Sales Tax Citizens’ Oversight Committee

Agenda prepared by: City Clerk (925) 779-7009 SALES TAX CITIZENS’ OVERSIGHT COMMITTEE Antioch Council Chambers 200 “H” Street MAY 8, 2014 4:00 P.M. ROLL CALL Committee Members: Joseph O. Adebayo Melvin Chappel Ralph Garrow Barbara Herendeen Hansel Ho Salvatore Sbranti Catherine Walker Staff Liaison: Dawn Merchant, Finance Director PLEDGE OF ALLEGIANCE PUBLIC COMMENTS ITEMS 1. Committee Formation and Duties Actions: STAFF REPORT 1. Motion to receive and file report 2. Motion to elect a Chair and Vice Chair of the Sales Tax Citizens’ Oversight Committee 3. Motion to establish a meeting schedule, location and any other meeting procedures 2. Measure C Budget Information STAFF REPORT  Informational report only  PUBLIC COMMENTS WRITTEN/ORAL COMMUNICATIONS ADJOURNMENT Notice of Availability of Reports This agenda is a summary of the discussion items/actions proposed to be taken by the Sales Tax Citizens’ Oversight Committee. Materials provided regarding the agenda items will be available at the following website: http://www.ci.antioch.ca.us/CityGov/Agendas/default.asp or at the City of Antioch Finance Department located on the 1st floor of City Hall, 200 H Street, Antioch, CA 94509, Monday through Thursday, for inspection and copying (for a fee). Copies are also made available at the Antioch Public Library for inspection. The meetings are accessible to those with disabilities. Auxiliary aides will be made available for persons with hearing or vision disabilities upon request in advance at (925) 779-7009 or TDD (925) 779-7081. Notice of Opportunity to Address the Committee The public has the opportunity to address the Committee on each agenda item. To address the Committee, fill out a yellow Speaker Request form, available on each side of the entrance doors, and place in the Speaker Card Tray. This will enable us to call upon you to speak. Each speaker is limited to not more than 3 minutes. Comments regarding matters not on this Agenda may be addressed during the "Public Comments" section on the agenda. No one may speak more than once on an agenda item or during “Public Comments”. PLEASE TURN OFF CELL PHONES BEFORE ENTERING COUNCIL CHAMBERS. STAFF REPORT TO THE SALES TAX CITIZENS’ OVERSIGHT COMMITTEE AT THE MEETING OF MAY 8, 2014 Prepared By: Dawn Merchant, Finance Director Date: April 29, 2014 Subject: Measure C Budget Information DISCUSSION On March 25, 2014, City Council was presented a first draft of the General Fund budget, including Measure C. The draft budget was again presented and discussed on April 8, 2014. The following budget was presented and discussed in relation to Measure C: CHART A June 30, June 30, June 30, June 30, 2014 2015 2016 2017 Projected Fund Balance July 1, $10,109,883 $7,887,249 $8,087,590 $7,138,029 Revenues: Taxes 28,382,304 29,659,478 30,526,663 31,463,673 Taxes – Measure C 0 4,489,747 4,579,540 4,762,722 Licenses & Permits 1,161,006 1,157,500 1,157,500 1,177,500 Fines & Penalties 45,112 35,100 35,100 40,000 Investment Income & Rentals 495,415 498,510 503,410 512,680 Revenue from Other Agencies 348,450 452,000 532,000 580,476 Current Service Charges 1,950,871 2,146,880 2,160,148 2,167,215 Other Revenue 866,610 824,040 854,040 614,040 Transfers In 3,734,473 3,761,471 3,783,898 3,839,376 Total Revenues $36,984,241 $43,024,726 $44,132,299 $45,157,682 Expenditures: Legislative & Administrative 1,121,493 640,039 654,284 636,019 Finance 36,964 38,700 43,180 38,213 Nondepartmental 624,361 782,349 801,470 848,945 Public Works 5,976,206 6,211,567 6,305,767 6,424,241 Police Services 27,956,371 27,923,456 27,900,169 31,321,130 Police Services – Measure C 0 3,291,110 5,452,327 4,592,090 Police Services – Animal Support 490,900 523,815 547,102 563,515 Recreation/Community Services 799,390 830,002 846,796 872,200 Community Development 2,201,190 2,419,447 2,368,815 2,374,973 Code Enforcement – Measure C 0 163,900 161,950 170,632 Total Expenditures $39,206,875 $42,824,385 $45,081,860 $47,841,958 Net (2,222,634) $200,341 ($949,561) ($2,684,276) Projected Fund Balance June 30, $7,887,249 $8,087,590 $7,138,029 $4,453,753 Committed for Police Services –Measure C 0 1,034,737 0 0 Committed for Compensated Absences 98,586 115,000 115,000 115,000 Committed for Litigation Reserve 500,000 500,000 500,000 500,000 Unassigned Reserve % 19.71% 14.96% 14.78% 8.50% ________________ 5-8-14  CHART B Police Department Measure C Funding Police Police Budget Police Budget Budget FY15 FY16 FY17* 13/14 Baseline Budget $28,447,271 $28,447,271 $28,447,271 Measure C projection 4,325,847 4,417,590 4,592,090 Measure C carryover 0 1,034,737 0 Budget Allotment 32,773,118 33,899,598 33,039,361 Proposed/projected 31,738,381 33,899,598 37,312,293 Difference under/(over) budget $1,034,737 $0 ($4,272,932) th *The proposed/projected budget has been revised since April 8 with Council direction to increase staffing to 104 sworn (this has not been updated in Chart A on previous page). As discussed with the City Council, Measure C revenues will be allocated directly to the Police and Code Enforcement budgets in the General Fund. Projected Measure C revenues are being allocated to Code Enforcement in an amount equal to the cost of hiring one additional contract code enforcement officer, additional equipment needed for this position, and allocation of 20% more of the Deputy Director of Community Development’s staff time for code enforcement matters, for a total of $163,900. This leaves $4,325,847 to be allocated to the Police Department budget as reflected in Chart B above. This amount is being added to what the Police Department budget is for the current fiscal year to provide a total budget allotment for the Police Department for the upcoming fiscal year (2014-15) of $32,773,118. The proposed budget for fiscal year 2014-15 is based on 97 sworn positions, with the addition of 1.5 new non-sworn positions. This results in a budget carryover being added to the Police budget in fiscal year 2015-16 on top of the projected annual Measure C revenue. Fiscal year 2015-16 is based upon 100 sworn positions and 2016-17 is based upon 104. The Chief of Police will have the discretion for the best use of the funds to achieve public safety goals, for example it may be more efficient to hire a Community Service Officer in lieu of a sworn position. In addition, more vehicles and safety equipment may be needed as well, which will reduce how much can be spent on staffing. A meeting of the Oversight Committee will be held in December to provide more detailed budget to actual information for the Police Department and Code Enforcement. Staffing and hiring updates will also be provided for the Police Department. ATTACHMENTS A. March 25, 2014 Budget Staff Report to the City Council B. April 8, 2014 Budget Staff Report to the City Council 2  ATTACHMENT A STAFF REPORT TO THE ANTIOCH CITY COUNCIL FOR CONSIDERATION AT THE MEETING OF MARCH 25, 2014 Prepared by: Dawn Merchant, Finance Director Reviewed by: Steve Duran, City Manager Date: March 13, 2014 Subject: Budget Development Fiscal Years 2014-16 RECOMMENDATION Provide direction and feedback to staff regarding the budget information provided. SUMMARY This study session is the first of several to begin building the fiscal year 2014-2015 budget and review projections for the fiscal year 2015-2016 budget. BACKGROUND The purpose of this study session is to start a preliminary review of the General Fund, as well as the Recreation and Animal Services Special Revenue Funds and Prewett Enterprise Fund as subsidies to these programs are integral to the General Fund budget. We are projecting to finish fiscal year 2014-2015 with just over $7.98M in fund balance, without utilizing reserves. The 2014-2015 budget as presented in Chart C represents full year funding of all vacancies in the General Fund and we expect there will be savings to further increase the fund balance (reserves) in this upcoming fiscal year. It is important to present staffing as fully funded in order to see a clear picture of the full impact to the General Fund and what it can afford to bear. Projections for fiscal year 2015-2016 and 2016-2017 are also provided for the General Fund in Chart C to better analyze where we are headed based on actions to date. While we are not adopting a 2015-2016 or 2016-2017 budget at this time, the Council needs to be aware of the potential for projected General Fund deficits, based on preliminary estimates. GENERAL FUND June 30, 2014 Current fiscal year projections indicate a fund balance of $7.86M, which is higher than projected with the adoption of the fiscal year 2013-2014 budget. This equates to an unassigned fund balance of 19.66% which exceeds the fund balance policy target of 15%. While this may sound like good news, it is important to note that revenues are projected to be just shy of $37M, which is still $10.3M short of pre-recession levels. Although the City has been successful in building up the fund balance since the recession began through severe cuts and employee concessions, fiscal year 2013-2014 is seeing the end of ___________ 3-25-2014  ATTACHMENT A one-time revenues that have been band aids for the City’s economic crisis. While departments have revised their budgets for this year to account for as much anticipated expenditure savings (including vacancies) as possible, we are projecting deficit spending of $2.24M for 2013-2014. A discussion of each of the next two fiscal years follows. June 30, 2015 Projected revenues in fiscal year 2014-2015 have increased $5,956,588 over fiscal year 2013-2014. The major factor contributing to this increase is Measure C, the half cent sales tax approved to take effect April 1, 2014. We have conservatively budgeted $4,489,747 for the fiscal year until actual figures can be seen. Measure C revenue is segregated on the General Fund table that follows later in the report (Chart C) and is being allocated to Police Department and Code Enforcement expenditures as directed by the City Council. This is also segregated out on the table as well. Other assumptions included in fiscal year 2014-2015 are:  5% increase in property tax revenue with an additional $450,000 estimated from the northeast annexation representing a half year of property tax revenue from the annexation, with a full year represented in fiscal year 2015-2016.  1.8% increase in sales tax revenue.  APOA and APSMA are entitled to a salary increase between a minimum of 2% and a maximum of 4.25% based on the existing four-city formula September 1, 2014. The budget assumes a 3% increase.  PERS employer contribution rate of 26.25% for miscellaneous and 34.255% for safety, representing a 2.563% increase in the miscellaneous rate and 2.575% increase for safety.  Increased cafeteria benefit cost of 8% for APOA and APSMA bargaining groups, with 4% for all others.  Increased workers compensation premiums of 20%.  Continue to fund medical after retirement and police supplementary retirement plans on pay as you go basis.  Continue to fund street light electricity costs out of Gas Tax.  Existing elected official voluntary reductions continue.  Furloughs still in place ($662,765 cost to General Fund to reinstate and $1.47M citywide).  Continue to fund vehicle replacement account with non-General Fund sources only.  Earthquake insurance for Prewett, City Hall and Police Facility (estimate cost of insurance to be approximately $125,000). Staff recommends reinstating earthquake coverage on these facilities and is requesting Council concurrence.  