REPORT TO COUNCIL
SUBJECT
Title
Annual Public Hearing on FY 2016/17 Budget and Resource Allocation Plan and Establishment of Appropriations Limit
Report
BACKGROUND
City Charter Section 1303 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 Originally enacted by Proposition 4 in 1979, the appropriations limit creates a ceiling for the appropriations of tax proceeds that can be made by the state, school districts,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 6, 2016 (Attachment 1). The material also is included in Volume I of the FY 2016/17 Recommended Budget.
EXISTING POLICY
In accordance with the City Charter, the California Constitution, and the California Government Code, a public hearing must be 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.
ENVIRONMENTAL REVIEW
As the City Council is only conducting a public hearing on the budget and is not taking any action on the budget no environmental review under the California Environmental Quality Act (“CEQA”) is required.
DISCUSSION
The purpose of the public hearing is to provide an opportunity for the public to provide input on the City’s budget and the appropriations limit. Legal notices of the hearing were published in the Sunnyvale Sun on May 27th, June 3rd, and June 10th. No action is required from the City Council at the hearing. The FY 2016/17 Recommended Budget and Resource Allocation Plan is scheduled for adoption on June 28, 2016.
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 2016/17 is $210,316,844. 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 $104.6 million for FY 2016/17.
FY 2016/17 Recommended Budget
The FY 2016/17 Recommended Budget balances resource demands for core operations, City Council’s strategic policy priorities, personnel costs, strategic investments, and the increasing demand for services from the community. City staff had four goals while developing the Recommended Budget: (1) Carefully reflect the benefits of the strong economy with thoughtful and reasonable revenue growth projections that provide a sustainable resource base to make strategic investments, while maintaining our high-quality services and fiscal prudence, (2) Make investments in internal service departments to improve support to externally focused departments that serve our community, (3) Invest in mission critical information technology systems, and (4) Provide a foundation to fund future increases in total compensation costs for employees.
In consideration of these four goals, two key areas of investment in the FY 2016/17 Recommended Budget should be highlighted. $15.7 million is budgeted to fund the replacement of antiquated information technology systems that are at a critical state of replacement, but had not been sufficiently funded in prior years. In addition, $167 million is planned over twenty years to fund projected increases in the cost of pensions.
The FY 2016/17 Recommended Budget includes total revenue of approximately $398.6 million. The total recommended budget for all expenditures is approximately $381 million. Of that total, $262 million is for operating; $105.9 million is for projects, project administration, and equipment; and $13.1 million is for other expenditures including but not limited to debt service ($9 million), lease payments ($2.3 million), and budget supplements ($1 million). The difference between total revenue and expenditures of $17.6 million is due primarily to large increases in developer impact fee revenues which are restricted and will be appropriated as part of the bi-annual projects budget in FY 2017/18.
The FY 2016/17 Recommended General Fund budget accounts for 41% of the citywide budget, with proposed revenues of $160 million and expenditures of $165 million balanced with a drawdown of the Budget Stabilization Reserve of $9.5 million. This drawdown is primarily the result of increased operating expenditures. Operating expenditures are $11.8 million, or 8.7%, higher in FY 2016/17, due to the strategic addition of personnel and new technology investments. On the revenue side, the City does anticipate an increase in the property tax base and elevated tax revenue in the short term. These resource increases enable the General Fund to remain in balance despite significant expenditure increases throughout the twenty-year plan. The General Fund is balanced over the twenty-year financial plan with a Budget Stabilization Fund Reserve that ends with $6.3 million. The Budget Stabilization Fund is used strategically over the twenty-year planning period to ensure we provide a stable and consistent level of service over the long term and remain fiscally sustainable.
It is also important to note that where new classifications were included in the budget, Human Resources staff must complete a classification study to determine the appropriate job duties and compensation before the position can be filled.
FY 2016/17 Budget Supplements
For the FY 2016/17 Recommended Budget, ten budget supplements are presented for Council consideration.
A brief summary of all the budget supplements presented for Council consideration is below. A more complete description of each budget supplement is included in Volume I of the FY 2016/17 Recommended Budget.
Budget Supplements Recommended for Funding:
• Silicon Valley Talent Partnership: This supplement would provide annual funding in the amount of $3,000 for three years from the General Fund to provide support in coordinating small business workshops and other services that may include specialized applications in support of City services. Since this supplement is being recommended for funding, the cost has already been incorporated into the FY 2016/17 Recommended Budget.
• Implementation of Green Bike Lanes: This supplement would provide one-time funding in the amount of $250,000 to allow for the installation of green bike lanes at 3-5 intersections in FY 2017/18. This supplement is recommended for funding in FY 2017/18. The cost has already been incorporated into the General Fund Long Term Financial Plan in the Recommended Budget.
• Tenant-Landlord and Community Mediation Services: This supplement would provide one-time funding of $45,000 in FY 2016/17 for dispute resolution and mediation services by the contractor currently providing these services, Project Sentinel. The focus of this service is on tenant/landlord disputes, but other types of community disputes would also be accommodated to the extent possible. Since this supplement is being recommended for funding, the cost has already been incorporated into the FY 2016/17 Recommended Budget.
