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HomeMy WebLinkAbout2008 02 26 CC MIN SS2008 02 26 CC MIN SSÄ—@¸—B1 Í«MINUTES CITY OF BALDWIN PARK CITY COUNCIL, COMMUNITY DEVELOPMENT COMMISSION & HOUSING AUTHORITY TUESDAY, FEBRUARY 26, 2008 6:00 p.m. ROOM 307 14403 E. Pacific Avenue Baldwin Park Manuel Lozano, Mayor Anthony J. Bejarano, Mayor Pro Tern Marlen Garcia, Monica Garcia, Ricardo Pacheco Council Members Maria Contreras, City Treasurer Susan Rubio, City Clerk The CITY COUNCIL, COMMUNITY DEVELOPMENT COMMISSION & HOUSING AUTHORITY of the City of Baldwin Park met in SPECIAL SESSION at the above time and place. CALL TO ORDER PUBLIC COMMUNICATIONS NONE REPORTS OF OFFICERS 1. 2007-08 MID YEAR BUDGET WORKSHOP Chief Executive Officer Singhal presented the report. Stated that trends are positive although there are some challenges on the horizon. Proactive efforts will make it possible for city to get through these tough times. CEO Singhal deferred the presentation to Consultant Bass. Revenue Highlights: Real Property Transfer Tax down 48% Motor Vehicle License fees down 12% Moving Violation Redflex down 26% Expenditures by category 73% Personnel Polilce Department largest, Recreation second largest) Councilmember/Member Bejarano inquired if the percentages shown include the reductions that were made in the prior year. CEO Singhal responded yes. He further inquired if there were proactive steps that the city could take to reduce that cost. CEO Singhal responded that the use of technology is one option that would improve processes. He also stated that non-sworn personnel was reduced by 20%. If the city had a plan to stem costs not just in the short term by reducing non-sworn but also as it relates to new hires. The work force could be less expensive. CEO Singhal commented that the city did things to add value because unlike Page 1 of 9 BIB] 39597-U01 2008-U02 02-U02 26-U02 CC-U02 MIN-U02 SS-U02 LI1-U03 FO8420-U03 FO117552-U03 DO117559-U03 C4-U03 MINUTES1-U03 5/28/2008-U04 ROBIN-U04 2008 02 26 CC MIN SSÄ—@¸—B1 Í«the private sector, the city could not increase revenues. Consultant Bass stated that GASBY retirement cost included the total component of what the city was presently paying. In response to an inquiry from Mayor/Chair Lozano staff responded that when an individual retired they will have lifetime medical benefits. In response to an inquiry from Councilmember/Member Marten Garcia, staff indicated that the city is drawing down on all monies that can be drawn down upon. Potential options were: Evaluate and freeze non-sworn positions; Identify and implement recommendations to increase revenues; Prioritize and evaluate the operations and implement ways to eliminate redundancy, waste and non-essential functions. CEO Singhal stated that there would be changes but the outlook is hopeful. Many accomplishments have been made in the past years with the support of the Council. In response to an inquiry from Councilmember/Member Pacheco staff indicated that reorganization would be done so that work continues to be completed. Items with the least amount of impact may not be done. Mayor/Chair Lozano requested that a message be placed in the NOW regarding the budget so that residents could see how they may be effected by these economic situations. Councilmember/Member Pacheco stated that he did not want public safety being sacrificed. CEO Singhal stated that public safety is a priority and would not be cut. Any changes would have to be approved by the Council. Councilmember Pacheco wanted to ensure that more officers are hired. PURPOSE To discuss the Mid Year budget performance for the City for the Fiscal Year 2007/2008 BACKGROUND & DISCUSSION For FY 2007-2008 the City adopted its budget at $43,047,000 with the General Fund budget at $23,274,100. The General Fund budget was balanced with revenues exceeding expenditures after transfers) by $240,000. The budget provided funding for numerous programs including funding for 192 positions. The current year has witnessed several issues such as a slowdown of the economy, lower home prices and home sales, potential for foreclosures and lower consumer spending. As a result the State of California is expecting budget deficits of enormous proportions. Many cities Page 2 of 9 BIB] 39597-U01 2008-U02 02-U02 26-U02 CC-U02 MIN-U02 SS-U02 LI1-U03 FO8420-U03 FO117552-U03 DO117559-U03 C4-U03 MINUTES1-U03 5/28/2008-U04 ROBIN-U04 2008 02 26 CC MIN SSÄ—@¸—B1 Í«and counties are also expecting significant budget constraints due to economic slowdown and lower tax revenues. While our City is also impacted by these factors causing our revenues to be lower than budgeted, we are in a better position then many due to our proactive strategy over the past year. Additionally we have been monitoring our revenues and expenditures on a regular basis. Mid year gives us an opportunity to evaluate our actual revenue and expenditure trends compared to the budget and recommend changes if any. Due to the condition of the economy this Mid year review will also provide us an opportunity to look at the next year's budget, evaluate trends, and take necessary steps to change