Library facility maintenance funding of $135,000. For the past several years, this funding has been paid out of the Residential Development Allocation Fund. In fiscal year 2013-2014, that funding source was depleted and the full cost will have to be paid out of the General Fund. Staff recommends Council consider whether or not to continue funding this maintenance.  Payment of $300,000 to the Office Equipment Replacement and Vehicle Replacement Funds towards the $1.5M borrowed in fiscal year 2009-2010 to help 2  ATTACHMENT A balance the budget. This was discussed with Council earlier in the year to be repaid over five years, with fiscal year 2013-2014 being the first year.  Code Enforcement: o Increase the time allocation of Deputy Director of Community Development from 40% to 60% for Code Enforcement, funding the additional 20% with Measure C. Shift responsibility for Recreation to other staff. o Hiring of one more contract code enforcement position to be funded by Measure C.  Police: o Allocate remainder of Measure C to Police Department. o Sworn officer funding of 97 for fiscal year 2014-2015 (this may be adjusted at the discretion of the Chief of Police to other non-sworn positions such as CSO’s). o Funding of Police Communications Supervisor (not funded in fiscal year 2013-2014). o Funding of Senior Administrative Assistant in the Police Department (not funded in fiscal year 2013-2014).  Other (non Measure C) staffing adjustments: o The Human Resources Technician was split 50/50 between the Police and Human Resources. We are proposing to put 100% of the position back into Human Resources. Human Resources has identified $42,000 in cost savings to help offset the cost. o Funding of an Associate Planner in Community Development to assist with the increased workload. This is almost cost neutral due to contracts ending for the Northeast Annexation and that being re-directed to funding for this position. o Remove funding of Chief Building Official and continue to pay existing employee special assignment pay when performing some of these duties. o Reclassification of the following positions to better reflect job duties (which also result in minor increases to personnel costs):  Human Resources Director to Administrative Services Director.  Administrative Analyst in Economic Development to Economic Development Program Manager.  Secretary in the Planning Department to Community Development Technician, Assistant Level  Changes to Recreation staffing as discussed on page 8. Measure C Measure C was passed by the voters in November 2013 for “Restoring Antioch Services”. City Council has directed that the funds will be used to enhance Police and Code Enforcement activities, with the goal of putting more police and code enforcement officers on the street. Although 102 sworn positions have been authorized, the General Fund has not been able to support that level of staffing due to the financial hardships the City has been facing since 2009. Sworn staffing has hovered in the 80 FTE range in the last several years. Significant vacancy savings in the police department realized each year since 2009 have helped the City close the budget gap. In fact, vacancies for 19 sworn positions were accounted for in the fiscal year 2013-2014 budget. 3  ATTACHMENT A In the fiscal year 2014-2015 budget, we are using the revised fiscal year 2013-2014 budget for the Police Department as the starting point for fiscal year 2014-2015 and adding projected Measure C revenue for the total budget allotment for police services in total (including the Animal Services subsidy). This is shown in Chart A. CHART A Police Department Measure C Funding Police Police Budget Police Budget Budget FY15 FY16 FY17 13/14 Baseline Budget $28,447,271 $28,447,271 $28,447,271 Measure C projection 4,325,847 4,417,590 4,592,090 Measure C carryover 0 561,856 0 Budget Allotment 32,773,118 33,426,717 33,039,361 Proposed/projected 32,211,262 33,901,135 36,474,230 Difference under/(over) budget $561,856 ($474,418) ($3,434,869) In fiscal year 2014-2015 projected expenditures in Chart A, based upon staffing for 100 sworn, are under the total allocated spending threshold for the Police Department. However, based upon Chart A, the projected Police Department budget increases for fiscal year 2015-2016 and 2016-2017 exceed the projected Measure C revenues for those years. In fiscal year 2016-2017, Police Department costs are projected to significantly exceed General Fund base plus Measure C projected revenues. Rather than spending all 2014-2015 Measure C funds in fiscal year 2014-2015, we are proposing to reduce staffing to 97 sworn in 2014-2015 and carry-forward a larger amount of unused Measure C funds to the next fiscal year to add to the fiscal year 2015-2016 spending allocation to increase staffing to 100 sworn, thereby balancing the next two fiscal years of budget allotment (shown in Chart B). This method of carrying forward the allocation ensures that expenditures are first applied to General Fund general revenues and then to Measure C. It will then be at the discretion of the Chief of Police to determine the staffing model that will best utilize allocated funds for maximum impact to safety in the City. The Chief is in the best position to determine the most effective mix of sworn officers, CSO’s and other Police Department staff. CHART B Police Department Measure C Funding Police Police Budget Police Budget Budget FY15 FY16 FY17 13/14 Baseline Budget $28,447,271 $28,447,271 $28,447,271 Measure C projection 4,325,847 4,417,590 4,592,090 Measure C carryover 0 1,036,274 0 Budget Allotment 32,773,118 33,901,135 33,039,361 Proposed/projected 31,736,844 33,901,135 36,474,230 Difference