BURBANK REDEVELOPMENT AGENCY
Tuesday, June 10, 2003
AGENDA
CITY COUNCIL CHAMBER - 275 EAST OLIVE AVENUE
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6:30 P.M.
INVOCATION: Chaplain Sally Kinarthy, Providence Saint Joseph Medical Center.
The Courts have concluded that sectarian prayer as part of City Council meetings is not
permitted under the Constitution.
FLAG SALUTE:
ROLL CALL:
6:30 P.M. JOINT PUBLIC HEARING WITH THE CITY COUNCIL, HOUSING AUTHORITY, PARKING AUTHORITY AND YOUTH ENDOWMENT SERVICES FUND BOARD:
1. PROPOSED FISCAL YEAR 2003-04 ANNUAL BUDGET, CITYWIDE FEE SCHEDULE, INCLUDING AN INCREASE IN THE TRANSIENT PARKING TAX, AND APPROPRIATIONS LIMIT PUBLIC HEARING:
The purpose of this report is to present the proposed Fiscal Year (FY) 2003-04 Annual Budget, Citywide Fee Schedule, including an increase in the Transient Parking Tax, and Appropriations Limit to the Council, Redevelopment Agency, Housing Authority, Parking Authority, and Youth Endowment Services Fund Board for public hearing. The adoption of the FY 2003-04 Budget will be considered by the Council at the June 17, 2003 Council meeting.
The past several years have been trying times, not only from an emotional standpoint, but also from an economic one. Following the tragedy of September 11, 2001 the State and Federal economies began suffering tremendously, and this downturn has finally begun to see minimal signs of recovery. The war in Iraq also contributed to this economic uncertainty.
The State of California deficit for the FY 2003-04 Budget has grown to $38.2 billion and despite numerous attempts, the Legislature is experiencing an uphill battle in finding a compromise that will allow them to reach an acceptable approach to deal with the crisis. The Governor released the �May Revision� to his Proposed FY 2003-04 Budget which continues to propose an approximate $250 million cut in redevelopment funding with increasingly larger cuts every year for 15 years, ultimately raising to cuts totaling $1.2 billion. Excluding the expense of administration, the Educational Revenue Augmentation Fund (ERAF) cost to Burbank�s Redevelopment Agency would increase from $912,120 (projected for FY 2002-03) to between $2.8 and $3.0 million in FY 2003-04 with 5.0 percent annual increases until the school share is removed from redevelopment agencies.
Additionally, the May Revision will impact the General Fund in the following areas: 1) Public Library Fund (PLF) - in conjunction with the proposed $15.8 million reduction in January and an additional $14.8 million reduction in May, $1 million will be remaining in the PLF. Based on this reduction, the City may receive only three percent of revenues received this year, or around $2,800; 2) Booking Fees - the proposed elimination of booking fees paid would amount to a $12,772 reduction in revenues; and, 3) State Mandates - the proposal recommends the suspension of 34 mandates, the repeal of one (Open Meetings Act which requires the posting of agendas), and the deferral of all other mandates. Although the City has not budgeted reimbursement payments for FY 2003-04, there is an actual real loss of revenues that the City has counted on for many years (approximately $227,000 annually). Of further concern in this area is the fact that the Administration intends to draft statutory language necessary to repeal 27 of the 34 mandates during the development of the FY 2004-05 Governor�s Budget.
The good news for local governments is that the Governor�s proposal includes the restoration of the Vehicle License Fee (VLF) to its 2.0 percent level by July 1st and the elimination of the backfill with a net zero impact to local agencies. Although there could be a potential loss from a gap in July and August during the transition from backfill to increased VLF payments due to a lag time of 60 to 90 days, the California Department of Finance has stated their intent to ensure that local agencies do not lose any VLF revenue.
Amidst the State�s budget problems, it is important to understand that Burbank is also experiencing increased recurring expenditures coupled with declining revenues which has caused the 2003-04 fiscal year to be grappled with a significant projected recurring budget deficit. As has been disclosed to the Council in the Five-Year Financial Forecast, with FY 2003-04 the City is beginning the first of some extremely difficult financial years.
It is with this in mind that staff has worked diligently over the past few months to develop a balanced approach to address the long-term structural problem that the City is now faced with. The proposed recurring deficit for FY 2003-04 was originally projected to be approximately $9.5 million and does not include any potential hits from the State. A deficit this large is extremely intimidating, and will no doubt have a negative impact on the delivery of services and programs, and most importantly on employees. As the Executive Team began contemplating the types of reductions that would need to be made this year and over the next five years, it became abundantly clear that there was no way that within a few months the best answer to an on-going problem would be found. As such, the Executives held a number of healthy deliberations, beginning in January and through working side by side as a team reached a compromise on a reasonable way to reduce costs and balance the budget.
