Item 3.1 Visual slideshow presented by Budget Review CommitteeBudget Review CommitteeCITY OF POWAYCITY COUNCIL MEETINGJUNE 18, 2019
Budget Review Committee Charter“The purpose of the Budget Review Committee (BRC) shall be to review the annual Operating and Capital Improvement (CIP) Budget as proposed by the City Manager and report its findings to the City Council.”Five BRC meetings this Spring:Tuesday, April 30, 2019Thursday, May 2, 2019Wednesday, May 8, 2019Tuesday, May 14, 2019Wednesday, May 22, 2019
Committee MembersBrian Pepin, ChairPeter De Hoff, Vice ChairBernie GuzmanDan MathsonMike Firenze
City StaffCity Manager Chris HazeltineFormer City Manager Tina White Assistant City Manager Wendy KasermanDirector of Finance Donna GoldsmithBudget Administrator Alex CastanaresDepartment Directors
Introduction (1)The City of Poway is a well-governed and well-managed city.The budget is built on good accounting procedures and a long history of efficient, focused, and conservative revenue application.However, despite good leadership, proficient management, and a strong local economy providing solid tax revenues, Poway is experiencing what almost every other California public agency is experiencing: an extremely troubling financial forecast in coming years.
Introduction (2)The FY 2019-20 budget is balanced, but with little room to spare.As early as next year City management will be faced with difficult decisions in order to balance the budget.In as little as two years the City may need to look at more drastic measures to balance the General Fund budget.It is the view of this BRC that aggressive moves be made by the City sooner rather than later to avoid future service cuts for Poway residents.
ChallengesHigh personnel costs.Slow revenue growth.Unfunded state mandates such as prevailing wage requirements.Unfunded regional mandates such as the looming cost of the Los Penasquitos Lagoon project.A number of costly items currently being funded in an unsustainable manner, primarily the Poway Center for the Performing Arts.
Solutions for any public agencyA.Cost efficienciesB.Revenue growthC.Service cuts
Solutions: (A) Cost EfficienciesCost efficienciesControl and reduce personnel costs.Don’t fill unneeded vacancies.Look at all options, including creative outside-the-box solutions.
Solutions: (B) Revenue GrowthRevenue growth“Growing the pie”Examine fees
Solutions: (C) Service cutsService cutsThis is an undesirable way to address budget challenges that should be avoided if possible. Like any city, Poway is a service-providing organization.Therefore, any cuts to the number of personnel or operations will likely present a decrease in service levels for Poway residents.
Specific Challenges and Recommendations
Challenges: Personnel CostsThe problem doesn’t appear to be the number of employees; rather, it’s the cost of total compensation per employeedriven by pensions, healthcare, and other benefits.Head count is close to recession levels, but cost per employee is higher.In some cases the costs of pensions and other benefits are over 50% of an employees annual wages.
Recommendations: Personnel Costs Control and reduce personnel costs.Evaluate healthcare costs.Analyze overtime costs, especially in the Fire Department.Don’t fill unneeded vacancies.Don’t create new positions moving forward unless absolutely necessary for health and safety.
Challenges: Revenue GrowthIn recent years the City has projected modest revenue growth (3%)In FY19-20, sales tax is projected to dip by 0.4%Redevelopment Property Tax Trust Fund (RPTTF) revenue is projected to decrease by 1% for the first time in several years.This is resulting in $700,000 in projected revenue being cut from early FY 19-20 budget projections.Property tax revenue is projected to have a slight increase.
Recommendations: Revenue GrowthGrow the pieThe City Council’s support for the revitalization of Poway Road is commendable and will help provide additional economic activity.Other areas where economic revitalization and revenue growth can be accomplished should be examined.Examine feesUser fees for non-Poway residents should be set at a full cost-recovery level
Other Recommendations (1)Budget ReadabilityPlanning DivisionManagement should look at improving efficiencies and streamlining processesTry to get permits and projects out the door faster, creating more revenue growthLook at additional opportunities for contracting out work where it makes sensePoway Center for the Performing Arts (PCPA)Wonderful venue that is operating significantly in the red and requires heavy subsidization from the General FundLook at personnel costs and hold a PCPA workshop
Other Recommendations (2)Mitigation of Unexpected Financial RiskPhase One of the Los Penasquitos Lagoon Silt Reduction Project$6-8 million in mandated costs and that’s only phase oneRecurrent Project Expenses from Outside AgenciesExternally-granted permits and large-scale maintenance operations like clearing storm drainsLED Streetlight RetrofitInformation Technology (IT)Staff should remain vigilant against cybersecurity threatsDevelop a Long-Range Financial ForecastFive-year financial forecast
A note on 45% reserve levelIt must be noted that the City’s reserve level of 45% is in reality a smaller dollar amount than last year’s 45% because of a modification in the way that 45% is calculated.The new calculation, which removes “rent” paid toward capital funding from the General Fund reserve, makes sense and removes a “double-counting” toward capital replacement.However, the Council should be aware that this revised calculation has provided additional funds (~$500k) available for the FY 2019-2020 budget that will not be repeatable in future years.
Budget Review CommitteeCITY OF POWAYCITY COUNCIL MEETINGJUNE 18, 2019