strategy if necessary in a timely manner. This report consists of following components: 1. Mid Year Trends a) General Fund and Departmental trends b) Trends for other funds 2. Outlook for the next fiscal year including preliminary budget projections General Fund Mid Year Trends The Mid-year trends suggest that our revenues are likely to be lower than budget primarily due to lower tax revenues and lower revenues from traffic violations including redflex cameras. However, these revenue shortfalls will be offset by expenditure savings giving us an overall positive performance. It is anticipated that the General Fund and its supported funds will end another year second year) in the black. The primary reason for lower expenditures is personnel cost savings due to vacancies. We have approximately 15 vacancies contributing to a potential salary and benefits savings for the year of $900,000. Based on Mid Year trends it is expected that overall General Fund performance will be positive as shown in the table below: See Staff Report General fund includes Traffic Safety Fund also As shown in the table the General Fund is expected to end the year with an overall saving of approximately $600,000, which is about $232,000 greater than the adopted budget. This amount is higher than the approved budget amount especially in view of the fact that the approved budget did not include the full impact of labor negotiations, which were concluded after the adoption of the budget. The savings are however one time savings because they are the result of vacancies. As these positions are filled the savings would not be there. General Fund Revenues: Page 3 of 9 BIB] 39597-U01 2008-U02 02-U02 26-U02 CC-U02 MIN-U02 SS-U02 LI1-U03 FO8420-U03 FO117552-U03 DO117559-U03 C4-U03 MINUTES1-U03 5/28/2008-U04 ROBIN-U04 2008 02 26 CC MIN SSÄ—@¸—B1 Í«For the fiscal year the total General Fund revenues are expected to be approximately 2.5% or $635,700 lower than budget. As shown in the following table, based on current trends at mid year several revenues are likely to be lower than budget. The primary reasons for revenues being lower than budget are; slower economy, lower consumer spending and impact of housing market. General Fund relies heavily on taxes and sources, which are not in city's control as shown in the following chart" See Staff Report Due to reliance on sources beyond our control our budgets have greater volatility. Following table shows the trends of major revenue sources: See Staff Report Note: Includes traffic safety fund revenue It is important to evaluate some revenue sources: Sales Tax: Based on data from the State the midyear trends indicates that the Sales Tax revenue is up by only 2% compared to the prior year, however, the budget anticipated a growth of approximately 5%. Additionally we anticipate lower sales tax due to closure of Altman's RV and lower sales tax from home improvement stores. Property Tax: Similarly property taxes were budgeted to grow at 5% even though they had been growing at 10% in prior years.. As a result of the condition of the housing market, which is impacted by delinquencies the growth in property tax collections is not expected to be more than 2%. Motor Vehicle License Fees: the non-property tax portion) are down by about 12% giving an overall shortfall of 2% compared to budget. Real Property Transfer Tax: which is collected on sale of properties is significantly lower than budgeted due to lower home sales almost 50%). Construction permits are also significantly lower. Police revenues from moving violations which includes redflex) are also coming in lower than budget. The citations due to red light violations have been trending downward. These projections are based on midyear trends any further deterioration in the Page 4 of 9 BIB] 39597-U01 2008-U02 02-U02 26-U02 CC-U02 MIN-U02 SS-U02 LI1-U03 FO8420-U03 FO117552-U03 DO117559-U03 C4-U03 MINUTES1-U03 5/28/2008-U04 ROBIN-U04 2008 02 26 CC MIN SSÄ—@¸—B1 Í«economy could cause greater adverse impacts on our revenues. General Fund Expenditures: The revenue shortfall in the General Fund will be offset by lower than expected expenditures. Based on Midyear trends it is anticipated that General Fund expenditures will be lower than budget by approximately $953, 000. Following tables show General Fund projections both by expenditure category as well as by department: See Staff Report The primary reason for lower expenditures is salary savings due to vacant positions. The following table shows General Fund expenditures by department: See Staff Report All departments with the exception of Legal costs are significantly under budget. The reason for legal costs being higher is unanticipated litigation. Departmental Trends Information on revenues and expenditures for each department is attached as Attachment- I". With the exception of some revenues tied to housing and economy such as construction permits, planning fees, engineering fees and police fines departments are ok on revenues. With respect to expenditures, departments are within budget. 