Although this approach may not meet the true �spirit� of the City�s financial policies because it proposes the use of one-time money to meet a recurring deficit problem, it does close the gap for this fiscal year. More importantly however, it buys time for the Executives to re-group following the adoption of the FY 2003-04 Budget, and begin the process of developing and producing a strategic plan that will help the City effectuate reasonable and prudent changes to the way business is currently conducted. This process will be all-encompassing in that the Executives will work with the unions to ensure that all avenues are explored and that together the City�s future is contemplated and determined. This strategy will include among many ideas, finding efficiencies in our own business practices while also looking to regional synergy and efficiencies to reduce our on-going costs.
In recognizing that a long-term financial strategic plan must be created, it must also be understood that in the absence of a plan, a balanced budget still needed to be presented to the Council for FY 2003-04. Before any appropriation reductions were achieved by the General Fund departments, the Executives agreed on some basic principles that would drive the budget process for FY 2003-04 and beyond. These principles include: maintaining critical City services with little or no impact; minimally impacting the community by avoiding, where possible, elimination of key programs, and maintaining affordable service fees through reasonable recommended increases; assuring that the City pays market based salaries especially in light of the fact that reductions typically mean doing more with less; not impacting programs that pay for themselves; and, achieving durable reductions to address the structural deficit in FY 2003-04 and into the future.
In light of the Executives� principles and the structural deficit facing the City, it was determined that each department would attempt to identify durable reductions and reasonable and fair increases in fees that would provide for an overall 10 percent reduction. For the most part, each General Fund department achieved or came close to achieving a 10 percent reduction through actual cuts in personnel, materials, supplies and services, and programs as well as fee increases. Making these cuts was not easy and each department will be impacted, some more than others, but each is doing its part to address the deficit.
PROPOSED FY 2003-04 RESOURCES AND APPROPRIATIONS:
The Council has spent a great deal of time reviewing the FY 2003-04 Proposed Budget. Due to the unfortunate need to make such large reductions this year, an initial Budget Study Session was held on April 9, 2003. This Study Session assisted staff greatly in that the Council gave specific direction on the reductions and fee schedule increases that were being proposed and also requested staff to conduct research on certain areas of concern so that they could be well informed when the time came for final decisions to be made.
The Council was presented with the Proposed Budget on May 1, 2003. Subsequently, Budget Study Sessions were held on May 6, May 20, and May 22, 2003.
The FY 2003-04 Budget, as proposed for Council consideration, includes a total recurring General Fund revenue growth of 2.0 percent versus a recurring expenditure growth of 2.5 percent.
The minimal revenue growth assumes the following:
Sales Tax continues to be the largest source of General Fund revenue. For FY 2003-04, Sales Tax is expected to grow at a net 2.2 percent growth rate, accounting for a full year of operation of the Burbank Empire Center, plus anticipated growth in overall collections.
Property Taxes are estimated to increase by 5.5 percent over FY 2002-03. This increase is due to the City�s anticipated growth in assessed valuation related to FY 2003-04.
Utility Users Tax (UUT) was re-estimated downward at the FY 2002-03 mid-year due to the following factors: Cellular telephone UUT revenues continue to increase due to the trend away from traditional telephone usage to cellular, and, UUT revenues from local and long distance phone services continue to decrease while electric UUT revenues continue to under perform budgetary estimates due to another cool summer. However, recent enforcement action related to cellular phone UUT by the City is projected to increase the cellular portion of the UUT, and as such, for FY 2003-04 this revenue category is projected to increase by approximately 4.8 percent over FY 2002-03.
Interest/Use of Money continues to decline due to the interest rates, thus, this revenue category is expected to continue experiencing a significant decrease for FY 2003-04.
Transient Occupancy Tax (TOT) had declined by 6.2 percent even before the events of September 11, 2001. Although Burbank is fortunate to have several new hotels come on line in the past year, the TOT revenues are still lagging behind budget estimates. At this point it is projected to increase by 4.3 percent over FY 2002-03.
Transient Parking Tax (TPT) has been a somewhat consistent revenue for the City over the past few years. However, although a new parking lot opened this past fiscal year near the Airport, with the Airport decreasing their daily rates to $5, the revenues are projected to decrease. As part of the City Fee Schedule, staff is recommending the Council take action to increase the TPT to 12 percent. This action, if approved by the Council, will only cause the revenue to be decreased by $100,000.
