REPORT TO COUNCIL
SUBJECT
Title
Annual Public Hearing on FY 2015/16 Budget and Resource Allocation Plan and Establishment of Appropriations Limit
Report
BACKGROUND
The City Charter requires a Public Hearing be held prior to the adoption of the City's budget and resource allocation plan.
Additionally, Article XIIIB of the California Constitution established appropriations limits on government agencies within California. Originally enacted by Proposition 4 in 1979, the appropriations limit creates a ceiling for the appropriations of tax proceeds that can be made by the state, school districts, and local governments in California. The limit uses 1978-79 as the "base" year and is adjusted annually for population growth and cost of living factors. The purpose of the appropriations limit is to preclude state and local governments from retaining excess revenues, which are required to be redistributed back to taxpayers and schools. To date, the City has not exceeded its appropriations limit in any year. Section 7910 of the Government Code requires that the City annually adopt an appropriations limit for the coming year. The supporting documentation for the establishment of the limit must be available for public review at least 15 days prior to the adoption of the appropriations limit resolution. The required material that provides detailed information on the City's appropriations limit has been available for public review since May 1, 2015, included in Volume I of the FY 2015/16 Recommended Budget. It is also provided as Attachment 1 to this report.
EXISTING POLICY
In accordance with the City Charter, the California Constitution, and the California Government Code, a public hearing has been held annually for public comment on the budget and resource allocation plan and appropriations limit for the upcoming fiscal year.
Council Policy 7.1.1 Fiscal -Long Range Goals and Financial Policies:
A.1.7: At least one public hearing shall be held after the City Manager's recommended budget is presented to the Council in order to solicit public input before adoption.
A.1.8: Boards and Commissions should review the annual budget as appropriate to their area of interest and make recommendations to the City Council.
A.1.14: Final actions on study items with significant financial impacts should be withheld until they can be made in the full context of the annual budget process.
ENVIRONMENTAL REVIEW
N/A
DISCUSSION
The purpose of the public hearing is to provide an opportunity for the public to voice its opinions on the City's proposed budget and the appropriations limit. Legal notices of the hearing were published in the Sunnyvale Sun on May 22nd and May 29th. No action is required from the City Council at the hearing. The FY 2015/16 Recommended Budget and Resource Allocation Plan is scheduled for adoption on June 23, 2015.
Appropriations Limit
The appropriations limit is set on an annual basis and is dependent upon the change in population within the jurisdiction and the change in the cost of living as determined by the State. As shown in Attachment 1, the appropriations limit for FY 2015/16 is $197,114,763. Expenditures subject to the appropriations limit exclude Redevelopment Successor Agency activity, enterprise and internal service activity, debt service payments, and capital outlay projects purchased with tax proceeds that have a useful life of ten years or more and a value that exceeds $100,000. Non-tax revenues, such as federal and state grants, fees for service, or revenues restricted for particular purposes are also excluded from the calculation. The City will be under the allowable appropriations limit by approximately $98.3 million for FY 2015/16.
FY 2015/16 Recommended Budget
The FY 2015/16 Recommended Budget strengthens the City's long term financial position, makes important investments in infrastructure, provides additional resources to address the increasing demands on City services from the growing economy, and rebuilds capacity to meet strategic priorities. The FY 2015/16 Recommended Budget is focused on the Projects Budget, which totals $89 million in FY 2015/16 and $879 million over the twenty-year plan. It is important to note that several projects in FY 2014/15 will continue into FY 2015/16. Council's four top-ranked priorities from the strategic planning workshop in the fall of 2014 have informed the development of the FY 2015/16 Recommended Budget. These four priorities include the Civic Center Campus and the Main Library modernization, infrastructure and traffic, open space planning, and Downtown Sunnyvale. In consideration of these priorities, focus has been placed on projects to rehabilitate the Fair Oaks and Calabazas Creek bridges, reconfiguration of Mathilda/237/101 intersection, and additional funding for the replacement of sidewalks, curbs and gutters. A twenty-year, $145 million plan has also been budgeted for the renovation and enhancement of all the City's 21 parks. Additionally, efforts are underway to modernize the civic center and main library, and a study issue to evaluate the market potential and land use mix for the Town Center has been proposed for FY 2015/16.
