2013-2014 Budget

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On July 9, 2013, the Davis City Council formally adopted the Fiscal Year 2013-2014 budget. A preliminary look at the upcoming Fiscal Year 2014-2015 budget was presented to Council on December 17, 2013 and is included.

The Fiscal Year 2013-2014 Preliminary Budget was shared with City Council on May 31, 2013. The Departments made their budget presentations at the City Council meeting on June 25, 2013 in the Community Chambers.

Other general budget documents as well as the Fiscal Year 2012-2013 Budget Update Report, which was presented to City Council on April 9, 2013 are available for review in this section.

The 2013-2014 budget was adopted by the Davis City Council during their meeting on July 9, 2013.

2013-2014 Adopted Budget

2013-2014 Budget Presentations

In preparation of the Fiscal Year 2013-2014 budget, City Departments provided a series of presentations to City Council. The first presentations by City Departments began on June 25, 2015.

Follow-Up to Council Questions from June 25, 2013 City Council Meeting

Departments presented their FY 2013-14 budgets at the City Council meeting on June 25, 2013. During the presentations, questions and/or direction were provided by the City Council. The following document provides follow-up information from the June 25 meeting: Council Directed Questions_6 25 2013.
2013-2014 Preliminary Budget

The Fiscal Year 2013-2014 Preliminary Budget will be shared with City Council on May 31, 2013. The Departments will be making their budget presentations at the City Council meeting on June 11, 2013 in the Community Chambers. Public input is welcome. The Council is scheduled to adopt the final budget on June 25, 2013.
General Documents

The documents listed below were presented during the April 9, 2013 City Council meeting> as agenda attachments:
FY 2013/14 Budget Preview

Overview

There are both challenges and opportunities ahead as the City prepares its FY 2013/14 budget. The City will be facing a structural imbalance of over $2 million in the General Fund and will need to make some difficult choices to fund deferred maintenance and infrastructure needs. On the plus side, the savings agreed to with our labor partners has made the funding gap far more manageable. These labor savings will fully be realized within three years. Also, the City has new rates in place that can fully fund a new water treatment facility and expanded wastewater facilities. In partnerships with the business community and UC Davis, we have implemented Davis Roots and are jointly funding a position through TechDAVIS. These activities should lead to greater business growth, new technology opportunities and hopefully, more revenue to the City

Due to the fact that there are large proposed capital projects which will span several years and the budget savings do not fully come to fruition for three years, I am proposing a multi-year budget approach which is outlined below. In addition, there may be a need to explore additional revenue sources since the supplemental Sales Tax expires in 2016 and the Parks Maintenance tax expires in 2018. The one-half cent supplemental Sales Tax annually generates approximately $3.7 million and the Parks Maintenance Tax brings in about $1.3 million per year.

Building a sustainable budget is a collaborative process and I have been reaching out to employees through a series of information meetings. Our staff is creative and resourceful and will have ideas which may trim costs or bring in new revenue. In addition, Davis residents are highly-educated and passionate about our City. When the proposed infrastructure plans are more fully formed, we will be taking them on the road to the various sections of town. In the meantime, residents may make comments or offer suggestions on the City website which will also have links to budget information.

Recommendation

This item presents information concerning the upcoming FY 2013/14 Budget which begins July 1, 2013, and runs through June 30, 2014. Staff seeks preliminary policy direction from the Council concerning the construction of the FY 2013/14 Budget. This direction will be translated into a proposed plan which will be brought back to Council on April 30, 2013

Fiscal Impact

The FY 2013/14 budget has a projected structural imbalance of up to $2.02 million in the General Fund or 4.7 percent of the budget (Attachment A). This means that the City doesn’t have enough ongoing revenue to meet its ongoing expenses. In order to close the gap, the City has to choose between making cuts, raising revenues, using one-time resources; or, a combination of these measures to balance the budget. Approximately 71 percent of the General Fund goes toward paying for Police, Fire, Parks and Recreation and Infrastructure services. In FY 98/99 this figure was 54 percent (see Attachment B).

The FY 2013/14 preliminary General Fund budget is based on the following assumptions:
- Water and Sewer payments included. This budget assumes the General Fund will be paying for water ($859,471 this year and $1.47 million next year and sewer ($13,774). There is a projected offset of lease revenue from the Utilities of $800,000 which results in a net increase for utility costs of approximately $700,000 in FY 2013/14.
- Includes $2.3 million for Street Maintenance. This includes $1 million which was originally included in the current year budget.
- Assumes that all labor groups have settled by July 1, 2013. The increased cost to the General Fund is $144,037 per month or $1.7 million per year, if no agreement is reached.
- Assumes a staffing level of eleven (11) Firefighters. The cost for staffing three (3) more Firefighters per shift would result in an additional cost of $443,66.
- Evaluation of the Parks Infrastructure. A review of the Parks operations showed that, in some areas, the City is spending more than the industry norm on maintenance. Much of this is due to outdated irrigation systems, labor intensive plantings and deteriorating infrastructure. In addition, the FY 2013/14 Parks budget will have to be adjusted to implement conservation measures which will help reduce our water consumption for irrigation. If water consumption is not reduced, the City’s water bill could exceed $3 million in FY 2016/17. Staff has budgeted $500,000 in next year’s budget for the initial costs of implementing conservation measures and updating infrastructure.
Attachment C projects General Fund revenues and expenditures over the next four years. As you can see, the General Fund is running a structural imbalance of about $2.02 million in FY 2013/14 and increases to $5.36 million per year by FY 2018/19. Most of this is related to increased water and infrastructure costs.

