Item 2 - Proposed FY 1999/00 & 2000/01 Comprehensive Financial Plan
- -
AGENDA REPORT SUMMAR
~. TO: Honorable Mayor and Members of the City Council
FROM: James L. Bowersox, City M~
INITIATED BY: Peggy A. Stewart, Director of Adìñinistrative ServiceiY
Peter Moote, Deputy Director of Administrative Services ~ l1"-
Andrew White, Finance Manager
DATE: June 15, 1999
SUBJECT: Proposed FY 1999-00 and FY 2000-01 Comprehensive Financial Plan
and 5-Year Fiscal Forecast for the General Fund
ABSTRACT
This report is the f11'St of three scheduled this fiscal year regarding the City of Po way Comprehensive
Financial Program. It presents the Proposed Comprehensive Financial Program for the periods FY 1999-00
and FY 2000-01. The report also includes a 5-year fiscal forecast for the General Fund through FY 2003-04
ENVIRONMENTAL REVIEW
r This action is not subject to CEQA review.
\
FISCAL IMPACT
As stated throughout this report.
ADDITIONAL PUBLIC NOTIFICATION AND CORRESPONDENCE
Notice was published in the Powav News Chieftain. The members of the Budget Review Committee have
been notified of this report.
RECOMMENDATION
It is recommended that the City Council:
I. Receive Staff's overview and the Budget Review Committee's report on the Proposed Financial Program
for Fiscal Year 1999-2000 and Fiscal Year 2000-01 and the 5-Year Forecast for the General Fund;
2. Take public input; and
3, Continue Public Hearing to June 22,1999
ACTION
--
1 of 18 "UN 1 5 1999 ITEM 2 ..-þ
~ AGENDA REPORr...
CITY OF POW A Y
TO:
FROM:
INITIATED BY:
DATE: June 15, 1999
SUBJECT: Proposed FY 1999-00 and FY 2000-01 Comprehensive Financial
Plan and the 5- Y ear Fiscal Forecast for the General Fund
BACKGROUND
On February 23, 1999, the City Council received the fiscal year 1998-99 midyear budget status
report which provided a review of year- to-date revenue and expenditure activity. The report
projected that FY 1998-99 will close with a General Fund surplus of$1.6 million, nearly double
the original projected surplus at budget adoption.
Using the midyear budget review as a base, staff has developed a preliminary Proposed Financial
Program for both FY 1999-00 and FY 2000-01 and updated the 5-year fiscal forecast for the
General Fund. From late April through May 1999, the Budget Review Committee completed a
detailed review of expenditure and revenue budgets for the upcoming fiscal year. A full report
and recommendations from the Committee will be presented to the City Council on June 15,
1999.
FINDINGS
Two-Year Plan
The proposed Comprehensive Financial Program represents a two-year plan, spanning both
FY 1999-00 and FY 2000-01. Preparation of a multi-year budget was feasible due to the
significant measure of known expenditures attributable to employee contracts which extend
through the two-year period and relatively predictable program costs. The Proposed Financial
Program incorporates two separate fiscal year budgets, establishing separate appropriations for
each year. Program perfonnance will continue to be evaluated every six months over the two-
year period, comparable to the midyear budget evaluation perfonned for the current and past
fiscal years.
ACTION: ~
'JUN 1 5 1999 j
2 of 18 '1'EM 2 ""
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- Agenda Report
FY 1999-00/2000-01 Financial Plan
Page 2
At the start of development of this year's budget process in December 1998, staffperfonned an
evaluation of the two-year budget process which was used for the first time for fiscal years
1997-98 and 1998-99. At midyearFY 1998-99, the General Fund Budget was adjusted upward
by 5.75%. The majority of this increase was related to increased development activity with
corresponding increases in revenues. Other significant amendments were primarily due to higher
than projected sales and property tax revenues, bringing the originally projected General Fund
suplus of $57,000 to $1.6 million. In addition, the Budget Review Committee was again able to
fully evaluate the two-year plan in the time allotted. In sum, the conversion to a two-year
process has proven successful, providing a budget document which remained relevant through its
second year while substantially reducing staff time dedicated to production.