1(b) Trends for Other City Funds: Other city funds can be categorized into two categories: those supported/subsidized by the General Fund. While any shortfall in these funds must be paid for by the General Fund any savings are retained in these funds for future expenditures. These funds include funds such as Gas Tax, Prop A, Park Maintenance Assessment District and Street Lighting and Landscape Maintenance Fund. Based on midyear projections these funds are also within budget. Another set of funds represents restricted funds, where the funds are subject to restrictions for example; Asset seizure, grant funds and funds which have legal or other restrictions. No adverse trends are noted in these funds either. Attachment-II' includes a summary of all city funds except CDC and their projections. No major adverse trends are noted in these restricted funds. 2. Outlook for the next fiscal year Page 5 of 9 BIB] 39597-U01 2008-U02 02-U02 26-U02 CC-U02 MIN-U02 SS-U02 LI1-U03 FO8420-U03 FO117552-U03 DO117559-U03 C4-U03 MINUTES1-U03 5/28/2008-U04 ROBIN-U04 2008 02 26 CC MIN SSÄ—@¸—B1 Í«While the current Fiscal Year looks good the next year poses some challenges. In order to have a good perspective of our fiscal future it is important to consider the past. The City has experienced good revenue growth over the past five years, which was attributable to good economic growth fueled by a housing boom and redevelopment projects such as Walmart, Smart and Final that increased both sales tax and property tax revenues. However, this revenue growth was not enough to keep pace with the growing expenditures. In order to maintain essential services and to stay competitive the city invested the revenue increases in providing services to the community. It must be noted that the City of Baldwin Park has a rather smaller tax base compared to many other cities. Our per capita revenues for the General Fund are significantly lower than many cities in the region. Further a significant portion of our General Fund is committed for essential services such as public safety. Our personnel costs also account for a very large portion of the total General Fund budget. This structure makes it very hard for the city to manage big downward swings in revenues without creating service impacts. In the past the city had to use reserves to maintain essential services in times of lower revenue growth. In 2005/2006 General Fund Revenues grew by less than 5% and the city had to take several proactive steps to balance expenditures with revenues. Measures implemented by the city included a restructuring plan, implementation of new revenues as well as measures to keep our spending low. City also had to reduce staffing and budgets for most departments. Compared to actual spending of 2005/2006 the 2007/2008 budget reduced staffing and budgets for many departments. Departments such as Administration, Community Development and Public Works saw staffing reductions of about 20% or more. Despite staffing reductions the budgets for essential services such as public safety programs were preserved or were higher. Staff was also able to identify and implement several creative ideas to improve efficiency of operations and maintain and improve service levels despite staffing and budget reductions. As a result of these measures we are in a better shape than many. Even though our fiscal performance has improved and is better than budget, there are numerous challenges on the horizon created by worsening economic environment. This economic downturn, which has impacted states, cities and private enterprises alike is likely to impact us as well. Following are some of the challenges that we will face in the next year: Page 6 of 9 BIB] 39597-U01 2008-U02 02-U02 26-U02 CC-U02 MIN-U02 SS-U02 LI1-U03 FO8420-U03 FO117552-U03 DO117559-U03 C4-U03 MINUTES1-U03 5/28/2008-U04 ROBIN-U04 2008 02 26 CC MIN SSÄ—@¸—B1 Í«Potential Impact of State's budget problems The State is anticipating a $14 billion budget deficit, Governor's proposed budget proposes 10% across the board cuts including cuts in essential services. The budget also includes a provision to delay payment of Gas Tax to Cities. Impact on Baldwin Park of this proposal would be delay in receipt of approximately $600,000. It is not known when this money will be repaid and if there will be any additional impacts. Proposition IA approved by California Voters prevents the State from taking money from cities to balance its budget as it has done in the past, however it allows the State to borrow money, which it is supposed to pay back within a certain period of time. It is possible that the State may do so and if so it is not known what the impacts would be. If this were to happen the city must have sufficient reserves to cover this payment. *Based on midyear estimates the 2007/2008 yearend unreservedlunrestricted fund balance reserves) for General Fund and funds supported and subsidized by the General Fund including risk management fund is expected to be only $2,000,000 including $1,000,000 for the lock box reserve). This is not a significant amount for a city our size. Even though this fund balance is available for spending as it represents net assets after setting money aside for all obligations) it should