Summary

Over the past two years the Council has been responsibly reshaping the City’s finances to address the challenges caused by the national economic downturn: the loss of long-term funding sources as well as dealing with unsustainable and unfunded costs. For example, over twenty percent of payroll was going to pay for current and future retiree medical costs. As a result, little money was left for infrastructure or other services that residents expect and deserve. The first step on this path was to work with the City’s labor partners to reshape the agreements over the next three years. During the life of the contract, this will result in avoided costs of $7,782,784 across all funds. The General Fund portion of this is $5,271,177.

The second step is to address the unmet infrastructure and service needs. This is part of the discussion tonight. In early February staff brought a report forward which discussed a pavement management program. Tonight we will be going over some of the related policy choices to help craft an infrastructure maintenance program which includes bike lanes, streets, sidewalks and lights. In addition, due to the change in the water rate structure and the formalization of a City payment structure, staff will be actively evaluating its landscaping and irrigation needs to develop a plan for the Council and residents to consider and adopt over the next eighteen months. In terms of revenue, there may be some opportunities with adjusting the policy and methodology on how much is charged for City services and facilities.

The third step in the process of creating a financially sustainable budget is to objectively examine our levels of service for each city function. In order to do this, we will be setting aside funds in the budget for updating our information systems along with documenting and evaluating every work flow process within the city. Armed with better performance data and a modernized workflow system, we will be able to objectively view the cost and benefit of every city service and bring back recommended changes to the City Council.

Conclusion

The past five budget cycles have been challenging for every municipality in California. Davis is no exception. In each budget, decisions were made to both address immediate revenue shortfalls, and to make long term changes to the City’s financial structure. This year is a continuation of that policy. There will need to be a mix of both short term and long term fixes within this budget document.

However, it is staff’s goal to provide the Council with a budget plan that puts the primary focus on long term sustainability. This will require the Council to consider a significant increase in capital expenditures and serious consideration towards increasing the types and/or rates of revenue received from voter approved measures.

Staff looks forward to discussing these issues in more detail with city staff, the community and the City Council.

Attachments:
- FY 2012/13 Budget Update – July 1, 2012 – January 31, 2013 (7 months)
  Apr 8 2013 2:35 PM
Recommendation

This informational item presents revenue and expenditure results through the first seven months of fiscal year 2012/13, as well as updated projections of General Fund results through the end of the fiscal year (June 30, 2013).

Fiscal Impact

No action is requested on this item, the information presented in this report provides budget-to-actual results and budgetary projections for the City’s FY2012/13. Staff is currently refining these projections, as well as developing the forecast for FY 2013/14.

The FY2013/14 budget and updated Five-Year forecast will be shaped by the projections for the current fiscal year, as well as updated information relative to revenue forecasts and personnel cost estimates; the latter to be informed by progress on current labor negotiations.

Summary

Based on revenue results through the first seven months of this fiscal year, the City’s General Fund revenue estimates have seen improvements and are being projected to increase over the adjusted budget by $2.5 million. Current results for General Fund expenditures suggest that the City will not meet its expenditure savings projections yielding a shortfall of $499,438. This is net of the personnel savings built into the FY 2012/13 budget which will not be fully achieved, as well as the assumed $1.0 million General Fund non-expenditure of supplemental allocations budget for street and road maintenance. This amount will be rolled forward to the next fiscal year for expenditure.

Based on the amended budget as well as results through the first seven months, the General Fund is projected to end the current year with an unreserved fund balance of $5,516,967, or 13.9% of operating revenues, which is slightly lower ($417,997) than the level suggested by the City’s 15% General Fund reserve policy. Although the fund balance on June 30, 2013 is below the suggested 15% reserve policy, it is consistent with Council discussion during the adoption of the FY 12/13 budget to deviate from the reserve requirements during these challenging fiscal times.

The following represent selected highlights from the budget report:

Conclusion

This informational report represents the Budget Update for FY2012/13, and has been prepared in response to the City Council’s objective of establishing regular quarterly budget updates. The information provided in this report includes year-to-date revenue and expenditure results through the first seven months of this fiscal year, as well as more detailed General Fund information as well as preliminary projections for year-end results.

Attachments