Summary of the Financial Plan
The first year of the proposed Comprehensive Financial Program recommends a City operating
budget of $42,840,470 and a Redevelopment/Housing Services operating budget of $5,202,840.
For FY 2000-01, the proposed operating budget for the City increased by 1% to $43,272,550,
and is adjusted by .6% to $5,233,500 for Redevelopment/Housing Services.
The Comprehensive Financial Program proposes an appropriation of $9,073,349 for City and
Redevelopment Agency capital improvement projects and multi-year programs. The majority of
this funding is for street and water system improvements and utilizes a combination of existing
capital project funding sources. No additional bond funds, Poway's primary source of funds for
capital improvements, are anticipated for the next two fiscal years.
The proposed General Fund budget is balanced, with expenditures budgeted at 98% of revenues,
resulting in a projected surplus of $434,684 in FY 1999-00 and $366,009 in FY 2000-01. The
total General Fund revenue projection for FY 1999-00 reflects a decrease of$137,178 from the
midyear projection for the current year. Revenues from development activity were adjusted
downward in anticipation of slowing activity. The overall development decrease is substantially
offset by increased projections for sales taxes of 12% over the two years. Attachment A provides
a summary account of General Fund revenue and expenditure activity.
Proposed General Fund expenditures continue the Council's policy of an increasing contribution
toward the street maintenance program with $600,000 in FY 1999-00 and $700,000 in FY 2000-
0 I, The contribution increases the total road maintenance operating budget to $2.5 million over
the two-year budget period, in additional to street system capital improvements of $5.2 million.
3 of 18 dUN 1 5 1999 ITEM 2 . þ
Agenda Report
FY 1999-00/2000-01 Financial Plan
Page 3
In sum, both FY 1999-00 and FY 2000-01 reflect few changes from the current year. Items with
significant fiscal impact include personnel cost increases established by employee MOUs, which
include a 3.5% salary increase effective July I, 1999. In addition, one traffic unit and one patrol
unit are proposed be added to the law enforcement contract with the San Diego County Sheriff
for coverage of additional roadways. The following table provides a summary of significant
changes to General Fund revenues and expenditures which are included in the preliminary
Proposed Financial Plan.
REVENUE
Expanded retail businesses generating sales tax and +$828,480 +$1l6,480
£~ I.! !i.!!.1! ~ ~ - ~Ì!~!l Ath.?L ~~! ~!!!l.&. Þ.!i..s~-- --- -- --- -- - -- --- ----- --- - --- - ---- --- - - -- --- - - --- - -- - -
Property Tax -- 2% increase plus known increases to retail + 196,090 + 160,540
base
- -- - -- - - - -- - - -- - - -- - --- - -- --- --- -- - -- --- ------ -- --- --- -- --- - --- - -- - ---- ----- - - - --- - ------
J? ~ ~ ~.?E.I.!!. ~I.!! 1'- ~~ ~ ---- -- - -- --- --- -- - -- --- --- -- - -- - -- --- -- - - --- ---- - ~J~ 1~ (2- - - _.: _1QM 1.2.
All Other +$589,530 +$200,080
+$70;690
EXPENDITURES
-- - - - - - - -- - - -- - - --- - -- - -- --- --- --- -- ------ --- --- ----- -- --- - -- --- --- - ---- - --- - - ----- ---- - -
Street Maintenance -- added additional $100,000 General +$100,000 +$100,000
£!!!l..<!. £.?_I!. t.!i~!:l !!~ I.! --- --- --- --- --- -- - -- --- --- --- -- --- -- - -- - - -- --- --- - --- ---- - ---- --- - ---- -
_Io!! ~-~ ~ f~!!:!:!!!!:!l !_ç.?!!. ~E!____- --- -- - -- - -- - ----- -- --- - -- -- ---- --~- § ~3.zJ~ '- --_:!: 2~Ml!_~
J? ~ ~ ~ 2.E.1.!!. ~I!! §- ~IY..\.C..e..s- {~!!~~!.þy-~ Y~!l..1! ~l!l E!~~ ~2. --- --- - - - -- ---~ _12J.! l!.?- ~ - - - _:. ~ 3 _~d~~-
All Other + 102,383 + 28,923
Total Ex
4 of 18 JUN 1 5 1999 ITEM 2 ~.
