SR-202-001 (88)
'iH
JAN 1 ! 2005
Council Meeting: January 11, 2005
Santa Monica, CA
TO: Mayor and City Council
FROM: City Staff
SUBJECT: Consider Context in which FY 2005/06 Budget will be developed, Receive
public comment on Budget Priorities including comments on Community
Development Block Grant and Home Investment Partnership Act (HOME)
Programs and Raise Questions of Staff
Introduction
Tonight's meeting is one important milestone in development of a budget for 2005/06
and a financial plan for 2006/07. This report recommends that Council consider the
context in which next year's budget will be formulated, take public input on the
community's priorities for fiscal year 2005/06 and raise questions of staff, At the
meeting of January 25, 2005 the mid-year 2004/05 budget status and community survey
results will be presented and Council will provide staff with preliminary direction on
budget development for 2005/06
Backaround
In Santa Monica, budget development is informed by a five year forecast of revenues
and expenditures, review of current year work plans and mid-year budget status and
public input. The public is invited to submit comments on budget priorities through the
City website as well as by more traditional means, including a public hearing
customarily scheduled in January. A statistically representative phone survey also
contributes to gauging community satisfaction with current services and understanding
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JAN 1 1 2005
priorities. Council provides staff with preliminary direction on budget development by
the end of January and may provide additional direction in the ensuing months.
Based on that direction, staff has in recent years developed both a proposed budget for
the coming fiscal year and a plan for the subsequent fiscal year. This two year
projection allows Council and the community to take a longer term view of revenue and
resource projections as well as multi-year work plans. With the budget Council adopted
for 2004/05, the current fiscal year, they reviewed a plan for FY 2005/06. The plan
anticipated that reductions to current programs would be necessary in order to keep
revenues and expenditures in balance and to accommodate program and maintenance
needs of new facilities. The reductions would primarily affect the Community and
Cultural Services and Police departments. As noted below, a stronger economic
recovery than projected should preclude the need for those reductions.
Discussion
Fiscal and Economic Outlook
Overall the local economy continues its upward momentum. The economic recovery is
more robust than predicted in prior City forecasts resulting in a modest boost to General
Fund revenue. This has been primarily fueled by Sales Tax and Transient Occupancy
Tax revenue growth.
The national economic outlook based on economic indicators reflects normal growth for
the first half of 2005. However, UCLA Anderson School predicts that for the second half
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of 2005 through 2006 the U.S. economy will experience a slowdown. For 2005, the
Gross Domestic Product (GDP) will begin at a normal growth rate of 3 - 3.5%, later
deteriorating to 2 - 2,5%. Job growth will remain normal at 2.2 million jobs with
unemployment at 5.6%. Inflation will begin to increase to 2.8% and long- term interest
rates are anticipated to increase to 5.75%. The California economy in 2005 and 2006,
based on the UCLA study, shows personal income growth around 5%, increases in
taxable sales of 4.8 - 5.1 % and CPI of 2.5 - 2.8%.
Based on information from the UCLA Forecast and other experts, and given current and
historical City revenue trends, staff projects the growth in revenues for the next five
years. Of the City's total General Fund revenue, 63% is derived from five sources:
Sales Tax, Property Tax, Utility Users Tax, Business License Tax and the Transient
Occupancy Tax. Forecasted sales tax revenue for this period is projected at the City's
average sales tax growth rate of 5% annually. Property tax revenues are estimated to
experience an annual growth rate ranging from 3.9% to 4.3% over the 5-year period.
Utility Users Tax revenue grows at approximately 3% per year and Business License
Tax revenue at 4% per year, The Transient Occupancy Tax is projected to grow 4 - 5%
per year over the period.
Overall revenue growth of the General Fund during the 5-year forecast period is
projected at 14.6%. Over the same period expenditures are expected to grow 18.7%.
This trend is one reason that considerable restraint should be exercised in assuming
additional ongoing costs. Another is that while local revenues are growing modestly,
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the State deficit has yet to be adequately addressed. The current estimates of the
deficit are $8.1 billion, a $1.4 billion increase from prior estimates of $6.7 billion. With
the passage of Proposition 1A last November, the modest local share of property taxes
received protection in the State Constitution. The Proposition prohibits the State from
permanently reallocating property tax from cities and counties to other purposes.
However, based on past history, local governments believe that the legislature will
continue to look to any unprotected local revenue as a "quick fix" to the State's budget
problems. Staff will follow state budget developments closely.
Other budget challenges facing the City relate to enterprise funds that rely on fees for
service as revenue. Those fees increase annually at CPI, but as with the General Fund,
the enterprise funds are experiencing expenditure increases at rates above CPI.
Finance and the enterprise fund managers are reviewing the status of these funds to
determine what rate increases or service reductions may be warranted in the coming
years.
Unfunded Capital Projects
Reductions to the capital budget program were among the first taken to constrain the
expenditure trend line in recent years. As a result, there is a significant body of
unfunded work which was previously identified for capital investment. The list of
unfunded capital projects appears at Attachment A. The estimated costs associated
with some of those projects are now several years old and will undoubtedly have
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increased in the interim. Council may wish to provide input on priorities should it be
possible to enhance the capital budget for 2005/06.
