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BURBANK REDEVELOPMENT AGENCYTuesday, June 10, 2003Agenda Item - 1 |
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BURBANK REDEVELOPMENT AGENCYTuesday, June 10, 2003Agenda Item - 1 |
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PURPOSE
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 City 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 their June 17, 2003 Council meeting.
EXECUTIVE SUMMARY
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, the State and Federal economies began suffering tremendously, and this downturn has finally begun to see minimal signs of recovery. The war in Iraq contributed to this economic uncertainty.
The State of California deficit for the 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 their crisis. The Governor released his �May Revision� to his Proposed 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 go 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 Revise 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 2004-05 Governor�s Budget.
The good news for local government 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 60-90 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 (April 9 staff report included as Attachment 1). A deficit this large is extremely intimidating, and will no doubt have a negative impact on the delivery of our services and programs, and most importantly on our 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 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 we currently conduct our business. 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 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 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.
Realistically, in cutting an approximate $9.5 million out of the General Fund there is no way that people, programs, and services won�t be harmed. However, the essence of the strategy which helped staff develop the 2003-04 Budget is to reduce in areas that will have the least impact, such as freezing or eliminating vacant positions, offering retirement incentives to employees close to retirement, and reducing programs and services or increasing fees for existing programs and services that will not totally harm the quality of life that the residents and businesses of Burbank have come to enjoy.
The following are the main components included within the 2003-04 Proposed General Fund Budget:
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.
During the May 6th Budget Study Session, staff advised the Council that the General Fund would need to use approximately $768,743 from the Burbank Water and Power (BWP) set-aside funds. (These are the incremental revenues that have been collected on the Utility Users Tax and In-Lieu Tax as a result of the most recent electric rate increases. These revenues were set-aside in a holding account because the Council did not want to count on these revenues as recurring since it was understood that the electric rates would eventually decrease.) Following a number of minor changes to the Proposed Budget (appropriation and revenue adjustments) at the May 22, 2003 Study Session, staff advised the Council that in order to balance the budget, the General Fund would now need to use approximately $1,206,186 from the BWP set-aside to balance the budget.
The following is a recap of how that number was arrived at:
Projected Undesignated Fund Balance at June 30, 2003 $ 197,674 Recent Non-recurring Appropriations: Charter Franchise Agreement Renegotiation (85,000) Post Retirement Medical Dollars for SERPS (55,440) Revised Projected Undesignated Fund Balance: $ 57,234_
Revenue Adjustments Subsequent to Proposed Budget Reduction of Transient Parking Tax (assumes 2.0% increase) $ (100,000) Increase in Utility Users Tax 400,000 Reduction of Interest Revenue for $25MM Subordinated Debt (750,000) Total Net Reduction of Revenue Adjustments: $ (450,000)
Appropriation Adjustments Subsequent to Proposed Budget Management Services Part Time Youth Worker $ 3,179 Library MS&S Budget 31,307 Increase Education Reimbursement (per MOU�s) 41,000 Eliminate Exception item for Police Computer Contracts (22,300) PerformArts Grant Recipient Awards for 03-04 (non-recurring) 39,073 Police Animal Shelter Reorganization (13,447) BPOA Approved MOU Savings (3.5% instead of 4.0%) (91,369) Total Net Increase of Appropriation Adjustments: $ 12,557 Projected Use of BWP Set-Aside as of May 1, 2003 $ 768,743 Revenue Adjustments 450,000 Appropriation Adjustments (12,557) Revised Projected Use of BWP Set-Aside $1,206,186_
As a result of the discussion at the May 22, 2003 Budget Study Session, the Council directed staff to make other changes to the Proposed Budget as follows (staff also had one appropriation change � �other minor changes� that are also listed below):
Revised Projected Use of BWP Set Aside as of May 22, 2003 $1,206,186 Revenue Adjustments No increase in Aquatic Fees for Residents 12 & under and 13 to 18 (23,129) Total Revenue Adjustments $ (23,129)
Appropriation Adjustments Other minor changes, primarily due to a decrease in Fund 532 rental rates (144,804) Employee Layoffs � 6 month extension (non-recurring) 52,974 City Clerk Training Reductions 1,590 Planning Board Meals 1,100 PAY Grants-1/2 of current appropriation 46,750 Total Appropriation Adjustments $ (42,390)
New Projected Total Use of BWP Set-Aside as of June 10, 2003 1,186,925 Non-Recurring Appropriations Portion 92,047 Recurring Appropriations Portion 1,094,878 This budget season has been a very difficult process for the City. It has been a long time since Burbank has had to make such significant cuts. Moreover, the outlook is not improving over the next five years, and this causes even more stress in terms of the City�s ability to make even further reductions. The culmination of this budget has been a true team effort.