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- Agenda Report
FY 1999-00/2000-01 Financial Plan
Page 4
Five-Year Fiscal Forecast for the General Fund
As part of the budget preparation process, staffhas prepared an updated five-year fiscal forecast
for the General Fund. The forecast provides an account of General Fund revenue and
expenditure trends under three different scenarios.
The first scenario is "Conservative," in which the assumptions reflect a conservative approach to
both revenues and expenditures, and includes our best estimates of probable changes over which
the City has control. The conservative scenario projects that revenue increases will continue to
offset expenditures through FY 2001-02. However, in the fourth year of the forecast, the trend
changes and indicates a deficit for the General Fund if left unadjusted.
In order to provide a range within which the City Council can view this forecast, Scenarios II and
III provide other ends of the spectrum. Scenario II assumes a higher level of costs within the
City with a lower level of revenues, indicating maximum potential shortfalls. Scenario III
assumes a lower level of costs with a higher level of revenues, indicating maximum surpluses.
Under a "Highest ExpenditureslLowest Revenue" scenario, expenditures exceed revenues by a
- deficit of nearly $5 million in the fifth year, while a "Lowest ExpenditureslHighest Revenue"
scenario would yield a surplus of $1.2 million for the same year. Our experience has been that
actual expenditures have remained closest to the conservative level of the model, while revenues
have been about midway between the conservative and high levels.
5.Year Fiscal Forecast
Conservative Model I. EXPENDITURES I
I . REVENUES I
23
22 1.574.27 434,'" ",,",009 124,'"
21 Ii (339"'2 (""'20
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~ 2°, :
5E 19' i
,
18
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FY 1997-88 FYI998-99 FYI_," FYI89NO FY 2000-01 FY 2OO1.oz FY 2002-03 FY 2OCJ3.ðI
Fiscal Year
Actual/Proposed Forecasted
... .
.JUM 1 5 1999 ITEII 2 ,'"
5 of 18
Agenda Report
FY 1999-00/2000-01 Financial Plan
Page 5
Assumptions used for significant revenue items under the conservative scenario include an
annual growth rate of3% for property tax. Long-range sales tax revenue projections assume a
slowing of retail growth after FY 1999-00 and are adjusted by 2% annually thereafter.
Development revenues reflect activity which declines to minimum levels by FY 2003-04.
Fiscal forecasts prepared in previous years projected a deficit General Fund budget for the out
years under the conservative model. However, continued vigilant management of operations
supported by the General Fund has resulted in balanced budgets by the end of each fiscal year.
For the period FY 1991-92 through FY 1997-98, General Fund revenues have exceeded
operating expenditures by a cumulative $4.8 million.
Attachment A-I presents the conservative model of the fiscal forecast through FY 2003-04,
while attachments A-2 and A-3 provide a summary of General Fund revenue and expenditures
under the remaining fiscal forecast scenarios. Attachments B-1 and B-2 summarize the
assumptions used in each of the three forecast scenarios.
ENVIRONMENTAL REVIEW
This action is not subject to CEQA review.
FISCAL IMPACT
As stated throughout this report.
PUBLIC NOTIFICATION AND CORRESPONDENCE
Notice was published in the Powav News Chieftain. The members of the Budget Review
Committee have been notified of this report.
RECOMMENDATION
It is recommended that the City Council receive this report, the Budget Review Committee's
report on the Proposed Financial Program for FY I 999-00IFY 2000-01, and the 5-Year Forecast
for the General Fund Budget; take public input; and continue Public Hearing to June 22, 1999.
