposed Budget, and staff will return to Council at later dates to request appropriation for these specific projects when project timing is determined and funding options have been analyzed.
A complete list of revisions to the FY 2011-12 Proposed Budget is included in Attachment B.
Revisions to FY 2012-13 Proposed Budget
1) FY 2012-13 General Fund Revenue Revisions from Proposed Budget – Net Increase of $2.8 million
The increase primarily reflects the final FY 2012-13 reimbursement amount from the Redevelopment Agency to the General Fund for administrative costs ($2.8 million) and the continuing revenue impacts of fee increases approved in FY 2011-12 ($30,990).
2) Proposed FY 2012-13 General Fund Expenditure Revisions from Proposed Budget – Net increase of $0.4 million
The increase primarily reflects an appropriation for the second year funding of the Early Childhood Education Center ($4.0 million), partially offset by a decrease in the General Fund subsidy to the Pier Fund as funding for certain Pier CIP projects is transferred from the Pier Fund to the Redevelopment Agency. Also included is the impact of salary adjustments based on equity increases and staffing changes.
3) FY 2012-13 Non-General Fund Revenue Revisions from Proposed Budget – Net Increase of $0.6 million
This increase primarily reflects increased Pier rental revenues due to changes in lease terms ($0.6 million), increased Prop A funding in the Miscellaneous Grants fund to be used to fund the Downtown shuttle ($0.2 million), and increased Big Blue Bus revenues from managing the Culver City transit system’s advertising program ($0.1 million), partially offset by a $0.2 million decrease in CDBG allocation and $0.1 million decrease in HOME allocations.
4) Proposed FY 2012-13 Non-General Fund Expenditure Revisions from Proposed Budget – Net Decrease of $53.8 million
Similar to the revisions to the FY 2011-12 Proposed Budget, the decrease is primarily to due timing changes in Redevelopment Agency funding for capital projects (-$53.4 million).
A complete list of revisions to the FY 2012-13 Proposed Budget is included in Attachment C.
As part of the budget process, proposed employee classification and compensation changes were reviewed by the Human Resources Department and City Manager’s Office. Resulting classification and salary changes are presented in Attachments D1 and D2.
Proposed Fee Revisions
Public Works Department
In FY 2009-10, the City hired Revenue & Costs Specialists to perform a comprehensive fee study to analyze the cost of services in various City departments including Public Works. Most Public Works Department fees were analyzed in the first phase of the fee study in FY 2009-10 with the exception of street offsite improvement fees, which were analyzed in the second phase in FY 2010-11. Based on the results of the fee study, the Public Works Department proposes fee revisions described in further detail below. Implementation of these fees will result in a net revenue increase of approximately $30,000 annually.
Newsrack Permit Fees
The current newsrack permit fees were adopted by City Council on June 15, 2010. After further review, staff is recommending a revised fee structure. The revised fees are structured so that the fee for the first newsrack, either new or renewal, represents the full cost recovery amount to process the initial newsrack. Each additional newsrack on the same permit would be issued at a reduced rate. The reduced rate for additional newsracks is achieved by a reduction in administrative processing time and efficiencies in scheduling inspections.
Blanket Utility Permit Fees
Fees for blanket utility permits were also adopted by Council on June 15, 2010. Implementation of these fees was delayed to allow staff time to review and discuss with the utility companies. After further review, staff recommends revised permit fees for blanket utility permits. A blanket utility permit would allow utility companies to conduct maintenance activities and perform minor excavations on public right-of-way without obtaining a separate permit every time. Utility companies are responsible for reporting the number of work activities on public right of way. Fees would be collected quarterly based on the number of work activities reported.
Street Offsite Improvement Fees
The fee study completed by Revenue & Costs Specialists resulted in full cost recovery fees that are higher than fees charged by local, comparable cities and contractors for similar work. As an alternative proposal, Staff is recommending direct cost recovery fees, which are based on direct labor and division overhead. In cases where the City is provided with less than a two week period to complete requested services, the end user would have the option to pay the fees including overtime labor rates. Overtime fees allow for the recovery of costs for work scheduled outside of regular business hours.
Planning & Community Development
Public Notification Fee
Staff is proposing a new fee to recover costs associated with the preparation of mailing labels for public hearings on private development projects. Using the City’s GIS system, staff can more efficiently and accurately prepare this material which, to date, applicants have been required to prepare and submit as part of the development application package. The fee is expected to generate $5,000-$11,000 per year.
Housing and Economic Development Department
Outdoor Dining License Fees
On February 22, 2011, Council approved a fee schedule for license fees charged to restaurants operating outdoor dining on public sidewalks. The resolution formally setting the fees is presented to Council as part of the FY 2011-13 budget. The current fees will increase by CPI until FY 2013-14, when the new rates will take effect.
