SR-7-B (23)
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i 1\ ~J 2 C1 1991
"nt. "
CM:JJ:LCB:CMD:dvm:memocpfc
council Meeting: January 22, 1991
Santa Monica, California
TO:
Mayor and City council
FROM:
city Staff
SUBJECT: BACKGROUND INFORMATION FOR PUBLIC HEARING ON
COMMUNITY PRIORITIES FOR THE FISCAL YEAR
1991-92 CITY BUDGET
Introduction
This is to provide background information for the City Council
and publ ic concerning the City I s budget structure, current and
projected financial condition, and major service and capital
proj ect needs which staff believe should be considered during
preparation of the FY1991-92 budget. This background information
provides a context for receiving and evaluating public comment
about budget priorities for next year.
Background
Dur ing last year's budget adoption precess, several community
groups suggested that the city provide an opportunity for public
input earlier in the budget preparation process. This would not
only allow time for more thorough staff and Council consideration
and evaluation of suggestions, but also allow more time for
public education on budget parameters and constraints.
This
hearing is being held prior to submittal of department budgets to
the city Manager.
JA~991
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It is important to note that this early hearing does not preclude
or supplant the public review opportunity and hearing process
normally scheduled for May and June.
Budget struoture
The adopted city budget for FY1990-9l totals $174.8 million. The
budget is organized into twenty-four separate funds. For ease of
discussion, these funds can be grouped into three major
categories:
Enterprise and Internal service Funds which operate much
like private businesses where the services provided are
financed primarily from fees. Examples are the Water
Fund, Solid waste Management Fund, and the city
self-insurance funds.
special Revenue Funds which are used
expenditures that can legally only be
uses and where the revenues come
sources. Examples are the Community
Grant Fund and the Beach Fund.
to keep track of
made for specific
from specialized
Development Block
The General Fund in which revenues and expenditures
associated with providing basic city services such as
POlice, Fire, and Library are tracked. Almost two-
thirds of the General Fund is financed from tax revenues
with the remaining revenues coming from various fines
and cost-Offsetting fees.
Attached are a series of pie charts showing the largest funds as
well as the major revenue and expenditure components of the
General Fund.
Current and projected Financial Condition
At this early stage of the annual budget process, staff has
focused its attention on projecting the financial condition of
the General Fund because it comprises a little over half of the
total City budget; incorporates all of the primary services which
are most easily controlled by the City Council; and is most
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directly impacted by changes in Federal and state budget policies
and the economy.
Recent Federal and state budget changes have adversely impacted
the city. city expenditures have increased this fiscal year due
to the increased medicare taxable base and will increase next
fiscal year because under Federal regulations some as-needed
staff will either have to be enrolled in social Security or the
State retirement system. As a result of unanticipated state
budget changes, the City now has to pay directly for certain
services (i.e. property tax collections, jail bookings and
subsidy to the state Board of Equalization) which traditionally
have simply been provided to the City, and because of state
budget cutbacks various demands for social services have been
indirectly shifted to the city. As a result of these actions,
city General Fund costs will increase hy at least $.5 million
this fiscal year and will grow to about $.9 million in FY1991-92.
While the economy has entered a recession, staff believes the
impact on the General Fund will be not as severe as it may be in
other jurisdictions. This is due to the City's diversified tax
and revenue structure which insulates it somewhat from downturns
in the economy, the City's desirability as a place to work, live
and vacation.
The following proj ections of General Fund revenues and
expenditures assume that the current recession will last about 18
months and will somewhat depress those revenues which are most
sensitive to economic factors. Consumer price index and other
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economic data employed by staff to prepare these projections was
derived from the Commission on state Finance's recent la-year
forecast of the state and regional economy. The projections also
assume that current service levels and the current revenue
structure remains unchanged throughout the projection period.
This means that in order to establish significant new services or
to substantially increase existing service levels, new sources of
revenues must be found and/or expenditures must be redirected
from current uses.