under/(over) budget $1,036,274 $0 ($3,434,869) 4  ATTACHMENT A The City Council will need to decide, based on the overall General Fund budget, if they will dip into declining reserves or slow down the growth of the Police Department budget so that the additional Measure C funds, on top of the 2013-2014 base General Fund allocation, is sustainable beyond the next two years. The City Manager and Finance Director strongly recommend, at minimum, balancing the two year Police Department budget projection (as presented in Chart B) by effecting Measure C savings in fiscal year 2014-2015 and carrying these savings forward so that fiscal year 2015-16 is balanced. Otherwise, the City will continue with a structural deficit and General Fund reserves will dip dangerously low, necessitating lay-offs at that point. The fiscal year 2014-2015 budget allocates $163,900 of Measure C funding to Code Enforcement. This represents funding of one more contract code enforcement officer with necessary equipment (for a total of 3) and 20% more staffing allocation of the Deputy Community Development Director to the program. June 30, 2016 Revenues are projected to increase 2.7% over fiscal year 2014-2015. While we are projecting a 5% increase in property tax, most other revenue sources continue to remain fairly flat. Expenditures are projected to increase approximately $2.25M above fiscal year 2014- 2015 to $45,052,049. This is mainly due projected salary increases in the Police Department, rising PERS and health care costs, rising insurance and other contractual costs. Assumptions included in fiscal year 2015-2016 are:  Overall 5.4% increase in personnel costs.  PERS employer contribution rate of 28.3% for miscellaneous and 36.7% for safety, representing a 2.05% increase in the miscellaneous rate and 2.445% increase for safety.  Work furloughs still maintained.  Existing elected official voluntary reductions still in place.  Continue to fund medical after retirement and police supplementary retirement plan benefits on a pay as you go basis.  Maintain funded staffing levels from fiscal year 2014-2015.  Continue to fund vehicle replacement account with non-General Fund sources only.  Earthquake insurance for Prewett, City Hall and Police Facility at an estimated cost of $137,500.  Library maintenance funding of $140,000.  Payment of $300,000 to the Office Equipment Replacement and Vehicle Replacement Funds towards the $1.5M borrowed in fiscal year 2009-2010 to help balance the budget. 5  ATTACHMENT A Projections The revised fiscal year 2013-2014, proposed budget for fiscal year 2014-2015 and current projections for the following two fiscal years are presented in Chart C below. CHART C June 30, June 30, June 30, June 30, 2014 2015 2016 2017 Projected Fund Balance July 1, $10,109,883 $7,867,023 $7,984,052 $7,004,131 Revenues: Taxes 28,362,078 29,639,043 30,506,020 31,442,822 Taxes – Measure C 0 4,489,747 4,579,540 4,762,722 Licenses & Permits 1,161,006 1,157,500 1,157,500 1,177,500 Fines & Penalties 45,112 35,100 35,100 40,000 Investment Income & Rentals 495,415 498,510 503,410 512,680 Revenue from Other Agencies 348,450 452,000 532,000 580,476 Current Service Charges 1,950,871 2,146,938 2,160,106 2,167,215 Other Revenue 866,610 824,040 854,040 614,040 Transfers In 3,734,473 3,677,725 3,744,412 3,799,890 Total Revenues $36,964,015 $42,920,603 $44,072,128 $45,097,345 Expenditures: Legislative & Administrative 1,121,493 626,012 631,290 610,333 Finance 36,964 38,001 42,479 37,784 Nondepartmental 624,361 780,267 796,280 838,125 Public Works 5,976,206 6,209,966 6,304,168 6,422,744 Police Services 27,956,371 27,923,456 27,900,169 31,318,625 Police Services – Measure C 0 3,289,573 5,453,864 4,592,090 Police Services – Animal Support 490,900 523,815 547,102 563,515 Recreation/Community Services 799,390 830,002 846,796 872,200 Community Development 2,201,190 2,418,582 2,367,951 2,374,076 Code Enforcement – Measure C 0 163,900 161,950 170,632 Total Expenditures $39,206,875 $42,803,574 $45,052,049 $47,800,124 Net (2,242,860) $117,029 ($979,921) ($2,702,779) Projected Fund Balance June 30, $7,867,023 $7,984,052 $7,004,131 $4,301,352 Committed for Police Services –Measure C 0 1,036,274 0 0 Committed for Compensated Absences 98,586 115,000 115,000 115,000 Committed for Litigation Reserve 500,000 500,000 500,000 500,000 Unassigned Reserve % 19.66% 14.75% 14.50% 8.17% As you can see, we are projecting to balance the budget next year and then deficit spend in fiscal years 2015-2016 and 2016-2017. This is due to several factors: small projected increases in the major sources of revenues; previously negotiated salary increases; increases in insurance premiums; projected increases in PERS rates. Expenditures are only going to continue to rise and significantly for PERS contributions in future years beginning in fiscal year 2016-2017. New assumptions were adopted by CalPERS in 2014 to take effect in fiscal year 2016-2017 and will have a significant impact to all agencies throughout California beginning in that fiscal year. We are estimating a 4.6% rate increase in safety (for a total rate of 41.3%) and 3.5% increase in miscellaneous (for a total rate of 31.8%) employer contributions over fiscal year 2015-2016. 