Community & Cultural Services
Human Services Grants Program & Organizational Support Program Grants for Arts and Culture Nonprofits
The Community and Cultural Services Department solicits funding requests from local human service and arts and cultural organizations for programs benefiting the community. Funding requests are evaluated based on Council-adopted funding rationale (January 11, 2011) and budget priorities along with documented needs and priorities identified through Council-adopted community plans (such as the Action Plan to Address Homeless in Santa Monica, Youth Violence Prevention in Santa Monica, Evaluation of Services for Older Adults and City’s FY 2010-15 Consolidated Plan).
The Proposed Human Services Grants Program (HSGP) for FY 2011-15 (Attachment G1) identifies each nonprofit organization and program proposed for funding and details the proposed program activities. The total recommended FY 2011-12 funding level is $7,419,647 ($7,027,792 for operating grants and $391,855 for capital/one-time projects), which is $344,344 over the FY 2010-11 funding level. To date, 15 agencies have provided comments on the Proposed HSGP. Two agencies, Upward Bound House and Meals on Wheels West, transmitted letters requesting increased funding. In addition, Meals on Wheels West transmitted 30 client letters to support the request for increased funding while expressing appreciation for the City’s support. Since the release of the draft document on May 16, 2011, funding recommendations established in the Proposed HSGP have not changed, with the exception of minor modifications to descriptions and cash match for various programs. Staff will return to City Council in FY 2011-12 with a funding recommendation for WISE & Healthy Aging in for senior service operations, once terms are negotiated and a final recommended grant amount is determined.
The Proposed Organizational Support Program Grants for FY 2011-13 (Attachment G2) identifies each nonprofit organization proposed for funding. The total recommended FY 2011-12 funding level is $244,600. This represents an increase of $8,030 over the FY 2010-11 funding level. The majority of public comments received to date expressed gratitude to the City for ongoing support of the arts and for maintenance-of-effort funding during the economic downturn. A small number of cultural organizations, including some that were recommended for funding and some that were not, requested clarifications and panel comments from the proposal review process. Since the release of the draft document on May 16, 2011 the proposed funding recommendations have not changed.
Funding recommendations established in these plans will serve as a framework for continued grant funding over a two-year period, FY 2011-12 through FY 2012-13, for the OSP Grants and a four-year period, FY 2011-12 through FY 2014-15, for the HSGP. Once approved, funding will be available beginning July 1, 2011 through June 30, 2012 and may be renewed an additional one year (OSP) or three years (HSGP) contingent upon available funding, effective program performance, ability to meet existing and emerging priority community needs, and City Council approval.
A contract will be executed with each organization approved for funding and City staff will work closely with organizations to promote quality services, monitor contract compliance, and advise agency staff on program, administrative, and fiscal matters.
A number of HSGP organizations provide outreach and in-home services to residents in Santa Monica. Non-profit agency staff and volunteers drive their own vehicles to deliver these services in the community. Staff recommends that the City continue to grant up to five parking permits for each City-funded program that provides outreach and in-home services. Additional permits will be issued at $15 per permit per year which is consistent with the current fee for a Preferential Parking Permit for residents. City staff will continue to monitor the issuance of these permits.
Federal Supportive Housing Program (SHP) Renewal Grants
The City has received Supportive Housing Program (SHP) funds for coordinated case management since 1996. At this time, staff is requesting authorization accept to grant funds from the Los Angeles Homeless Services Authority (LAHSA) for the SHP grant in the amount of $381,941 for a one year renewal (November 1, 2011 – October 31, 2012).
On March 21, 2005, the U.S. Department of Housing and Urban Development (HUD) announced a $10 million funding initiative for housing for people who are homeless and addicted to alcohol. Staff is requesting authorization to accept grant funds from HUD for the Serial Inebriate grant in the amount of $491,791 for a one year renewal (for the sixth year of the grant).
Approving the resolutions at Attachments E1 – E4, will:
a) adopt the FY 2010-11 Budget revenue at the account level, with operating expenditure appropriations for the Salaries and Wages and Supplies and Expenses (including Capital Outlay) major expenditure categories within a fund for each department, and capital improvements within a fund;
b) re-appropriate funds from FY 2010-11 into FY 2011-12 for: continuing capital projects (not to exceed $58,923,923 for the General Fund, $216,428,946 for the Redevelopment Agency, $8,220 for the Housing Authority, $254,007,775 for all other funds, and $2,361,095 for the Disaster Recovery Fund);
c) authorize staff to roll over appropriations for multi-year operating grants not completed at the end of the fiscal year, unspent donations dedicated to programs, and the encumbrances for goods and services purchased by FY 2010-11 year-end but not delivered or provided until FY 2011-12.
GANN Appropriations Limit
State law places limits on the amount of Santa Monica’s General Fund appropriations that can be made without voter approval based on certain growth factors in Santa (City population change and Statewide personal income). This restriction was placed in effect in November 1979 with the approval of Proposition 4, commonly known as the GANN Initiative (Article XIII B of the State Constitution).
Staff recommends that this item be continued until June 28, 2011.
Adoption of the Proposed Budget as amended by Attachments B and C will formally adopt the first year and approve the second year of the City’s FY 2011-13 biennial budget for the City’s programs and services. Approval of the changes on Attachment A will revise the FY 2010-11 budget as shown.