Although no one would consider reducing an approximate $9.5 million from their budget successful, the fact of the matter is, it had to be done, and it was done with care, concern and reasonableness.
Trying times have a way of bringing the best out in people. The next five years will be trying times for Burbank and it is staffs belief that given the right amount of time for the City family to come together to address our structural problem, we are confident that a sound strategic plan will be created and successfully implemented.
BACKGROUND
Knowing that there was a need to make serious reductions from the budget, staff also thought that one way to minimize some of the reductions would be to consider increases in existing fees. To assist in this process, a kickoff meeting was held with all departments in November 2002, which gave staff ample time to review the current fees, consider new fees, conduct research on fees of similar agencies, and work with applicable boards etc. to obtain their input on any proposed changes. The Enterprise (electricity, water, water reclamation & sewer, refuse collection & disposal, and golf) and Redevelopment Funds performed extensive analysis of cash flows, including future needs and debt service requirements, to determine adequacy of current rates. The internal service funds also analyzed future needs and current status to determine the internal charges to apply to other funds.
During the months from January to March, the Executive Team met regularly to discuss a reasoned approach to dealing with such a large deficit facing the City. In addition, through the entire process of developing the City�s 2003-04 Budget there has been constant concern with what action the State may or may not take to balance their budget with regard to local government revenues.
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 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 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. Thus, each General Fund department has achieved or come close to achieving a 10 percent reduction through actual cuts in personnel, materials, supplies and services, and programs as well as fee increases. Finding these cuts has not been easy and each department will be impacted, some more than others, but each is doing its part to address the deficit.
In addition to the reductions that each department was required to achieve, the budget was developed under the following parameters agreed upon by the Executive Team:
New Positions/Upgrades: No new positions or upgrades were accepted unless there was a �rock solid� revenue offset. Other than a number of positions that were approved during FY 2002-03 (during the year and at the mid-year report), the other requested new General Fund positions are either revenue offset or part of a departmental reorganization with no extra budget dollars expended.
2002-03 Frozen Positions Remain: The positions that were frozen in the FY 2002-03 Budget will remain frozen. (Two of these positions have been eliminated to meet the Public Works and Fire Departments reductions). This equates to an annual savings of $122,592.
Materials, Supplies & Services (MS&S): There was no allowable increase in MS&S provided to any General Fund departments. Any MS&S exceptions must be beyond the Departments control. All of the exceptions are costs that are either mandated by other agencies or are increased costs for existing services.
Capital Outlay: No new requests for capital outlay were to be allowed. That being said, there is one new Fire request for hazardous material suits due to maintenance problems and their age, and two other Fire items that were previously approved and are in their second of a third year of replacement funding (nozzles and Emergency Operations Center furniture).
The first Council Budget Study Session was held earlier than usual on April 9, 2003. This Session included staff recommended reductions and fee increases. The Council received the Proposed Budget at their May 3, 2003 annual Goal Setting Workshop. Budget Study Sessions were held on May 6, May 20, and May 22, 2003. At the first Study Session, the Financial Services Director provided a brief overview of the Proposed Budget, projected available recurring and non-recurring fund balances, and significant changes to all departmental budgets including increases in internal service funds and PERS rates. Then, each Department Manager reviewed their proposed reductions, fee changes if applicable and any new positions/upgrades (which had to be revenue offset), materials, supplies and services exceptions (which had to be out of the departments control), and any capital outlay.
At each budget presentation, the City Council asked questions, provided feedback, and gave direction to staff regarding the proposed budget. This direction from the City Council has been included as part of the Budget before the Council for consideration.
FY 2003-04 BUDGET � GENERAL FUND APPROPRIATIONS AND REVENUES:
The total recurring General Fund revenue growth for FY 2003-04 will be 2.0 percent versus a recurring expenditure growth of 2.5 percent.
The minimal revenue growth assumes the following:
Sales Tax: Sales Tax continues to be the largest source of General Fund revenue. This Tax generally grows as a function of the economy. 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: 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 the 2003-04 Fiscal Year.
Utility Users Tax: Utility Users Tax (UUT) was re-estimated downward at the 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. 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: 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 2003-04.