6  ATTACHMENT A The projections for fiscal years 2015-2016 and 2016-2017 are working baseline estimates for planning purposes and continued vacancy and other savings may significantly lessen the deficits. The City needs to use these projections to chart our course going forward to determine funding priorities as we continue with the strategic planning process that has begun. We need to look for long term stability. OTHER FUNDS The Recreation Fund, Prewett Water Park Fund and Animal Services Fund all receive operating subsidies from the General Fund thus it is important to review them in conjunction with the General Fund. The budget summaries are presented next. Recreation & Prewett Water Park Funds Recreation Fund 219 2013-14 2014-15 2015-16 Revised Proposed Projected Beginning Balance, July 1 $70,518 $104,613 $153,953 Revenue Source: Investment Income 1,000 100 100 Revenue from Other Agencies 13,000 13,000 13,000 Current Service Charges 1,078,450 1,157,450 1,207,450 Other 35,300 35,000 35,000 Transfer in from General Fund 494,650 577,002 579,796 Transfer in from Senior Bus 7,700 7,700 7,700 Transfer in from Child Care Fund 35,000 35,000 35,000 Total Revenue 1,665,100 1,825,252 1,878,046 Expenditures: Personnel 799,538 946,314 976,063 Services & Supplies 821,426 819,448 821,359 Transfers Out 10,041 10,150 10,259 Total Expenditures 1,631,005 1,775,912 1,807,681 Ending Balance, June 30(a) $104,613 $153,953 $224,318 (a)Fund balance maintained for monies collected for Sports Field, Memorial Field and Turf Field maintenance and replacement. 7  ATTACHMENT A Prewett Water Park Fund 641 2013-14 2014-15 2015-16 Revised Proposed Projected Beginning Balance, July 1 $319 $417 $945 Revenue Source: Interest Earnings 300 300 300 Current Service Charges 931,700 938,700 938,700 Other Revenue 1,577 500 500 Transfer in from General Fund 304,740 253,000 267,000 Transfer in from Child Care Fund 35,000 35,000 35,000 Total Revenue 1,273,317 1,227,500 1,241,500 Expenditures: Personnel 640,601 614,662 630,020 Services & Supplies 623,075 602,664 602,259 Transfers Out 9,543 9,646 9,750 Total Expenditures 1,273,219 1,226,972 1,242,029 Ending Balance, June 30 $417 $945 $416 The Recreation and Prewett Water Park Funds have a combined subsidy from the General Fund of $830,002 in fiscal year 2014-2015. This is $30,612 higher than the current fiscal year with only a moderate increase projected in fiscal year 2015-2016. The increase is due primarily to staffing changes being proposed for the Recreation Department. Currently, oversight falls under Community Development with direct supervision provided by the Deputy Community Development Director. Staff feels that this department would be better served by having a full time Parks & Recreation Director that can concentrate on running programs more efficiently and cost effectively. The budget tables presented above reflect staffing changes as follows:  Parks & Recreation Director funded 50% from each fund. This classification does not currently exist and will have to be brought back to Council with a job specification and salary range.  Removing oversight by the Deputy Community Development Director which is currently charged a total of .20 between the two funds.  Removal of 1 recreation supervisor and 1 recreation specialist position currently funded and vacant.  Addition of funding for 1 Aquatics Maintenance Worker, replacing a position currently funded with part time help.  Addition of funding for 1 Recreation Coordinator, replacing a position currently funded with part time help. 8  ATTACHMENT A Animal Control Fund Animal Control Fund 214 2013-14 2014-15 2015-16 Revised Proposed Projected Beginning Balance, July 1 $11,592 $0 $0 Revenue Source: Current Service Charges 300,000 295,000 295,000 Investment Income 14 0 0 Revenue from Other Agencies 74,000 70,000 70,000 Other Revenue 11,914 11,000 11,000 Transfer in from General Fund 490,900 523,815 547,102 Total Revenue 876,828 899,815 923,102 Expenditures: Personnel 615,343 638,197 661,130 Services & Supplies 272,516 261,051 261,399 Transfers Out 561 567 573 Total Expenditures 888,420 899,815 923,102 Ending Balance, June 30 $0 $0 $0 The subsidy from the General Fund is moderately projected to increase over the current fiscal year mainly due to projected salary increases. Staffing is proposed at the same level. However, the current staffing authorizes 3.75 FTE’s for Animal Care Attendants which are filled by several part time temporary employees and one permanent part-time employee. These positions are being changed to strictly part-time temporary employees, as the permanent part-time designation is an anomaly and inappropriate for the staffing model. NEXT STEPS Staff will be bringing forth budgets for remaining funds of the City for Council deliberation, including the five year capital improvement program. The final budget document incorporating all budgets that have been presented will be brought for Council approval on June 10, 2014. OPTIONS 1. Provide direction to staff regarding the budget information provided. 9  ATTACHMENT B STAFF REPORT TO THE ANTIOCH CITY COUNCIL FOR CONSIDERATION AT THE MEETING OF APRIL 8, 2014 Prepared by: Dawn Merchant, Finance Director Reviewed by: Steve Duran, City Manager Date: April 1, 2014 Subject: Budget Development Fiscal Years 2014-16 RECOMMENDATION Provide direction and feedback to staff regarding the budget information provided. SUMMARY This study session continues the budget study session from March 25, 2014 centering on budget development for the General Fund, Recreation Fund, Prewett Water Park Fund and Animal Control Fund. BACKGROUND AND DISCUSSION The City is projecting a significant structural deficit over the next several years and is on a course to deplete General Fund reserves. The use of all Measure C funds for Police Services and Code Enforcement as directed by the City Council does not address this issue and, in fiscal year 2016-17, the level of deficit spending is projected to be $2.7M, reducing the General Fund reserve to $4.45M. The budget projections presented in Attachment A show the reserves running dangerously low in fiscal year 2018-19 and fully depleted in 2019-20. The projections are based on a 4% per year increase in costs and a 5% per year increase in