The FY 2015/16 Recommended Budget includes total revenues of approximately $356 million. The total recommended budget for all expenditures is approximately $350 million. Of that total, $245 million is for operating; $93 million is for projects, project administration, and equipment; and $12 million is for other expenditures including debt service ($9 million), lease payments ($2 million), budget supplements ($271k), and service level set-aside ($950,000). The service level set-aside of $950,000 per year has been added to the General Fund expenditure budget, primarily due to the increase in the property tax base. The Service Level Set-Aside represents the amount of flexibility the City has in General Fund expenditures, while also keeping the Fund structurally balanced. Planned contribution to reserves total $5.5 million Citywide, which factors in drawdowns and additions to reserves across all funds. The majority of reserve funds planned to be drawn down are from the Water and Wastewater Funds for capital projects to address water pipe replacements, the City's share of a regional project to expand the recycled water production and distribution system, and the rehabilitation of the City's wastewater collection and treatment system. These significant drawdowns on reserves are offset by additions to reserves across a number of funds, including the Park Dedication, Capital Projects, and Development Enterprise Funds, primarily due to increased Mitigation and Impact Fee Revenues from the recent surge of development activity in the City. This increase in reserves has been set aside in the FY 2015/16 Budget as Future Projects, or in the reserves of the respective fund.
Because the FY 2015/16 Budget is focused on the City's projects budget, staff has not made many changes to the operating budget. However, a few significant changes include the addition of three new public safety officers starting in FY 2016/17 to staff the new fire truck and facility in North Sunnyvale; the addition of a Public Safety Specialist to accelerate recruitment efforts; the addition of a second Assistant City Manager to lead efforts in modernizing the Civic Center, administer the Stevens Creek Trail Study, and work on other special projects; and the addition of an Assistant City Engineer for three years to manage workload in the land development and project engineering division-dollars have been assembled by grant funds, project budgets, and DPW operating budget savings. It is anticipated that vacancies in other positions within the department will occur over the next three years and the employee can be absorbed within the budget after three years.
The FY 2015/16 Recommended General Fund budget includes a drawdown of the Budget Stabilization Fund Reserve of $5 million. Drawdown of this reserve is consistent with Council's past actions and the City's funding strategy to use this reserve to stabilize services through economic cycles. A drawdown has been anticipated for the near term years with the rising costs of employee benefits and the resetting of revenues to a sustainable base. For this recommended budget, primarily due to an increase in revenues, the drawdown of the Budget Stabilization Fund Reserve is $1 million less than what was anticipated for FY 2015/16 in the current General Fund financial plan and the number of years of anticipated drawdown is reduced, now going out to FY 2020/21 rather than FY 2021/22. The FY 2015/16 General Fund financial plan preserves the amount of the current adopted Budget Stabilization Fund with an ending balance of $13.5 million at the end of the twenty-year plan.
In reviewing the Budget Stabilization Fund Reserve, it is also important to factor in the service level set-aside. While budgeted as an expenditure, it is not appropriated for a specific service or expenditure and would require Council approval to be expended. As such, the $950,000 annual amount can be considered a reserve amount, as an addition to the Budget Stabilization Fund Reserve.
One small addition in the FY 2015/16 Recommended Budget to highlight is the new state requirement to provide paid sick leave for all employees. Given that the City already provides a paid leave benefit for all regular employees, only the City's Casual employees are affected by this law and the fiscal impact of providing the benefit is estimated to be modest, at approximately $115,000 per year. This addition is included in the budget and Council's action to the budget will authorize implementation of the new law. The salary resolution will be amended at a future date to include this change.
FY 2015/16 Budget Supplements
For the FY 2015/16 Recommended Budget, eight budget supplements are presented for Council consideration.
A brief summary of all the proposed budget supplements is below. A more complete description of each budget supplement is included in Volume I of the FY 2015/16 Recommended Budget.