Transient Occupancy Tax: The Transient Parking Tax (TOT) had declined by 6.2 percent even before the events of September 11th. 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: The Transient Parking Tax (TPT) has been a somewhat consistent revenue for the City over the past few years. However, even with a new parking lot opening this past fiscal year near the Airport, with the Airport decreasing their daily rates to $5, the revenues are projected to decrease. The Burbank voters recently approved a ballot measure to enable the Council to increase this Tax from its current 10 percent up to 12 percent. As part of the City Fee Schedule, staff is recommending that 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. (Discussed in more depth in the Fee Schedule portion of the report).
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 the Public Employees Retirement System (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.
In a related PERS cost, the City is also responsible for paying a portion of the Retiree PERS Health Care for each employee as mandated by Senate Bill 1464. This cost will annually increase from the current $25 per month per retiree to $32.20 for 2004 and will increase to $97 in FY 2008 where after it will increase by the medical component of the Consumer Price Index (CPI). The impact to the 2003-04 Budget is projected at $19,000.
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 (projected at 4.0% so a savings was achieved), 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. This amount takes into account 97 new computers at the Buena Vista Library, disaster preparedness E-Team software/hardware and maintenance costs, and also reflects a change in the computer replacement life from three to four years.
With the budget parameters, costs, and revenues in mind, the chart on the following page is the proposed source of funds and appropriations for each fund or fund type for the 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. CHANGES SUBSEQUENT TO THE PROPOSED BUDGET
As is typical with every budget season, items will be inadvertently left out of the budget, conditions will change that will require staff to rethink a revenue estimate or program cost, or the Council will direct staff to make adjustments to the appropriations. This budget year is no different. There are a number of items that have changed.
It is also important to note that anticipated budgetary reductions as a result of the Governor�s May Revision to the 2003-04 State Budget related to ERAF, Public Library Fund grants and booking fees, have been identified, but not incorporated as reductions to revenues. Any changes that may take place will be addressed in the quarterly or mid-year reports. A list of reconciling changes is delineated below:
Sources of Funds � Assuming a 2.0 percent increase in the Transient Parking Tax, the revenue is projected to decrease by $100,000. � Due to recent enforcement action by the City related to the cellular portion of the Utility Users Tax, this revenue is anticipated to increase by $400,000. � At the May 22nd Budget Study Session, the Council was in basic agreement that staff should proceed with remarketing the $25 million subordinated debt between the City and the Agency. This remarketing, once complete, will cause the General Fund to lose the interest revenue from the loan of $750,000. � At the May 22nd Budget Study Session, the Council agreed that the aquatic fees for the resident 12 and under and 13 to 18 categories should not be increased as recommended by staff. Thus, this revenue has been decreased by $23,129.
Appropriations
All of these changes have been captured in a budget matrix which is included as Attachment 2. STATE BUDGET � IMPACT ON BURBANK
On May 14, 2003, Governor Davis announced his revisions (�May Revision�) to his proposed budget for FY 2003-04. Overall, the adjusted budget gap for California is now estimated to be $38.2 billion. This significant gap is proposed to be closed through the following: $18.9 billion in cuts/savings; $6.9 billion in fund shifts/transfers/loans; $1.7 billion in program re-alignments to local government; and, $10.7 billion in deficit financing. It is important to note that in addition to the presumed trigger of the Vehicle License Fee (VLF) on July 1 ($4.2 billion), the Budget requires the passage of $1.8 billion in cigarette and income taxes for local government to operate realigned programs (primarily County administered programs), and a temporary one-half cent sales tax ($2.3 billion) to pay for the deficit financing plan.
In his May 14 announcement, the Governor made three requests of the Legislature: 1) Pass the budget on time (i.e., June 15); 2) Enact a responsible plan that uses a temporary tax to pay back that portion of the deficit to be financed so that the temporary tax is later automatically repealed; and, 3) Devote July and August to developing structural reform of state and local finance.
The following is a brief look at the potential impacts that the Governor�s May Revision to the Proposed Budget for FY 2003-04 will have on the City of Burbank.
Significant Budgetary Reductions
Redevelopment Agency Significant Impact:
City � General Fund Significant Impacts:
Good News for the City General Fund
Through the Mayor, staff has sent numerous letters opposing legislation that has been introduced that would have negatively impacted local governments. On the flip side, letters have been sent to Burbank�s legislators in addition to others for their efforts in working hard to listen to local government concerns and find reasonable alternatives to maintain revenues to local government.
Working through a $38.2 billion deficit is a huge challenge, and with all of the competing interests, it is only reasonable to expect that most will be presented with some sort of reductions in FY 2003-04. The good news is that thus far, local government, with the exception of redevelopment agencies, has received minimal reductions, which helps cities like Burbank which are in the midst of grappling with their own budgetary problems.