revenues after fiscal year 2016- 17. The 2016-17 costs include increases in PERS for changes in actuarial assumptions that are being phased in over five years and are projected to increase PERS rates an additional 1.5% for Miscellaneous and 2.5% for Safety beyond the normal estimated rate increases. These cost estimates do not include additional potential health premium increases due to the new regions PERS is considering for the health plans. No financial impact information has been provided by PERS at this time, but if these new regions are approved we know that the rates will be higher starting January 1, 2015. Staff does not recommend any deficit spending. However, given the direction on the use of Measure C funds, it is essential to at least slow the pace of deficit spending. Staff’s recommended budget slows the pace of deficit spending by using any increases in non-Measure C sources of revenue to reduce the structural deficit. This is a very optimistic approach, hoping that the City can buy enough time for the current wave of development applications to bring forth development that will increase property tax, sales tax and Measure C revenues significantly enough to avoid significant lay-offs about three years down the road. Attachment A to this report shows the impacts of deficit spending on future budgets and projecting the depletion of the ________1_______ 4-8-14  ATTACHMENT B General Fund reserve. It also compares projected balances to the recommended minimum unassigned fund balance equivalent to two months of operating expenditures to provide a level of financial stability and cash flow. The minimum balance is recommended by the Government Finance Officers Association, an organization that provides financial and accounting guidance to government entities. At the study session on the 25th, several items were discussed by the City Council and requested to be brought back with more information. Specifically: 1) Property Tax revenue history prior to fiscal year 2006-2007 to reflect what the City was receiving before the “bubble”. The history demonstrates that the City needs more development to increase our property tax and assessed values still have not returned to pre- recession levels. Please see the chart below for fiscal years 2003-04 through 2014-15: Property Tax History 2003-04 through 2014-15 2003-04 $20 2004-05 Millions $19.05M 2005-06 $18.58M $15 2006-07 $17.13M $16.04M 2007-08 2008-09 $13.64M $10 $12.98M $13.41M $12.41M $12.38M 2009-10 $11.71M $11.65M 2010-11 $7.18M $5 2011-12 2012-13 $0 2013-14 2014-15 The chart reflects a significant increase in property tax revenues from 2003-04 to 2004-05. On August 5, 2004 the governor signed SB 1096, Chapter 211, Statutes of 2004 which reduced the Vehicle License Fee (VLF) rate from 2% to .65%. When this reduction was instituted, the difference was replaced with a like amount in the form of additional property taxes to cities. Fiscal year 2004-05 was the first year of receiving this “Property Tax in Lieu of VLF” , which accounts for some of the large increase shown above. The amount received under this formula increases annually in proportion to the growth in assessed valuation in the jurisdiction. Fiscal year 2014-15 includes the first year of revenue from the Northeast Annexation, estimated at $450,000 in this first year representing 50% of the annual estimate due to the timing of when the annexation was completed. Building permits issued prior to 2007 were as follows: 2  ATTACHMENT B Building Permits Issued Single Multi- Family Family Calendar Year Units Units 2004 124 140 2005 350 2006 172 40 2007 154 Total 800 180 2) Overtime costs incurred by City staff as a result of being on furloughs. Total General Fund non-police department overtime incurred in fiscal year 2012-13 was $32,199. Departments have indicated that the time is attributable to both furlough and non- furlough reasons and it is difficult to segregate out the cost attributable to each. 3) Information on the repercussions of not paying for library maintenance costs. Staff is still researching this question and will provide information at the meeting on the 8th if available; otherwise it will be brought back at a future meeting. 4) Police sworn staffing was 82 thirty days prior to the November election. 5) Total personnel cost of all police sworn and non-sworn staffing hired in the last four months. Seven Police Officers and one CSO have been hired since November 1st. Current annual salary and benefit costs are $1,024,585 for the seven Officers and $98,975 for the CSO. However, there has also been salary savings which have occurred through attrition, with 6 total sworn positions having separated since November 1st. 6) How many Officers could the Police allocated Measure C revenue fund? We are projecting $4,325,847 in Measure C revenue allocation to the Police Department in fiscal year 2014-15. The amount of Officers this could fund varies on the step the Officer would come in as (A, B, C, etc.), whether they are a “classic” or “PEPRA” PERS employee, what extra compensation the Officer may receive, and what level of benefit coverage they are entitled to. For purposes of this analysis to make it as least complicated as possible, we used the salary of a lateral Officer at Step E receiving the highest level of extra compensation and benefits possible (educational, senior Officer, family cafeteria benefits) and then lateral Step C and a new Officer at Step A for a comparison range (based on fiscal year 2014-15 budgeted salary costs). The cost does not include costs that may be incurred for shift differential, field training, standby pay, holiday pay, bilingual pay or additional overtime. These additional costs could increase the cost per Officer. Each