Attachments: A-I: Fiscal Forecast Summary--Conservative
A-2: Fiscal Forecast Summary--Low Revenue/High Cost
A-3: Fiscal Forecast Summary--Low CostlHigh Revenue
B: Forecast Assumptions
C: Report by Budget Review Committee
c:\data\wpfiles\budgetlhearing 1.00
.JUIi 1 5 1999 ITEM 2 ~
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B-2 N 1 5 1999 ITEM 2
CITY OF POW A Y
BUDGET REVIEW COMMITTEE
TO: Honorable Mayor and Members of the City Council
FROM: Members of the Budget Review Committee
DATE: June 15, 1999
SUBJECT: The Proposed Comprehensive Financial Plan for
Fiscal Year July 1, 1999 through June 30, 2001
I. RECOMMENDATION OF PLAN
The Budget Review Committee has completed the review of the City Manager's Proposed
Financial Plan for fiscal years 1999-00 and 2000-01. The Committee finds that the
expenditures as proposed are necessary to maintain the appropriate levels of service as
provided by the City in recent years and would provide for a balanced General Fund
budget. The updated five-year forecast for the General Fund, under a "conservative"
model, projects that operating revenues will exceed expenditures through 2001-2002,
Beyond this point, diligent budget management efforts will be necessary to sustain the
General Fund supported services as proposed by the Financial Plan. The Fund's increased
contribution towards the street maintenance program and the expansion of law enforcement
services coincide with the permanent leveling off of development generated revenue. The
continuation of a conservative fiscal policy is vital in order for the City to avert any
potential need for reduction of other General Fund supported services.
II. SUMMARY OF REVIEW PROCESS
The Committee, consisting of Carol Chosmer, Susan Crane, Mary Cross, Phillip Jelsma and
Anthony Pagano, held public meetings with the City Manager, Director of Administrative
Services, Deputy City Manager, Deputy Director of Administrative Services, Director of
Redevelopment Services and Finance Manager. The Committee began its detailed review of
the proposed Comprehensive Financial Plan for the City and Redevelopment Agency on April
21, 1999, and met eight times to accomplish a thorough evaluation of the Plan. Additionally,
the Committee members spent many hours of independent study reviewing the Plan and
supporting material.
12 of 18 Attachment C .WN 1 5 1999 ITeM 2 ..
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Budget Review Committee Report FY 1999-00/2000-01
- Page 2
The Committee's review included a detailed examination of the budget for all City
operations, an analysis of anticipated revenues, and a review of balances and inter-fund
activity for various City and Redevelopment Agency funds. The Committee also received
an overview of the purpose, formation process, and fmancing capabilities of the Poway
Redevelopment Project. This presentation was followed by a review of proposed funding
for City and Agency capital improvement projects, as well as the preliminary financing
plan for utility operations and rate setting. Supporting documents and reports reviewed by
the Committee included the following:
* Past Committee Recommendations and Status of Implementation
* FY 1998-99 Midyear Report to Council
* Operating Revenue and Expenditure Budget Flowchart
* Detail/justification for revenues and expenditures
* Report of General Fund support for various City Programs (net of revenues)
* Report on the City Safety Program
* The Year 2000 Readiness Report
* Five-year Fiscal Forecast for the General Fund
* The FY 1998-99 Capital Improvement Program Agenda Report
- * Water and Wastewater rate structure and preliminary rate adjustment worksheets
* City and Agency Fund Activity Detail Statements and
Inter-fund Activity Flow Chart
* City and Agency Capital Improvement Program Worksheets
III. COMMITTEE RECOMMENDATIONS
A. FINANCING REQUIREMENTS FOR INFRASTRUCTURE AND
RECREATIONAL FACILITY NEEDS
The Financial Plan for FY 1999-00 and 2000-01 demonstrates the scarcity of funding
sources for the City and Redevelopment Agency capital improvement program.
