City Council Meeting: June 12, 2012
Agenda Item: 9-A
To: Mayor and City Council
Chairperson and Redevelopment Successor Agency members
Chairperson and Housing Authority members
Chairperson and Parking Authority members
From: Gigi Decavalles-Hughes, Director of Finance
Subject: Adoption of the Second Year of the Fiscal Year (FY) 2011-13 Biennial Budget and the first year of the FY 2012-14 Biennial Capital Improvement Program Budget; Approval of FY 2011-12 Year-End Budget Changes; Approval of Personnel Changes, Approval of Resolutions Adjusting and Establishing Various Rates and Fees and a Resolution Establishing the GANN Appropriations Limit for FY 2012-13; Approval of the Proposed Human Services Grants Program and Organizational Support Program Grants for Arts and Culture Nonprofits for FY 2012-13; and Authorization to Negotiate and Execute Contracts with Human Service Grantees and Arts and Culture Grantees.
Staff recommends that the City Council, Housing Authority, Redevelopment Successor Agency and Parking Authority:
Staff also recommends that the City Council:
1) Approve the Resolution of the City of Santa Monica establishing new classifications and adopting salary rates for various positions detailed in Attachment F1;
2) Approve the position and classification changes detailed in Attachment F2;
3) Approve the amended FY 2012-13 Fiscal Policy (Attachment G);
4) Approve the resolutions of the City of Santa Monica setting and revising various fees in the Office of Sustainability and the Environment, Finance Department and Public Works Department (Attachments H1-H3);
5) Approve the Resolution of the City of Santa Monica establishing the GANN appropriations limit for Fiscal Year 2012-13 (Attachment I);
6) Approve the Proposed FY 2012-13 Human Services Grants Program (HSGP), incorporating the proposed Fiscal Year 2012-13 funding levels and amendments (Attachments J1 and J2);
7) Authorize the City Manager to negotiate and execute a contract with Social and Environmental Entrepreneurs for fiscal sponsorship of the Pico Youth and Family Center, a grantee of the HSGP, with the proposed funding conditions, as shown in Attachment J3;
8) Approve the Proposed Fiscal Year 2012-13 Organizational Support Program (OSP) Grants for Arts and Culture Nonprofits, incorporating the proposed funding levels (Attachment J4);
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; and
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.
This report presents information and requests actions necessary to adopt the second year of the Fiscal Year 2011-13 biennial budget for the City of Santa Monica and first year of the FY 2012-14 Biennial Capital Improvement Program (CIP) Budget. The City Council approved the FY 2012-13 Budget Plan on June 21, 2011, at the same time as it adopted the FY 2011-12 Budget. Every effort has been made to maintain the June 2011 funding and staffing levels, with the exception of necessary adjustments to reflect new information and significant program changes. These changes are included in the FY 2012-13 Proposed Budget staff recommends for adoption as part of this report. Staff also recommends the creation of new fees that recover costs for specific services, and changes to the FY 2011-12 Revised Budget to reflect significant unanticipated events.
On February 8, 2011, Council approved the implementation of a biennial budget process that included revisiting the five year forecast every six months and only making limited second year budget changes as needed. Council adopted the FY 2011-12 Budget and approved the FY 2012-13 Budget Plan on June 21, 2011. At the time, the five year forecast showed a deficit beginning in FY 2013-14. On January 10, 2012, Council received an update of the City’s five year financial forecast that showed a projected deficit of $100,000 in FY 2015-16, and approved midyear changes to the FY 2011-12 Revised Budget. At this time, staff also recommended an increase in the General Fund operating and capital contingency minimum amount from 10 percent to 15 percent of total revenue-supported operating and capital expenditures (Attachment G).
Since January, staff completed an exception-based budget process, requesting budget adjustments only if programs, activities or revenue had changed significantly since the FY 2011-13 Biennial Budget adoption. These adjustments, first presented to Council on May 22, 2012 align the FY 2012-13 Budget with current operations. Also presented to Council on May 22, 2012 were the FY 2012-14 Proposed CIP Budget and the financial status update. The Proposed CIP Budget, which includes $55.8 million and 53 General Fund projects, and $191.7 million and 142 capital projects Citywide, funds those capital projects identified as the City’s highest priorities while still maintaining existing infrastructure. The financial status update included the proposed operating and capital budgets and showed a potential structural deficit of approximately $3.6 million beginning in FY 2014-15, increasing to approximately $4.6 million in FY 2015-16. This projection is higher than prior estimates primarily due to the decreased revenues resulting from the dissolution of redevelopment in the short term, to the higher pension costs resulting from the California Public Employees Retirement System (CalPERS) discount rate change, and new operating and maintenance costs for new public spaces, in the long term.
As part of the Budget adoption process, on June 21, 2011 Council approved the Final Proposed FY 2011-15 Human Services Grants Program (HSGP) and the Organizational Support Program (OSP) for Arts and Cultural Nonprofits. The program goals and funding levels established in the FY 2011-15 HSGP serve as a framework for continued grant funding over a four-year period. On May 22, 2012, Council directed staff to proceed with incorporating the proposed funding levels and amendments into the FY 2012-13 HSGP. No proposed programmatic or funding changes for the OSP grants were recommended.