new Officer also has hiring costs that are paid for recruitment/background, uniform and safety equipment. The breakdown of these costs is itemized on the next page. 3  ATTACHMENT B Amount for Lateral Amount for Entry Hiring Cost Item Hire Level Hire Polygraph/Background/Psychological/Medical $3,550 $3,550 Uniform 1,700 1,700 Academy Uniform 0 380 Academy Tuition 0 4,385 Salary & Benefits for Academy Student 0 39,335 FTO additional salary (8 wks lateral/20 new) 1,255 3,055 Safety & Other Equipment 4,610 5,380 Total Cost Per Hire $11,115 $57,785 This next table details the total cost per officer with hiring costs, and how many positions that equates to. Total Hiring Total Cost per Potential # of Officers Officer level & Salary Costs Officer Step E, lateral = $208,850 $11,115 $219,965 19 Step C, lateral = $192,445 11,115 203,560 21 Step A, new = $154,400 57,785 212,185 20 It is important to note that such a significant increase in the amount of officers may require additional senior sworn staff, vehicles, equipment, support staff, etc. which are not accounted for in the table above and will impact the number of Officers that can ultimately be hired as the funds may need to be directed to other staffing and equipment needs besides just the hiring of patrol officers. 7) A static General Fund base budget is being proposed for the Police budget because the General Fund is running a significant structural deficit. Since all Measure C funds are going to increase Police and Code Enforcement spending, any non-Measure C revenue increases are being used to reduce that deficit. 8) Costs for all staffing proposals outlined on March 25th. • In accordance with the existing labor agreements, Antioch Police Sworn Management Association (APSMA) and Antioch Police Officers Association (APOA) salary increases are projected at 3% effective September 1, 2014 at a budgeted cost of $514,220. The cost may be higher or lower depending on the analysis of the four city formula done at that time. The minimum salary increase will be 2% and the maximum 4.25%. Council would have to direct the City’s labor negotiators to request APSMA and APOA to open their contracts in order to discuss forgoing this increase. There is a Re-opener Clause in the APSMA agreement, so only a written request to meet and confer would be required. The APOA agreement does not contain a Re-opener Clause, and would therefore require the consent of the bargaining unit to initiate discussions. • Reclassification of Human Resources Director to Administrative Services Director to reflect work assignments. This results in additional costs of $8,805 (of which 4  ATTACHMENT B $4,904 is annual salary and the remainder is benefit costs). Although this job classification and salary range would need to be established, the proposal is to establish the range at the same level as the Finance Director. • Reclassification of Administrative Analyst in Economic Development to Economic Development Program Manager to reflect work assignments. This results in additional costs of $16,716 (of which $4,190 is annual salary and the remainder is benefit costs). However, this classification will be exempt from overtime, creating a savings to offset some of these costs. This job classification and salary range would need to be established so the actual cost could be more depending on the salary range. The cost represents the salary equivalent of a Senior Planner, Step D, in the Management Bargaining Unit. The following matrix outlines all staffing adjustments proposed that fall under the umbrella of Community Development with the total net impact to the budget. Community Development Staffing Proposals Description Cost/(Savings) Associate Planner $113,780 Contract for Northeast Annexation (savings to offset Associate Planner) (112,520) Reclassification of Secretary to Community Development Technician 3,773 Chief Building Official (remove funding - existing employee continue to perform some duties) (153,320) 20% of Deputy Director of Community Development to Code Enforcement - Measure C funding (33,700) Parks & Recreation Director* 214,625 Recreation Supervisor (remove funding) (103,740) Recreation Specialist (remove funding) (93,970) Aquatics Maintenance Worker 87,195 Recreation Coordinator 65,500 Part-Time Help reductions (Recreation/Waterpark staffing) (105,345) Net Savings of all Staffing Proposals ($117,722) *Job classification and salary range would need to be established therefore the cost figure is an estimate only As demonstrated above, the staffing adjustments proposed in Community Development actually result in a net savings to the City of $117,722 overall. Adding the above noted costs of the reclassifications outside of Community Development, the net savings to the City remains $92,201. 9) The cost of a Business License Representative at Step A would be $73,600. Staff does not feel the potential increase in fees from being able to more thoroughly enforce collections would offset the cost of this position as the base business license fee is only $25. However, staff feels it may be more cost effective to outsource collection efforts to a company that could find undiscovered business licenses. These companies charge a fee based on what is collected and fees typically range from 30-40% of collected revenues. 