The expenditure growth assumes (in addition to approximately $9.5 million in reductions) the following costs:
Public Employees Retirement System (PERS) Costs - Like many agencies, for many years, the City was superfunded in PERS and as a result did not have to pay the actual employer rates and was able to use the budgetary savings for other City expenditures. However, with the downturn of the market and the economy in general as well as the enhanced retirement packages offered to the bargaining groups, the City, along with many other agencies, has lost its superfunded status for miscellaneous employees in FY 2004-05, and thus will again be required to pay PERS the actual employer rates. It is anticipated to cost the City $2.48 million in additional PERS costs for FY 2003-04 and an additional $2.15 million in FY 2004-05.
Memorandum of Understanding Projected Costs - Three of the bargaining units have agreements in place for FY 2003-04. The BPOA calls for an increase of 3.5 percent based on the April CPI, and the BFFA and BFFCOU call for a 3.0 to 5.0 percent increase based on survey. Based on staff�s estimate of where the survey will be, the approximate cost of these already negotiated MOU�s along with the remaining bargaining agreements to be negotiated next year is estimated to cost approximately $3.178 million.
Internal Service Funds (ISF) - The General Liability and Workers Compensation Self-Insurance Funds increased by $1,350,070 due to an increase in both the insurance costs and claims, the Communications Replacement Fund increased by $314,000 to provide sufficient funding to replace radios Citywide over a five or more year period, and the Computer Equipment Replacement Fund had a net increase of $103,000.
With the budget parameters, costs, and revenues in mind, the chart below is the proposed source of funds and appropriations for each fund or fund type for the FY 2003-04 Budget:
*Resources represent the total sources available to each fund, such as taxes, fees, charges, sales, interest, use of fund balance (from bond proceeds, depreciation, and available retained earnings) and includes changes disclosed in the addendums to the Proposed Budget.
** The General Fund variance between proposed sources and appropriations is a result of the following: the inclusion of the 1) use of reserves (Utilities Users Taxes, BWP In-Lieu and related interest earnings) previously designated for BWP competitiveness and set-aside in the General Fund and 2) yet to be settled contracts with several bargaining groups.
CITYWIDE FEE SCHEDULE:
The primary purpose of the Citywide Fee Schedule is to provide a one-stop listing of all City fees, charges, and rates. The Fee Schedule is reviewed and updated annually as part of the budget process in an effort to document all of the fees that have been revised or changed during the fiscal year.
As was previously discussed, there was a conscious effort made to review all of the City�s fees, charges and rates due to the significant budget reduction facing the City. It was agreed that making reductions in costs alone would not be the most prudent course of action, as many more services, programs and employees would no doubt have been affected. Thus, each department that has fees, charges and rates, spent a great deal of time researching the current rates, identifying areas of concern, and conducting surveys of other cities to ascertain a fair and reasonable charge. In addition, some departments were able to identify new fees that were being charged by surrounding communities that made sense for Burbank to consider.
Although there are a number of changes, the following are the more significant fee changes being proposed.
Transient Parking Tax (TPT):
Until recently the TPT has been a stable revenue stream for the City since its inception in 1996. Since its implementation, it has represented approximately 1.9 to 2.0 percent of total General Fund revenues. On an annual basis the City has received approximately $2.04 million in TPT revenues. The only significant drop in this revenue occurred in FY 2001-02 and that could in large part be attributed to the September 11, 2001 tragedy at which time the City collected $1.87 million.
Recently, two significant things have occurred related to the TPT: a new parking lot opened near the Airport and the Airport reduced their daily rate to $5. While the new lot will most likely have a positive impact on the revenue, the decrease in the rates by the Airport has had a significant negative impact on this revenue. Based on current receipts, it is anticipated that the TPT revenues for FY 2003-04 will decrease by approximately $400,000.
Even before the Airport rates decreased, staff was looking for creative ways to increase the City�s revenues to address the projected budget deficit. Increasing the TPT was one way that was suggested by staff.
Following a lengthy analysis of the TPT, including a survey of the rates charged by other cities (November 26, 2002 report included as Attachment 4), the Council approved placing a ballot measure on the General Election for the citizenry to consider increasing the TPT. At the April 8, 2003 General Election, the voters of Burbank approved the ballot measure which allows the City Council to increase the City�s existing TPT from the current rate of 10 percent up to a maximum of 12 percent, after a public hearing on the matter.
In light of the City�s current financial condition, and the fact that there are very few opportunities for the City to effectuate a positive change in a revenue source, staff is recommending that the Council take public comment on the matter at the June 10, 2003 hearing as required by the ballot measure, and ultimately take action at the June 17, 2003 meeting to approve an increase in the TPT from 10 to 12 percent. It is estimated that this increase will provide for the TPT revenue for FY 2003-04 to be decreased by $100,000 instead of $400,000. It is important to note that all of the owner/operators of parking lots subject to the TPT have been notified of this public hearing.