The City of Santa Monica’s FY 2012-13 Proposed Budget is $530.5 million, of which $274 million is in the General Fund.
FY 2012-13 Proposed Budget Adjustments
The FY 2012-13 Proposed Budget is largely based on the approved FY 2012-13 Budget Plan and includes adjustments as presented to Council on May 22, 2012 and shown in Attachments A and B. A portion of the adjustments carry over from budget revisions approved in FY 2011-12, and the rest are new changes to recognize updated revenue projections, corrections based on historical spending, and program changes.
Updates to Proposed Expenditure Changes – General Fund
Since the May 22, 2012 report, staff has made the following additional adjustments:
· Personal Protective Equipment ($90,000): reflects transfer of funds for Fire Safety Officer protective equipment purchases from the capital to the operating budget, to correctly show it as an ongoing operating cost. This change is cost neutral, and is included and footnoted in Attachment B.
· Staffing changes ($35,698): these changes reflect the results of classification studies and title changes completed after May 22, 2012. $31,460 of the total is a General Fund cost, and $4,238 is a Big Blue Bus Fund cost. These items are included in the General Fund and Big Blue Bus totals in Table 1 below, and included and footnoted in Attachment F2.
· Capital Improvement Program changes ($87,942): On March 27, 2012, Council approved the purchase of equipment for City TV’s new studio production facility. Additionally, the Fire Department has requested funds to purchase a graphic data analysis tool to decrease response times and better allocate resources. To realize these purchases, $450,000 and $38,942 respectively have been added to the FY2012-13 capital budget. The added projects increase the two year General Fund capital budget to $56.3 million and funds 55 projects. The street sweeper camera enforcement project ($401,000), originally proposed to be funded by the General Fund and the Resource Recovery and Recycling Fund, is being postponed to incorporate the results of a cost benefit analysis and to determine whether the project would be funded solely by the General Fund. Therefore, the project funded by the Resource Recovery and Recycling Fund has been removed from the Proposed CIP Budget. The Citywide capital budget has increased to $191.8 million and provides funds for 144 projects (Attachment C).
With these adjustments, the FY 2012-13 Proposed Budget revenues are below the Budget Plan by $0.6 million in the General Fund and $40.1 million in all other funds, primarily due to the dissolution of redevelopment and the loss of property tax increment revenue. Expenditures in the General Fund are higher than the Budget Plan by $3.5 million, and in all other funds by $13.5 million, due primarily to water purchases, Successor Agency debt service programming, and Big Blue Bus budget realignment to reflect current operations. All FY 2012-13 Proposed Budget adjustments described above are listed in Attachments A and B and summarized in Table 1 below. The budget remains balanced when these adjustments are incorporated.
As part of the budget process, proposed employee classification and compensation changes were reviewed by the Human Resources Department and the City Manager’s Office. The resulting classification and salary changes and position list are presented in Attachments F1 and F2.
Goals and Objectives
During the FY 2012-13 exception-based budget process, departments reviewed goals and objectives with the City Manager, and made minor changes to reflect updated timelines and programs. These revised goals and objectives will be incorporated in the FY 2012-13 Adopted Budget online documents and in department workplans, which are tracked quarterly.
Note: Changes since May 22, 2012: General Fund expenditure total increased by $121,460. Of this amount, $90,000 is for a CIP cost moving to operating, and $31,460 is for salary-related increases reflected in Attachment F2. The Big Blue Bus fund (41) increased by $4,238. Corresponding totals (FY 2012-13 changes, total Proposed Budget changes) increased by the same amount.
Proposed Fee Revisions
Part of the City’s strategy to sustain fiscal health is to set user fees at levels that recover the City’s cost of providing a specific service. Certain new fees and revisions to existing fees are included in the proposed changes to the FY 2012-13 Proposed Budget, as follows. Staff recommends that Council adopt fee resolutions related to the following:
Fees Set and/or Amended (Attachment H1):
· Film Permit Application Fee changed to recover staff costs, established new location fees and incorporated location-related changes to the Citywide filming policy, and revisions to the fee for Business License Processing.
Landscape Inspection and Plan Check Fees:
· New fees to recover City costs to review landscape plan submittals for major remodel and new construction projects and associated project inspections (Attachment H2).
· New fees to recover City costs for inspection of construction projects per the urban runoff mitigation plan (Attachment H3).
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 a growth factor calculated on changes in Santa Monica population and either State per capita personal income growth or the growth in non-residential assessed valuation. This restriction was placed in effect in November 1979 with the approval of Proposition 4, commonly known as the (Paul) Gann Initiative. The City’s GANN Appropriations Limit, based on growth in non-residential assessed valuation times the annual percentage population change for the City in FY2012-13, is $1,187,650,733.