Budget Supplements Recommended for Funding:
· Consider Multi-family Residential Transportation Demand Management Programs: This supplement would provide one-time funding in the amount of $30,000 from the Development Enterprise Fund to hire a transportation professional to develop a residential Transportation Demand Management (TDM) program similar to the requirement for office projects. Guidelines developed will be given to residential project applicants to be able to prepare adequate TDM programs, and will be used by staff and decision-makers in reviewing the programs prepared by the applicants. Since this supplement is being recommended for funding, the cost has been incorporated into the FY 2015/16 Recommended Budget.
· Determine Steps to Move Forward to Becoming a Silver Level in the League of American Bicyclists - Bicycle Friendly Communities: This supplement would provide one-time funding in the amount of $25,000 from the General Fund for consultant services to evaluate the action items that the City would need to take to achieve Silver Level status. The consultant will also provide conceptual costs for any action items or needed improvements. Since this supplement is being recommended for funding, the cost has been incorporated into the FY 2015/16 Recommended Budget.
· Determine Feasibility of Establishing a Park Mitigation Fee for Non-Residential Development: This supplement would provide one-time funding of $50,000 from the General Fund for consultant services to evaluate the action items that the City would need to take to establish a park mitigation fee for non-residential development. The consultant will also provide conceptual costs for any action items. Since this supplement is being recommended for funding, the cost has been incorporated into the FY 2015/16 Recommended Budget.
· Relocation of the Butcher House to Heritage Garden Park and Review of the Need for a Retaining Wall: This supplement would provide one-time funding of $50,000 from the General Fund to help master plan and identify a possible location for the Butcher House at Heritage Park. It would also include conceptual infrastructure needs and a review of the existing site drainage to determine if modifications, such as a retaining wall, are required to prevent future flooding. The cost of construction activities related to relocating the Butcher House and constructing the retaining wall are not included in this one-time funding of $50,000. If Council approves moving forward with these two items, additional construction funds for any drainage elements will have to be added at a later date. It is anticipated that all construction work for relocation of the Butcher House will be privately funded. Since this supplement is being recommended for funding, the cost has been incorporated into the FY 2015/16 Recommended Budget.
· Funding for an Economic Consultant to Evaluate the Market Potential and Appropriate Land Use Mix for the Town Center: This supplement would provide one-time funding in the amount of $50,000 from the General Fund to obtain an economic consultant to evaluate market potential and the appropriate mix and quantity of retail, office, and residential units for a successful Town Center project. They will also provide a thorough market assessment and evaluation of realistic market potential, as well as the fiscal implications of various land uses. Associated staff costs would be absorbed within the existing operational budget. Since this supplement is being recommended for funding, the cost has been incorporated into the FY 2015/16 Recommended Budget.
· Funding for Tenant-Landlord Dispute Resolution Services: This supplement would provide one-time funding for dispute resolution and mediation services by the contractor currently providing these services, Project Sentinel, for FY 2015/16. The focus of this service is on tenant/landlord disputes, but other types of community disputes would also be accommodated to the extent possible. Approval of this request would allocate $30,000 from the General Fund for this purpose. Associated administrative costs would be absorbed by the Department of Community Development, Housing Division. Since this supplement is being recommended for funding, the cost has been incorporated into the FY 2015/16 Recommended Budget.
· Funding for Leadership Sunnyvale: This supplement will provide one-time funding of $6,000 from the General Fund to continue providing the Leadership Sunnyvale public affairs and leadership training program provided by Silicon Valley Leadership (SVL). SVL anticipates enrolling 18 participants in the program; similar to the FY 2014/15 agreement, funding will be provided commensurate with the actual number of participants in Quarter 1. On September 30, 2014, the City Manager approved an In-Kind Services Agreement, which includes the use of City facilities and City staff presentations at leadership classes. At the Budget Workshop, Council directed staff to include this as an ongoing appropriation into the FY 2015/16 Recommended Budget.
· Sunnyvale Downtown Business Association (SDA) $30,000 Funding: This supplement would provide five years of annual funding at $30,000 from the General Fund and a formal partnership with the Business Improvement District (BID) to expand the SDA's current marketing efforts of Downtown Sunnyvale. This would stabilize funding, provide a position on the BID's Board of the Directors for the Vice Mayor, and require the City's Economic Development staff's continued support and partnership. The requested funding will allow the SDA to continue producing the same annual events in a consistent manner. This funding would also be used to develop additional marketing tools to support Downtown Sunnyvale as a place to visit for entertainment, dining, and shopping opportunities. $30,000 would be allocated annually to the SDA for a total of $150,000. Annual funding will be disbursed on a reimbursement basis. Since this supplement is being recommended for funding, the cost has already been incorporated into the FY 2015/16 Recommended Budget.