not be spent. The city uses the fund balance for its working capital needs to maintain operations during the months of July to January when it does not receive enough tax payments. This reserve is also supposed to protect the city in case of emergencies and allow time to react to fiscal emergencies such as loss of revenues to state of for other reasons. Any payment to the State is likely to cause some hardships and is not factored into midyear projections. *Revised 2.26.08 Desire and ability to maintain competitiveness in the market The City also has to deal with the challenge of staying competitive in the market for its recruitment and retention needs. Absent significant revenue growth or in times of declining revenues as is the situation currently our expenditure growth must not exceed the revenue growth. Therefore we must find innovative ways to provide service and reevaluate our business processes. Additionally use of technology and process simplification must be embraced. Furthermore importance of increasing revenues cannot be overemphasized. While these mean change these are essential in order to generate resources to stay competitive. During the past years most departments have been successful in increasing revenues and reducing costs. We plan to continue our quest to identify creative ways to reduce spending with out impacts and increase revenues to generate resources to hire and retain good staff and stay competitive. Impact of fiscal outlook on 200812009 budget Page 7 of 9 BIB] 39597-U01 2008-U02 02-U02 26-U02 CC-U02 MIN-U02 SS-U02 LI1-U03 FO8420-U03 FO117552-U03 DO117559-U03 C4-U03 MINUTES1-U03 5/28/2008-U04 ROBIN-U04 2008 02 26 CC MIN SSÄ—@¸—B1 Í«Given the current economic scenario we expect a growth of no more than 1- 2%. could be lower if the economic outlook worsens). Based on these projections a preliminary look at 2008/2009 suggests that if we were to budget for all authorized positions, the city would need to either generate new revenues or reduce expenditures to balance the budget. The following table shows the potential impact of slower economy on city's budget. See Staff Report The above table shows that if all vacancies were to be kept vacant we would have a balanced budget. However, there still would not be any amounts for cost of living increases or to restore programs and positions. The city cannot keep all vacant positions vacant because some of the vacancies are in process of being filled and some such as sworn positions are important and need to be filled. Staff therefore needs to identify additional options to not only balance the budget but to generate resources to allow the city to stay competitive for its staffing needs. Additionally efforts to balance the budget must also balance the need to maintain services. Since significant staffing and budget reductions have already been made in many departments in the prior years accomplishing further reductions without generating impacts is a very challenging task. While this is a very tough challenge we are very hopeful that we will be able to generate innovative ideas, revamp business processes, identify new revenue sources and implement technology supported programs to generate efficiencies and balance the budget while maintaining the quality and level of service. Staff is already working on exploring following options: Evaluate and freeze non-sworn vacancies Identify and implement recommendations to increase revenues Prioritize and evaluate the operations and implement ways to eliminate redundancy, waste and non essential functions We expect to bring a balanced budget for Council review in April 2008. FISCAL IMPACT No fiscal Impact at this time RECOMMENDATION Page 8 of 9 BIB] 39597-U01 2008-U02 02-U02 26-U02 CC-U02 MIN-U02 SS-U02 LI1-U03 FO8420-U03 FO117552-U03 DO117559-U03 C4-U03 MINUTES1-U03 5/28/2008-U04 ROBIN-U04 2008 02 26 CC MIN SSÄ—@¸—B1 Í«It is recommended that the City Council review the information and provide directions as deemed appropriate. ADJOURN TO CLOSED SESSION OF THE CITY COUNCIL & COMMUNITY DEVELOPMENT COMMISSION 7:10 p.m. 2. PUBLIC EMPLOYEE PERFORMANCE EVALUATIONS GC 54957) Title: Chief Executive Officer Title: Recreation & Community Services Director Title: Public Works Director Title: Human Resources Manager 3. CONFERENCE WITH LABOR NEGOTIATORS GC 54957.6) A) Agency Negotiator: Manuel Lozano, Mayor Unrepresented Employee: Vijay Singhal, Chief Executive Officer B) Agency Negotiator: Vijay Singhal, Chief Executive Officer Unrepresented Employees: Recreation & Community Services Director Public Works Director Human Resources Manager 4. PUBLIC EMPLOYEE APPOINTMENT GC 54957) A) Interim Chief of Police B) Chief of Police RECONVENE IN OPEN SESSION REPORT FROM CLOSED SESSION No reportable action taken. ADJOURNMENT There being no other matters for discussion the meeting was adjourned at 7:30 p.m. Approved as presented by the Council, Commission and Authority at their meetings held April 16, 2008. Laura M. Nieto Deputy City Clerk Page 9of9 BIB] 39597-U01 2008-U02 02-U02 26-U02 CC-U02 MIN-U02 SS-U02 LI1-U03 FO8420-U03 FO117552-U03 DO117559-U03 C4-U03 MINUTES1-U03 5/28/2008-U04 ROBIN-U04