A comparison of the City's FY 2012-13 GANN Appropriations Limit and FY 2012-13 appropriations and tax proceeds subject to limitation as set forth in the City's Proposed FY 2012-13 Budget follows:
Proposed GANN Limit-related Spending for FY 2012-13
Appropriations Subject to Limitation
Proposed Gann-related Tax Proceeds Spending for FY 2012-13
Revenues Subject to Limitation
FY 2012-13 appropriations subject to limitation are $1,025,488,646 less than the City’s GANN Appropriations Limit. In terms of receipt of tax proceeds, the City is $1,004,375,133 under the GANN Limit. A resolution to establish the City's FY 2012-13 GANN Appropriations Limit is included in Attachment I.
Community and Cultural Services Grants
Human Services Grants Program
The City has appropriated funds in the FY 2012-13 Budget to the grantee organizations at the FY 2011-12 funding levels with a 2.5 percent cost of living adjustment (COLA). Attachment J2 lists the individual grantee agreements previously approved for funding through the FY 2011-15 Human Services Grant Program and the grant amounts in the FY 2012-13 Budget. Highlights of the program include: a 2.5% COLA for grantees, strengthening of Good Neighbor Agreements for all HSGP recipients, operating and capital funding to complete the service delivery transition from the City to WISE & Healthy Aging for older adults/senior services and a last chance agreement for funding for the Pico Youth and Family Center to ensure accountability for public funds along with focused service delivery to the most vulnerable gang involved youth ages 16- 24, as detailed in attachment J3.
Federal Supportive Housing Program (SHP) Renewal Grants
The City has been receiving Supportive Housing Program (SHP) funds for coordinated case management since 1996. At this time, staff is requesting authorization to accept 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, 2012 – October 31, 2013).
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 seventh year of the grant).
Organizational Support Program (OSP) Grants for Arts and Culture
Attachment J4 lists the individual grantee agreements previously approved for funding and the grant amounts in the FY 2012-13 Budget.
Approving the resolutions in Attachments D1-D4, will:
· Adopt the FY 2012-13 Budget revenues 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 improvement program budget within fund;
· 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 2011-12 year-end but not delivered or provided until FY 2012-13.
· Authorize staff to roll over appropriations for the General Fund and all other Non-general Fund unexpended encumbrances for the fiscal year 2011-12 capital improvements program budget.
FY 2011-12 Budget Changes
Proposed changes to the FY 2011-12 Revised Budget are necessary to accurately reflect significant changes in expenditures in the current fiscal year, or to modify budgets to reflect program changes implemented throughout the year. A detailed listing of changes is included in Attachment E. Two significant changes are described below:
Paydown of Unfunded Pension Liability
Retirement unfunded liability is a significant City obligation that can, and has, increased dramatically due factors largely outside of the City’s control. Because the City is in an overall strong fiscal condition, it is able to make large, one time payments that decrease ongoing charges. On June 21, 2011, Council approved a $10 million payment to CalPERS ($8.8 million General Fund; $1.2 million other funds), with an estimated $800,000 annual associated savings. Staff recommends an additional $10 million one-time payment to CalPERS for FY 2011-12 ($8.0 million General Fund; $2.0 million other funds). Funds are available in the fund balances of various funds. In the General Fund, funds as of June 30, 2011 were set aside specifically for this purpose in a PERS Paydown assignment. Staff anticipates realizing an additional $800,000 in savings per year from this payment; $630,000 of this savings is budgeted in the General Fund and an additional $170,000 in savings budgeted in other funds , as shown in Attachment B.
The City’s Warehouse closed on May 1, 2012. Staff took this step to lower overhead costs and to make space available for programs. The space vacated by the Warehouse in the Corporation Yards will provide the City flexibility as it loses portions of the Colorado Yards to Expo Line construction. The City will realize ongoing savings through staff reduction, noted in Attachment D2. However, in FY 2011-12, the City must make a one-time expenditure associated with the warehouse supplies and parts that have either been issued to various operating divisions of the City for use at a later date or, if obsolete, written off as surplus supplies and parts. The City must record this expenditure in FY 2011-12 to reflect the warehouse closing in this year. Therefore, staff recommends the release of $1.2 million of Non-Spendable General Fund fund balance and appropriation of this amount to the FY 2011-12 Revised. Once a final physical inventory count is taken, the actual expenditures will be made. Staff is also requesting an expenditure appropriation of $450,000 in the Water Fund to recognize similar expenses in this fund.
Expenditure Control Budgeting
For the first time, each department will have the benefit of using one third of its year-end savings through the expenditure control budgeting program. Staff will appropriate these funds for departments’ use as part of the midyear budget adjustments in January 2013. Expenditure control budgeting is a best practice budgeting-saving technique. No action is required at this time.
Budget-related information received from the Recreation and Parks Commission is included as Attachment K.
Adoption of the Proposed Budget as amended by Attachments A and B will formally adopt the second year of the City’s FY 2011-13 biennial budget for the City’s programs and services. Adoption of Attachment C will formally adopt the first year of the Fiscal Year 2012-14 Capital Improvement Program Budget. Approval of the changes as amended by Attachment E will revise the FY 2011-12 budget as shown.
Forwarded to Council:
Director of Finance