Staff will continue to monitor the State Budget and its potential impacts on the City of Burbank and keep the Council advised as developments arise.
At this point, the Budget does not include any reductions that may still be forthcoming from the State. Since Burbank has already had to make tremendous reductions, any further reduction from the State would be totally devastating. It is our hope that the Legislature understands the impact their actions could have on local government. As of the writing of this report, both Assembly and Senate Budget Committees have passed their versions of the budget and the bills are awaiting floor action. There are no general fund hits to cities included in the committee budgets. The Assembly failed to include any hit to redevelopment agencies while the Senate approved a $250 million one-time shift to the ERAF account based on the current law formula.
PROPOSED 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. The City Council has already approved fee changes during FY 2002-03 that have been incorporated into the Fee Schedule which is presented for Council consideration. (The Fee Schedule and Summary of Proposed Fee Schedule Changes are included as Attachment 3).
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, which are outlined in Attachment 2, 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 2001-02 and that could in large part be attributed to the September 11, 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 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. The end result of the April 8, 2003 Election, was that 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 they 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 tonight�s hearing as required by the ballot measure and ultimately take action at the June 17th 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 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 FY 2004-05 through 2007-08.
Street Sweeping Charge: This 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 in to 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 provide 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.
Safety Personnel Rates: Both the Police and Fire personnel rates in a number of categories have been increased to be in line with recent MOU increases. The rates were last updated in the 2001-02 Fee Schedule.
License and Code Services Fees: Fees for various types of regulatory business licenses that were previously maintained in the Burbank Municipal Code have been incorporated in to the Fee Schedule this year. Within the many categories of fees, there are some very minimal increases proposed.
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.
Group Picnic Fees: The resident fee for having a five hour group picnic at Robert Gross Park is proposed to increase from $250 to $350. A survey that was conducted by staff reflects that the new fee puts Burbank consistently with benchmark cities� fees.
In light of the budget deficit, it is true that staff has done a comprehensive overhaul of the Fee Schedule which has resulted in the recommendation for a number of fee increases as well as new fees. It is important to note that while there are a number of changes proposed, staff gave considerable thought to each proposal so that we were comfortable that the fees are in line with our surrounding cities, remain affordable, and have minimal impact on the users. Further, it is worth noting that a number of these fees, charges and rates had not been updated in a number of years. To avoid this situation from happening in the future, staff will continually review all fees each year so that incremental increases can be made when necessary. Moreover, it is important for people to keep in mind that the City is not out to make money and as such very few of the non-enterprise funded programs have total cost recovery, instead the City General Fund subsidizes many City services to a great extent.
GANN INITIATIVE APPROPRIATION LIMITThe 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 City 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. The exact figures will be calculated and made available after the Council adopts the budget on June 17, 2003.
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. In recognizing that a long-term financial strategic plan must be created, the Executive Team also 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 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 2003-04 and into the future.
While the end result of these driving principles have caused the City to balance its budget using non-recurring dollars, and one could argue this does not meet the �true spirit� of the City�s Financial
Policies, after lengthy deliberations, 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 2003-04 Budget. With this use of funds, there is still projected to be $7.0 million in the BWP set-aside holding account at 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 City Council�s adopted financial policies.
CONCLUSIONThe City 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 our services and programs, and most importantly on our employees. As the Executive Team contemplated 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.
This approach is balanced and buys time for the Executives to re-group following the adoption of the 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 we currently conduct our business. 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.
This budget season has been a very difficult process for the City. It has been a long time since Burbank has had to make such significant cuts. Moreover, the outlook is not improving over the next five years, and this causes even more stress in terms of the City�s ability to make even further reductions. The culmination of this budget has been a true team effort. Although no one would consider reducing an approximate $9.5 million from their budget successful, the fact of the matter is, it had to be done, and it was done with care, concern and reasonableness.
Trying times have a way of bringing the best out in people. The next five years will be trying times for Burbank and it is staffs belief that given the right amount of time for the City family to come together to address our structural problem, we are confident that a sound strategic plan will be created and successfully implemented.
RECOMMENDATIONStaff 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.
Staff Report Attachments:
Attachment 1 April 9, 2003 Budget Staff Report Attachment 2 Budget Matrix Attachment 3 Fee Schedule and Summary of Fee Schedule Changes Attachment 4 Transient Parking Tax November 26, 2002 Report
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