• Safe Routes to School: This supplement would fund the addition of one limited-term Community Services Officer to staff the Safe Routes to School program for three years. This supplement would provide funding for three years totaling $453,637. The FY 2016/17 cost is $176,279. Since this supplement is being recommended for funding, the cost has already been incorporated into the FY 2016/17 Recommended Budget.
• Care Management: This supplement will provide annual funding in the amount of $81,264 to increase the budgeted hours in the City’s Care Management Program from 20 hours per week to 68 hours per week for the entire 20-year plan. The Care Management program is currently funded by a special project that will end in FY 2015/16. Since this supplement is being recommended for funding, the cost has already been incorporated into the FY 2016/17 Recommended Budget.
• Sustainability Speaker Series: This supplement would provide $25,000 annually for five years to create and conduct a Sustainability Speaker Series designed to engage and educate Sunnyvale residents and businesses on key issues related to sustainability and climate change. Since this supplement is being recommended for funding, the cost has already been incorporated into the FY 2016/17 Recommended Budget.
• Scoping of Grade Separation for Caltrain Crossings at Mary Avenue and Sunnyvale Avenue: This supplement will provide one-time funding of $500,000 to provide for consultant services to develop conceptual options and cost estimates for the proposed grade separations for the Caltrain crossings at Mary and Sunnyvale Avenues. The consultant services will include coordination with Caltrain, conceptual designs, cost estimating, environmental evaluation, and public outreach. Since this supplement is being recommended for funding, the cost has already been incorporated into the FY 2016/17 Recommended Budget.
• Vision Zero: This supplement would provide one-time funding of $150,000 for consultant services to develop a Vision Zero Plan that includes education, enforcement, engineering, encouragement, and evaluation. Since this supplement is being recommended for funding, the cost has already been incorporated into the FY 2016/17 Recommended Budget.
• Comprehensive Update to the Murphy Avenue Design Guidelines: This supplement would provide one-time funding of $25,000 to hire a consultant with specialized knowledge to update the existing version of the Murphy Avenue Design Guidelines. Since this supplement is being recommended for funding, the cost has already been incorporated into the FY 2016/17 Recommended Budget.
Budget Supplements - Not Recommended for Funding:
• Inflation Adjustment to Planned Supplemental Human Services Funding: This supplement would index the City’s General Fund contribution for human services grants to the Consumer Price Index (CPI) to adjust for inflation. Since this supplement is not being recommended for funding, the cost has not been incorporated into the FY 2016/17 Recommended Budget.
Notable Changes from the Recommended Budget
Staff has identified two items that were mistakenly omitted from the Recommended Budget document.
One limited term Engineering Assistant position was left out of the budget for the Department of Public Works. This position, which is fully funded by development related fees, is now included.
As part of the startup of the Silicon Valley Clean Energy Authority, Sunnyvale is providing approximately $225,000 in administrative support services. As these services are fully reimbursed, the City will receive revenue from SVCEA for the work performed. This revenue was not reflected. It is now reflected to reimburse the funds for budgeted expenses.
In addition, staff has updated the recommended FY 2016/17 allocation for the project for Outside Group Funding Support to be consistent with Council's action regarding the two-year human services grant awards in FY 2015/16 related to the FY 2016 HUD Action Plan, which was approved by Council in May. The recommended budget for this project is now $135,000 for FY 2016/17, rather than $100,000 originally budgeted. This change increases the General Fund appropriation for this project to $135,000 for FY 2016/17 (for one year only) using $35,000 from the Budget Stabilization Fund reserve. The initial $100,000 was already in the long-range plan for this project.
May 26, 2016 Budget Workshop
Staff provided a detailed presentation on the City’s FY 2016/17 Recommended Budget and Resource Allocation Plan at the Budget Workshop. At the workshop, Council did not take action on any items. 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
The majority of the City’s boards and commissions have had the opportunity to review the FY 2016/17 Recommended Budget, which was made available beginning May 6, 2016. Boards and commissions wishing to make comments, suggestions, or recommendations have the opportunity to address the Council at the June 14, 2016 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 scheduled for consideration on June 28, 2016.
FISCAL IMPACT
There is no fiscal impact to this public hearing. Budget adoption is scheduled for June 28, 2016.
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 noticing the public hearing were published in the Sunnyvale Sun on May 27, June 3 and June 10, 2016. Finally, the City’s website has included the entire FY 2016/17 Recommended Budget and Resource Allocation Plan since May 9, 2016.
STAFF RECOMMENDATION
Recommendation
Conduct a 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 2016/17 Budget on June 28, 2016.
Council is conducting a public hearing in order to solicit public input and provide direction to staff on any fee requiring further review prior to the June 28, 2016 Council meeting where the proposed schedule will be considered for adoption.
Prepared by: Nick Kurns, Budget Analyst
Reviewed by: Timothy J. Kirby, Director of Finance
Reviewed by: Walter C. Rossmann, Assistant City Manager
Approved by: Deanna J. Santana, City Manager
ATTACHMENTS
1. FY 2016/17 Appropriations Limit
2. Responses to Council Questions from the Budget Workshop