Notwithstanding, new recreational facility needs have been identified by the Park and
Recreation Committee Needs Assessment study. With the Agency's current bonding
capacity fully utilized at present and the potential for severe debt issuance limitations
imposed on the Agency effective December 31,2003, efforts need to be directed toward
leveraging current available capital program funding sources. Examples include
earmarking any funds that remain from the $250,000 Year 2000 compliance contingency
project to go towards identified park and recreation facility needs, and considering
development of sports fields as an alternate use for the Palomar College site or at
- Meadowbrook,
13 of 18 dUN 1 5 1999 ITEM 2 t"
Budget Review Committee Report FY 1999-00/2000-01
Page 3
Capital project funding requests for repair and reconstruction are beginning to reflect the
aging of the City's infrastructure. The history of activity for the Drainage Fund, the
proper source for many of the projects, demonstrates that the Fund is capable only of
sustaining current maintenance operations. In addition, Water and Sewer Fund supported
capital improvement needs will increase pressure on long-term utility rate stability. As
such, the Committee recommends supplementing the annual capital improvement plan
with an updated long-range fmancing plan for infrastructure repair and reconstruction.
B. WATER AND SEWER SYSTEM FINANCING AND RATE SETTING
The Committee reviewed the City's approach to fInancing water and sewer operations.
The Committee's discussion focused on the increasing importance of utilizing a multi-
year financing and rate setting plan, Costs passed on to the City by the Metropolitan
Water District, San Diego County Water Authority and San Diego Metropolitan
Wastewater Department for financing regional capital improvements as well as newly
implemented rate structures for member agencies have made costs difficult to project.
The Committee also cited the need to continue participation in the AFFORD review
group and the use of a utility rate consultant familiar with regional issues. These
practices have been critical for continued rate stability and defining sufficient service
standards. The use of the utility rate stabilization funds as a factor in the setting of rates
for FY 1999-00 continue to be appropriate, permitting more moderate incremental rate
adjustments while maintaining the long-term fiscal well-being of the utility funds.
C. DIVESTURE FROM DIRECT ADMINISTRATION OF HOUSING OPERATIONS
The housing operations budget demonstrates that proposed expenditures will continue to
support appropriate levels of maintenance for the mobile home parks, including the
continued set aside of funds for major facility maintenance requirements. The five-year
projection for housing operations reflects an increased level of fiscal self-sufficiency.
In recognition of management's assessment that the City's governance is not well
structured for direct administration of housing operations, the Committee recommends
strengthened efforts towards utilizing outside management resources which are better
suited for this purpose or actual sale of the properties. The potential to achieve divesture
has improved due to the increased self-sufficiency of the City's housing operations as
well as an improved economy.
14 of 18 JUN 1 5 1999 ITEM 2 .1
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- Budget Review Committee Report FY 1999-00/2000-01
Page 4
D. ECONOMIC DEVELOPMENT
The Committee commends the City Council's successful effort to stabilize the fiscal
condition of the South Poway Business Park's community facilities districts and the
resulting in increased growth. The Business Park remains the City's single largest source
for expanding the sales tax base.
Based on the Committee's finding regarding future competition for General Fund
resources between present service levels, safety services requirements and infrastructure
maintenance, intensive efforts in the area of economic development should be sustained.
Sales tax receipts from within the Business Park should continue to be tracked to
determine if the threshold goal of $.25 per square foot on average is being met or
exceeded.
E. REVENUE MANAGEMENT
The Committee's review included an evaluation of programs with offsetting revenues
- from fees, demonstrating the net General Fund support for such operations in past years
and as proposed for FY 1999-00/2000-01. The current accounting structure of some
programs makes tracking net support costs difficult. To ensure best management of all
programs, the Committee recommends adjusting the accounting structure as necessary to
eliminate any ambiguity with respect to actual program costs.
F. STAFFING LEVELS
The Committee would like to emphasize a past recommendation citing the need to
establish an organizational structure for Development Services which reflects a
community approaching build out. We are pleased to see that an organizational study and
plan development was commissioned by the City Council and is well underway.