Water Rate:
This is the second year of a five-year smooth ramp-up of a water rate increase, which averages 4.8 percent a year.
Sewer Fee:
Following an extensive analysis of the City�s Sewer Fund cash flow, it was determined that the monthly sewer service charge needed to be increased from $12.89 to $13.99 for a single-family residential household. Other increases are proposed for manure accounts, multi-family residential etc. It is estimated that an approximate $1.10 annual increase will be necessary from FYs 2004-05 through 2007-08.
Street Sweeping Charge:
The street sweeping program, currently funded by the General Fund, will be shifted to the Refuse Fund to comply with the City�s stormwater permit for trash and litter control on City streets. The $.043 charged for this service on the utility bill will be rolled into the refuse rate and charged on a per trash volume basis.
Film Permit Fees:
It is recommended that the existing film permit fee be increased from $200 to $300. Additionally, a new street/sidewalk use fee for film permits is recommended at $200. These proposed fees will still allow the City to have its filming fees among the very lowest of the comparison cities, while at the same time providing a more reasonable revenue stream for the City.
Animal Adoption Fees:
The fees for dogs previously altered are proposed to increase from $15 to $25. The fee for dogs altered by the City are proposed to increase from $45 to $60. It is important to note that the City currently subsidizes at least $10 of previously altered dog adoptions, and at least $30 of dogs altered by the City adoptions. Further, these proposed fee increases still keep Burbank�s fees $5 lower than the average of surrounding jurisdictions.
Monthly Parking Permit Fee:
The monthly parking permit fee is proposed to be ramped up over the next three years. It is proposed that the rate increase from $20 to $24 in FY 2003-04, and increase $4 in FY�s 2004-05 and 2005-06. From surveys performed, staff has found that the full $32 rate is still lower than the fees charged by other cities.
GANN INITIATIVE APPROPRIATION LIMIT:
The City is required by State law to establish an appropriation limit each fiscal year. Only those revenues received from proceeds of taxes are subject to this limit. This means that only certain revenues from funds such as the General Fund and Propositions A & C Transportation Funds are subject to the appropriation limit. All other funds that fall under the Council�s control (i.e. Redevelopment Agency and Enterprise Funds) are exempt from this limitation. The Agency is statutorily exempt and Enterprise Funds receive their funds through service charges, not general taxes.
The City�s FY 2003-04 appropriation limit is estimated to be $116,607,407. The actual amount of the appropriations contained in the budget that is subject to the limit is $86,174,216. The difference between the City�s appropriation limit and the amount subject to it is $30,433,191. As a result, the City has a significant gap between its legal limit and the actual appropriations subject to the limit.
FISCAL IMPACT:
Heading in to the 2003-04 Fiscal Year, the City was faced with an intimidating $9.5 million deficit. This problem, in addition to the implications of the State�s budget deficit of $38.2 billion, provided for a significant challenge for the City to work through.
City staff, along with the Council through the Budget Study Sessions, has developed a balanced budget for FY 2003-04. As was previously discussed, the budget development was based on some guiding principles agreed to by the Executive Team. While it is true that these principles have caused the City to balance its budget using non-recurring dollars, after reducing approximately $9.5 million from the budget and increasing fees reasonably and fairly, it has become apparent that this is the most prudent course of action for the City to take.
After all reductions have been made, and the proposed revenue from the fee increases have been accounted for in addition to the other adjustments made to the appropriations and revenues, it is projected that the City will need to use $1,347,882 from the BWP set-aside to balance the FY 2003-04 Budget. With this use of funds, there is still projected to be $7 million in the BWP set-aside holding account on June 30, 2004.
The adoption of the Budget sets the initial appropriations for the new fiscal year. Appropriations have been balanced against estimated revenue and other sources of funding, such as reserves or bond proceeds and are in compliance with the Council�s adopted financial policies.
Recommendation:
Staff recommends that the City Council/Redevelopment Agency/Housing Authority/Parking Authority/Youth Endowment Services Fund Board conduct the public hearing on the Proposed Fiscal Year 2003-04 Annual Budget, Citywide Fee Schedule, Transient Parking Tax increase, and Appropriations Limit. Staff will incorporate any City Council direction into the Budget resolutions that will be presented to the Council on June 17, 2003 for final adoption.
RECESS to continue the Parking Authority, Youth Endowment Services Fund Board and the City Council meetings.
ADJOURNMENT.