Budget Issue - Dropped as Budget Supplement:
· Prohibit Smoking Inside all Units and in Common Areas of Multi-Family Residences (DPS 15-01) and Expand Smoking Regulations to Prohibit Smoking Near Doorways and Outdoor Areas of Retail and Commercial Businesses (OCA 14-03b): During the Public Hearing on Study Issues on March 17, 2015 (RTC 15-0012), Council approved the combination of Study Issues DPS 15-01 and OCA 14-03b. The combined study would include research, public outreach, surveys, community meetings with the general public and stakeholders, and the development of effective and meaningful ordinance amendments. When this Study Issue was proposed in January 2015, the estimated cost was $100,000, and staff noted that they were seeking grant funding, with any amount not covered by the award to be funded as a Budget Supplement. In March 2015, the Department of Public Safety (DPS) was awarded $95,000 through the Santa Clara County United for Health - Partnership to Improve Community Health project to administer the study. The formal contract from the County is expected to be submitted to Sunnyvale in May, and DPS is currently interviewing consultants to conduct the majority of the study; DPS management and oversight costs will be reimbursed by the grant. Once the contract is executed, the study is expected to commence immediately. DPS staff anticipates presenting a Report to Council by December 2015. As funding has been provided through the grant, a budget supplement is no longer needed.
May 21, 2015 Budget Workshop
Staff provided a detailed presentation on the City's FY 2015/16 Recommended Budget and Resource Allocation Plan at the Budget Workshop. At the workshop, Council took action to make two additions to the City Manager's Recommended Budget. $75,000 was appropriated from the Budget Stabilization Reserve to provide an ongoing increase to the budget for materials at the Library. Also, $6,000 per year was appropriated from the Budget Stabilization Reserve to provide annual funding for Leadership Sunnyvale. These two action items reduce the General Fund Budget Stabilization Fund Reserve down by $2.9 million in the twentieth year and will be incorporated into the FY 2015/16 Budget that Council will consider for adoption on June 23, 2015.
During the presentation, Council asked for information and/or clarification on a number of issues. These items are listed in Attachment 2, with responses or follow-up action noted as appropriate.
Boards and Commissions Budget Review
All of the City's boards and commissions have had the opportunity to review the FY 2015/16 Recommended Budget, which was made available beginning May 1, 2015. Boards and commissions wishing to make comments, suggestions, or recommendations have the opportunity to testify at the June 9, 2015 public hearing. Testimony from the hearing, as well as draft board and commission meeting minutes discussing the Budget, will be included in the Budget Adoption Report to Council.
FISCAL IMPACT
There is no fiscal impact to this public hearing. Budget adoption is scheduled for June 23, 2015.
PUBLIC CONTACT
Public contact was made by posting the Council agenda on the City's official-notice bulletin board outside City Hall, at the Sunnyvale Senior Center, Community Center and Department of Public Safety; and by making the agenda and report available at the Sunnyvale Public Library, the Office of the City Clerk and on the City's Web site. Legal ads were published in the Sunnyvale Sun on May 22, 2015, and May 29, 2015. Finally, the City's website has included the entire FY 2015/16 Recommended Budget and Resource Allocation Plan since May 1, 2015.
STAFF RECOMMENDATION
Recommendation
Council's only action is to conduct the Public Hearing to meet the legal requirements of the City Charter, the California Constitution, and the California Government Code. Council can also provide direction to staff on any issue requiring further review prior to the adoption of the FY 2015/16 Budget on June 23, 2015.
Staff
Prepared by: Timothy J. Kirby, Assistant Director of Finance
Reviewed by: Grace K. Leung, Director, Finance
Reviewed by: Robert A. Walker, Assistant City Manager
Approved by: Deanna J. Santana, City Manager
ATTACHMENTS
1. FY 2015/16 Appropriations Limit
2. Responses to Council Questions and Requests from the Budget Workshop