The fiscal forecast confirms the importance of establishing a staffing plan which best
utilizes permanent and contract staff commensurate with the base level of development
activity which is expected over the long-term. The Committee endorses and encourages
the City's current practice of augmenting Development Services staff with consultants
where appropriate in order to accommodate any heightened activity, providing a well
utilized and stable work force.
-
15 of 18 dUN 1 5 1999 ueM 2 ,~
Budget Review Committee Report FY 1999-00/2000-01
Page 5
G. PUBLIC ACCESSmILITY TO THE FINANCIAL PLAN
In its present form, the City's Comprehensive Financial Plan is a highly detailed and well
structured document that provides a comprehensive representation of all aspects of the
City's fiscal operations. The Committee acknowledges the efficiency and success of the
two-year format, and recommends its continued use during periods of relatively stable
fiscal conditions.
While production of the Budget document in its present form is needed to provide full
representation of the City's Financial Plan and serve as a reference for internal uses, the
Committee recommends improving public accessibility to the Financial Plan. Full
understanding of the Plan requires an intensive and lengthy review such as that performed
by the Committee with significant support from staff, a process not practical for broad
application.
The Committee concurred that improved public accessibility to the Financial Plan would
be best accomplished through development and production of an "Executive Summary."
The Committee concluded that the summary should focus on major services performed by
the City, major multi-year programs and capital improvements, supported by a graphical
depiction of the sources and uses of City funds. The summary should be cost effective to
produce, brief, and easily understood. The Committee further recommends that future
Budget Review Committee sessions be adjusted to simplify presentations of various
logistic and technical aspects of the Budget development process in order to accommodate
an ongoing review of the "Executive Summary" from a citizen's perspective,
IV. CONCLUSION
The continued economic growth and strong fiscal health of our City demonstrates the
continued proficiency of our elected and appointed officials. With this growth comes
increasing pressure on our General Fund for support of safety services, community
services and the street improvement program. This condition is demonstrated by the
safety services budget, where costs are growing proportionally greater than any of
component of the General Fund budget. As such, innovative methods for meeting
funding requirements need to be continually evaluated.
16 of 18 JUN 1 5 1999 ITEM ?
- -
Budget Review Comm._...;f Report FY 1999-00/2000-01
Page 6
- The distribution of the General Fund Budget increase from FY 1998-99 to FY 1999-00, and
from FY 1999-00 to FY 2000-01 as proposed is demonstrated by the following charts.
P..",s......"""",
20,""
C.mm."", s.......
4.'%
Distribution of Budget Change.
FY 1998-99 to FY 1999-00
Distribution of Budget Changes
FY 1999-00 to FY 2000-01
The members of the Budget Review Committee would like to thank the City Council for the
opponunity to serve the City. We believe that our evaluation consisted of a thorough and
complete evaluation of the Proposed Financial Program for FY 1999-00 and FY 2000-01 as
well as an in-depth examination of the City's fiscal policies. In addition, the Committee's
review of the Financial Program provides a broad look into the City's financial operations
from a citizen's perspective, and provides participants with an informative and rewarding
experience. The Committee would like to express our gratitude and thanks to Jim Bowersox,
Warren Shafer, Peggy Stewart, Penny Riley, Peter Moote, and Andrew White for their
assistance, and to recognize the total staff effort that went into the financial program. Their
work on preparation of the program is reflected in what the Committee believes to be a well
prepared, informative document.
17 of 18 dUN 1 51999 ITEM 2 ,.
Budget Review Committee Report FY 1999-00/2000-01
Page 7
This report on the Proposed Comprehensive Plan for Fiscal Year 1999-00 and 2000-01 as
prepared by the Budget Review Committee is hereby submitted to the Poway City Council.
Respectfully submitted,
~ ¿¡44ft"""' 17t~Ts? I~
Anthony P ano, Chao erson Marý Cra s
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c 7.
Oi-ICiLl ei~Lf-/
Susan Crane
18 of 18 dUN 1 5 1999 ITEM 2 ~'