Given these assumptions, here is what the General Fund looks like
over the next five years:
General Fund "Current Services" Projection
(in millions)
90/91 91/92 92/93 93/94 94/95 95/96
Beg. Fd. Bal. $ 6.2 $ 8.0 $ 8.0 $ 7.8 $ 8.2 $ 6.6
Revenues 101. 3 103.9 110.3 117.8 122.9 129.9
Expenditures (99.5) (103.9) (110.5) (117.4) (124.5) (134.3)
End. Fd. Bal. $ 8.0 $ 8.0 $ 7.8 $ 8.2 $ 6.6 $ 2.2
These projections show that through FY1993-94, revenues will
somewhat exceed expenditures but that in FY1994/95 it will be
necessary to augment revenues and/or reduce expenditures to bring
revenues and expenditures back into balance.
Throughout the
FY1990/91
FY1993/94 period, the General Fund unobligated
balance remains in the range of 7% to 8% of General Fund
expenditures. The generally accepted guideline is for a city to
maintain a General Fund unobligated balance of between 5% and 16%
(about 2 months of operations) of budgeted expenditures.
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Gann Limit
For FYI990/91, the city will be under its Gann Limit. However,
based on the existing revenue structure, the City is projected to
exceed its Gann Limit in FYI991/92. This is primarily due to tax
increases approved to help provide financial assistance to the
Santa Monica-Malibu Unified School District, increase police
resources and other service level enhancements adopted in the
FY1990/91 City Budget. If the FY1991/92 City Gann Limit is
exceeded, under existing State law, the City will have two years
to either seek voter approval to adjust its Gann Limit by
increasing existing overrides and/or by decreasing the amount of
tax proceeds to be received.
pen4in9 Unfunded Needs
Each year, difficult decisions must be made to balance
expenditures and revenues. This results in many worthwhile
projects and service level improvements having to be deferred for
a period of time. Presently, the following program/project
suggestions which may have General Fund impact are pending
consideration:
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Police
o Additional police officers
Parks
o Increased park maintenance
Social Services
o Implementation of Youth
Taskforce recommendations
o Childcare
o Homeless service facility
TOTAL FUNDS NEEDED - Operating Costs
Parks
o Palisades Park preservation
and improvements
o Proposed recreation building
at Clover Park
o Lincoln Park renovation
o Miles Playhouse seismic
and accessibility improvements
o Virginia Park renovation expansion
o Ocean Front area master plan
implementation
o pier infrastructure improvements
street and Traffic Improvements
o Traffic signal improvements
o street resurfacing/
reconstruction program
Downtown Parking structures
o Expansion
Library
o Main Library expansion
o Increased meeting room space -
Montana and Fairview
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projected
operating costs
(Annual Expenses)
$ 2.0 million
1.5
.3
.1-1. 0
.2-1. 0
$ 4.1-5.8 million
Projected
Capital Costs
(One-Time Expenses)
$12.0-$18.0 million
.6
.5
1.1-2.0
.3-7.0
2.9
3.0
2.0
.5
5.0
12.0
1.5
Youth Center
2.2
Public Safety
o Expansion of Main Fire station No. 5
o Replacement of Fire Station No. 2
on Hollister
o New Police facility and
employee parking
o Fire training facility
1.0
1.9
35.0
1.0
Social Services
o Homeless service facility
2.0
TOTAL FUNDS NEEDED - Capital Costs
$84. 5-98. Imillion
TOTAL FUNDS NEEDED - Grand Total
$88.6-l03.9million
Historically, the annual General Fund contribution to the City'S
capital improvements is approximately $ 3.5 million which will
fall far short of funding the projects listed above.
Some of
these funds may be able to be raised through the issuance of
bonds, specifically the expansion of the Main Library or a new
Police Facility, but the majority of these projects are not
appropriate for debt financing. Additionally, as the result of a
projected reduction in development activity, the city's housing
and parks funds generated by the Office Housing and Parks
Mitigation Fees will be significantly reduced.
It should be noted that the above list is not intended to be an
all-inclusive summary of major expenditure/policy issues which
will need to be addressed in the upcoming year. Environmental
programs,
wastewater
treatment,
water
production
and
conservation, traffic improvements and mitigations, affordable
housing development, solid waste management are funded from
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sources other than the General Fund but will take considerable
Council and staff attention.
Recommendation
It is recommended that the Council conduct the public hearing and
receive input regarding priorities for preparation of the 1991-92
City budget.
Prepared by: John Jalili, City Manager
Lynne C. Barrette, Assistant City Manager
Mike Dennis, Finance Director
Attachments
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