Major Work Initiatives
The work plan for the current fiscal year is based on the following multi-year,
interdepartmental "Common Work Objectives", which respond to Council and
community priorities and appear in the 2004/05 adopted budget.
. Enhance the quality of life, safety and community involvement of residents of the
Pico neighborhood.
. Incorporate ways to achieve the goals of the Sustainable City Plan into daily
activities and special projects.
. Ensure that the public receives timely and responsive service from all
departments and that the City's regulatory processes are fairly, efficiently and
courteously administered with a high degree of predictability for customers
moving through the process,
. Promote "active living".
Progress has been made on each objective and will be reported in the 2004/05 mid-
year status report for the January 25, 2005 Council meeting. Council will want to
consider whether each remains a high priority and may want to change or add priorities
in giving direction to staff that evening.
Five Year HUD Consolidated Plan
This Spring, in addition to developing the City budget, staff will be preparing the City's
Consolidated Plan covering the period 2005 to 2010. This is a planning document
required by the U.S. Department of Housing and Urban Development. It assesses how
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the City assists its low and moderate income population by meeting federal
requirements for decent housing, a suitable living environment and economic
opportunities. It provides housing and community development strategies for the next
five years. A draft Consolidated Plan will be developed and made available for a 30 day
comment period in May, 2005. Because the five year plan reflects work priorities and
projected revenues and expenditures related to the Community Development Block
Grant (CDBG) and HOME Investment Partnership Act (HOME) programs, a public
hearing on the plan and Council consideration of its adoption will coincide with budget
adoption.
Public Input
In addition to public input from those present and comments on priorities communicated
through the website and other means, the results of a statistically representative
resident survey will be available to Council at the January 25 meeting. Those results
will be posted on the City website and can be compared there with results of prior year
surveys.
Budget Calendar
On January 25, 2005, taking into consideration budget context and public input, Council
will be asked for preliminary policy direction regarding the priority of capital
improvement projects as well as ongoing infrastructure replacement and programs
priorities. Subsequent budget development milestones are as follows:
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Feb - Apr
May 17
May 25, 26, 27
June 21
Departmental budget development
Proposed budget released for public review
Budget study sessions
Public hearing and budget adoption
Recommendation
Staff recommends that the City Council consider the context in which the FY 2005/06
budget and financial plan for 2006/07 will be developed, take public input on the
community's priorities and address questions to staff. Staff will return on January 25
with follow-up information, results of the resident survey and mid-year status report and
will request Council policy direction to guide major work initiatives and budget
preparation.
Prepared by: Susan E. McCarthy, City Manager
Mona Miyasato, Assistant to the City Manager for Management Services
Steve Stark, Director of Finance
Janet Shelton, Budget Manager
Attachment A:
Capital Needs by Project Time Frame
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Attachment A
e....-
J
CAPITAL NEEDS BY PROJECT TIME FRAME
"Readiness" refers to general time frame a project is scheduled, required or could lil:?ely start
S...a H..I.....
Readiness (years)
10
Project
Status
Estimated Cost
<'0
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......
~
N
..:-
General City Infrastructure
A Airport ParI:? Bids are expected in Fall 2004, Of the estimated need, $1.3 M is for $3,500,000 X
second phase of (streetscape along Airport Avenue), which was
deferred in March 2003, Field use could be partnership opportunity,
B BiRe Master Plan Improvements For improvements, striping and signage, This project could be $200,000 X
completed in 3 years.
C BreaRwater The status of the $4 M in federal funding for the project is unclear, $2,100,000 X
The EIR is scheduled to be completed in 2005-06, The estimated
City expense is to match federal funding to build a required
commercial harbor,
0 CCSP Facilities - Early Childhood Part of Civic Center Specific Plan, Proposed partnership $8,115,000 X
Development Center opportunity with SMC
E Library Murals Significant funds are needed to conserve the 30 murals (of 38) from UnRnown X
the Smithsonian for placement in the new Main Library, which is
currently under constuction,
F ParI:? Restroom and Building Phase 2 of project for replacement of restrooms at Clover, Stewart, $1,500,000 X
Replacement HotchRiss and Marine parl:?s,
G Pier Circulation Improvements This is an estimate of circulation imrpovements, which may include $1,750,000 X
a ramp for cars and biRes, The EIR is scheduled for completion in
January 2005,
H Restoration (Conservation) of Public Art The public art collection needs significant conservation and $525,000 X
Collection restoration. These costs would cover a 3-year period,
I CCSP Roadway -Second Street Bridge to One fo the first infrastructure projects needed to allow future $2,060,750 X
OlympiC Drive phases of the CCSp,
) CCSP Facilities - Civic Auditorium ParI:? decisions will be Rey in determining the Civic Auditorium's $63,317,500 X
Expansion future configuration, Could be a potential partnership
opportunity in the future,
I< CCSP Public Open Space - Civic Port of CCSP; will be integral to Civic Auditorium reuse. Could be $8,585,400 X
Auditorium ParR (Sports field) a potential partnership opportunity for sports fields in the futire,
L CCSP Public Open Space - Palisades Part of the CCSP, These improvements are scheduled 5-7 years $6,296,700 X
Garden WalR/arboretum away, Proposed otential partnership with SMC.