5  ATTACHMENT B PROJECTIONS Since the meeting on the 8th, a few adjustments have been made to the 2014-15 proposed budget figures; the estimate for earthquake insurance was increased to $150,000, reduction of the library maintenance cost to $112,082 based on a letter received from the County, costs for OES training, adjustment of lighting and landscape transfers based upon the draft engineers report, as well as some other minor adjustments. As in the past couple of budget years, the budget also assumes that the City continues to provide reduced maintenance levels for trails and paths throughout the City, including recreational trails, bike paths, parks, and the trail at the Marina and along the river waterfront. The City could close these trails and paths to avoid possible liability, but Council has given prior direction to keep these trails and paths open despite declining levels of maintenance given the immunities provided by the Government Claims Act for trails and paved walkways. Language, the same included in the prior year budget resolution, will be in the resolution on June 10th memorializing this assumption. Chart A reflects an update to the chart provided at the previous meeting showing June 30, 2014 revised, June 30, 2015 proposed and projections for 2015-16 and 2016-17 budget for the General Fund. Chart B reflects the proposed Police Department budget with the addition of Measure C funding and Attachment A to the staff report is a projection for the General Fund going out to 2021-22. Assumptions for 2017-18 and beyond assume a 5% increase in revenues and a 4% increase in expenditures annually. 6  ATTACHMENT B CHART A June 30, June 30, June 30, June 30, 2014 2015 2016 2017 Projected Fund Balance July 1, $10,109,883 $7,887,249 $8,087,590 $7,138,029 Revenues: Taxes 28,382,304 29,659,478 30,526,663 31,463,673 Taxes – Measure C 0 4,489,747 4,579,540 4,762,722 Licenses & Permits 1,161,006 1,157,500 1,157,500 1,177,500 Fines & Penalties 45,112 35,100 35,100 40,000 Investment Income & Rentals 495,415 498,510 503,410 512,680 Revenue from Other Agencies 348,450 452,000 532,000 580,476 Current Service Charges 1,950,871 2,146,880 2,160,148 2,167,215 Other Revenue 866,610 824,040 854,040 614,040 Transfers In 3,734,473 3,761,471 3,783,898 3,839,376 Total Revenues $36,984,241 $43,024,726 $44,132,299 $45,157,682 Expenditures: Legislative & Administrative 1,121,493 640,039 654,284 636,019 Finance 36,964 38,700 43,180 38,213 Nondepartmental 624,361 782,349 801,470 848,945 Public Works 5,976,206 6,211,567 6,305,767 6,424,241 Police Services 27,956,371 27,923,456 27,900,169 31,321,130 Police Services – Measure C 0 3,291,110 5,452,327 4,592,090 Police Services – Animal Support 490,900 523,815 547,102 563,515 Recreation/Community Services 799,390 830,002 846,796 872,200 Community Development 2,201,190 2,419,447 2,368,815 2,374,973 Code Enforcement – Measure C 0 163,900 161,950 170,632 Total Expenditures $39,206,875 $42,824,385 $45,081,860 $47,841,958 Net (2,222,634) $200,341 ($949,561) ($2,684,276) Projected Fund Balance June 30, $7,887,249 $8,087,590 $7,138,029 $4,453,753 Committed for Police Services –Measure C 0 1,034,737 0 0 Committed for Compensated Absences 98,586 115,000 115,000 115,000 Committed for Litigation Reserve 500,000 500,000 500,000 500,000 Unassigned Reserve % 19.71% 14.96% 14.78% 8.50% CHART B Police Department Measure C Funding Police Police Budget Police Budget Budget FY15 FY16 FY17 13/14 Baseline Budget $28,447,271 $28,447,271 $28,447,271 Measure C projection 4,325,847 4,417,590 4,592,090 Measure C carryover 0 1,034,737 0 Budget Allotment 32,773,118 33,899,598 33,039,361 Proposed/projected 31,738,381 33,899,598 36,476,735 Difference under/(over) budget $1,034,737 $0 ($3,437,374) 7  ATTACHMENT B While we are projecting a balanced budget in the next fiscal year, expenditures are projected to grow at a quicker pace than anticipated revenues causing deficit spending in fiscal year 2015-16, with the trend continuing in 2016-17 and beyond. It is imperative to be cognizant of the projected deficits in all budget decisions made to ensure the General Fund remains financially stable to avoid future severe cuts to services which are already at bare minimum levels. There are a few items Council direction is still needed on regarding the General Fund budget: • Earthquake Insurance for Council Chambers, City Hall and Police Facility at an estimated cost of $150,000 (included in budget projections in Chart A and Attachment A). • Library facility maintenance at an estimated cost of $112,082 (included in budget projections in Chart A and Attachment A). • Proposed staffing adjustments. NEXT STEPS Staff will be bringing forth budgets for remaining funds of the City for Council deliberation. The final budget document will be brought for Council approval on June 10th. ATTACHMENT A. General Fund Projections 8  ATTACHMENT B General Fund Projections 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 Beginning Fund Balance $10,109,883 $7,887,249 8,087,590 $7,138,029 $4,453,753 $2,113,683 $154,166 ($1,385,868) ($2,464,747) Total Revenues 36,984,241 43,024,726 44,132,299 45,157,682 47,415,566 49,786,344 52,275,661 54,889,444 57,633,916 Total Expenditures 39,206,875 42,824,385 45,081,860 47,841,958 49,755,636 51,745,861 53,815,695 55,968,323 58,207,056 Surplus/(Deficit) (2,222,634) 200,341 (949,561) (2,684,276) (2,340,070) (1,959,517) (1,540,034) (1,078,879) (573,140) Ending Fund Balance $7,887,249 $8,087,590 $7,138,029 $4,453,753 $2,113,683 $154,166 ($1,385,868) ($2,464,747) ($3,037,887) Committed 598,586 1,649,737 615,000 615,000 615,000 115,000 0 0 0 Unassigned Fund Balance $7,288,663 $6,437,853 $6,523,029 $3,838,753 $1,498,683 $39,166 ($1,385,868) ($2,464,747) ($3,037,887) Recommended minimum unassigned fund balance* $6,534,479 $7,137,398 $7,513,643 $7,973,660 $8,292,606 $8,624,310 $8,969,283 $9,328,054 $9,701,176 over/(under) $754,184 ($699,544) ($990,614) ($4,134,907) ($6,793,923) ($8,585,144) ($10,355,150) ($11,792,801) ($12,739,063) *The Government Finance Officers Association recommends cities maintain unassigned fund balance/reserves equal to at least two months of operating expenditures. ATTACHMENT A