M CCSP Public Open Space - Town Square Port of the CCSP, These improvements are scheduled 5-7 years $4,770,300 X
away,
N eesp Roadway - Second Street and Port of the eesp, These improvements ore scheduled 5-7 years $15,264,800 X
Main Street Bridges away,
0 Citywide ADA improvements for older Gross estimate of cost for needed upgrades to City facilities, $5,000,000 X
facilities
P CCSP Roadway. Main Street. Main These roadway improvements are scheduled 10 years away, $12,800,000 X
Street Circle, Civic center Drive, Ocean
Avenue, Pico Streetscape, Fourth Street
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Attachment A
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CAPITAL NEEDS BV PROJECT TIME FRAME
"Readiness" refers to general time frame a project is scheduled, required or could libely start
",,,.j. ,,........
Readiness (years)
ID
Project
Estimated Cost
""
c.
('oJ
Status
....
""
,..:.
0 City Hall Renovation and City Services This is the estimated cost to renovate City Hall, including seismic $85,000,000 X
Building retrofit, and build a City Services building,
R City Yards Landfill Mitigation Significant measures will need to be taben prior to and in Unbnown X
conjunction with the City Yards Master Plan to mitigate impacts of
the landfill below the City Yards,
S City Yards Master Plan The project is on hold pending resolution of transfer station and $38,400,000 X
subsidence issues (see below),
T Crescent Bay Parb Rehabilitation This is the estimated cost to completely rehabilitate the parb, The $1,540,000 X
pergola rehab has been completed.
U Development of parbland sites This is an estimated cost for improvements and parbing at potential $20,000,000 X
parb sites, This could be a potential partnership opportunity for
field improvements,
V Freeway Sound wall Gap Closures The cost is unbnown, Although these sound walls are on MTA's Unbnown X
sound wall list, they are at minimum of 15 years away from being
considered for funding by the MTA,
W Lincoln Boulevard Improvements This is an estimate for rehabilitation and street enhancements on $19,000,000 X
Lincoln Boulevard, The City has been worbing with Caltrans on
relinquishment, which will tabe another 9-12 months,
X Route 10 E/B on-ramp widening for HOV The City's Engineering Division has not yet estimated the cost for this Unbnown X
Lane at Cloverfield project,
Y Santa Monica Boulevard Improvements Funding for a streetscape project was deferred in March 2003, $10,000,000 X
Z Senior Recreation Center Renovation An early conceptual design was completed but emerging needs of $2,500,000 X
Project next generation of seniors remains to be defined,
Projects Consisent with Redevelopment Plan (Non-Housing)
AA Downtown Parbing T asb Force Strategic This project would retrofit the "tall" parbing structures (2,4,5); $250,000,0001 X X X I
Plan demolish and rebuild the "short" structures (1, 3, 6); and construct
new structures in the downtown, The original cost in 2001 was $92
million; the costs could rise to $250 on design selected,
Much of these costs could be funded by the RDA with bond
financing, as discussed in its 5-year Implementation Plan.
BB Land Acquisition for public uses Land acquisition for potential parbing structures, light rail, housing $30,000,000 X I I
and pedestrian-oriented retail or other public uses, This could be a
future partnership opportunity depending on the use selected,
CC Development Costs of Land Acquired for This is a gross estimate of development costs (acquisition costs are $40,000,000 X I
Public Uses listed under the high category).
DD Civic Auditorium Seismic Retrofit This project is still unfunded, pending decisions on the Civic $5,000,000 X
Auditorium,
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1/4/2005
Attachment A
8..-
J
CAPITAL NEEDS BY PROJECT TIME FRAME
"Readiness" refers to general time frame a project is scheduled, required or could Iil?ely start
S..la ,'1..t......
Readiness (years)
N
ID
Project
Status
Estimated Cost
""
o
......
"'"
~
Projects Consisent with Redevelopment Plan (Affordable Housing)
EE Civic Center SpecifiC Plan - Housing
The affordable housing component of the Civic Center Specific Plan
will be one of the first developments of the plan, This could be
funded debt supported by RDA affordable hOUSing funds,
$30,000,000 X
FF
CCSP Public Open Space - Village
Green/Mews
These are public improvements linl:1ed to the affordable housing
(Village Green) which could be funded with RDA afforable housing
funds.
$9,"0,000 [ X
II I
I
X I I I
i i I
GG
CCSP Roadway - Olympic Drive (Ocean These are public improvements Iinl:1ed to the affordable housing
Ave to Main Street) (Village Green) and could be funded with RDA afforable housing
funds,
$2,020,000
City Infrastructure S 312,225,450
Redevelopment (Non-hOUSing) $ 325,000,000
Redevelopment (Affordable housing) $ 41,130,000
Grand Total $ 678,355,450
The list excludes the 2oth/Ooverfield street improvements in the Pica Neighborhood, for which funds have been identified, Also excluded are projects far in the future, ar in
conceptual development, such as the urban runoff master plan, Community Energy Fund
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