HomeMy WebLinkAbout10/16/2019 00 Misc. Distributed at Meeting Distributed at the
Meeting L 4._
MEMORANDUM
To: Honorable Mayor and City Council members
From: Cynthia Martinez, Interim City Manager
Date: October 15, 2019
RE: City Manager 2020 Budget Recommendations
Finance staff has been working on developing a 2020 budget that is both fiscally
responsible and balanced. In reviewing the 2019 year end budget projections, it
appears the City will have a positive general fund balance of$38,000. This amount,
plus the $620,000 in revenue or fee increases already approved by Council, provides
$658,000 in new revenue in 2020.
One of Council's priorities is to rebuild the reserve amount in order to meet the 16%
minimum established by Council. Staff has determined the amount needed to begin
replenishing reserves in 2020 is $675,000. With only $658,000 in revenues and adding
$675,000 to reserves will leave the 2020 budget at a $17,000 deficit. Therefore, staff
has identified further changes for Council consideration.
Fees:
I do not recommend that Council approve the Two-Tier Hazardous Materials Fee.
While I believe this fee may be warranted in the future and would be paid by those
utilizing the service, at this point the fee needs further review to weigh the benefits vs.
the impact to businesses of this proposal.
Policy Issues:
I do not recommend that the City add an FTE positions funded by the General Fund.
Any items that are not budgeted, if approved, will be funded from the general fund
unless some other creative funding option is identified. I believe there is a good case
for each of the proposed positions and each position will improve services offered by
the City. But, given the current state of the budget, adding positions is not feasible.
The other items are all needed, but adding expenses to the budget will detract from
Council's number one priority to restore reserve funds. Staff is aware of the budget
issues and the difficult decisions our policy makers are facing.
Revenue Options
Sale of Property: The sale of City property is an option, but for reasons that Jeff Cutter
will explain Wednesday, it would not be a quick option. Looking through the City real
property inventory, there are some properties that make sense to sell. However, the
easy choices are not the most lucrative properties on the list. Fisher Park, which has
been discussed by prior Councils, tops the list of high valued properties.
Because the sale of real property is not an ongoing revenue source, I cannot
recommend utilizing those proceeds to fund a policy issue that will add an ongoing
expense to the budget. However, the sale of property to add to reserves, and free up
some of the general fund, may be a sound strategy.
Levy Lid Lift:
The general fund represents most core City services including police, fire, municipal
court, parks, planning, and some street projects. The cost of these services are
outpacing the revenue. Even though inflation is growing by as much as 3% a year, and
the value of homes has increased as much as 7 and 10% the past 2 years (and in some
areas even more), by state law, we can only increase property tax revenue on existing
property by 1% annually. This has frustrated our ability to ensure that funding for core
services is growing at the same or similar rate as the population and inflation. This is
especially challenging since 30% of all general fund revenue comes from property tax.
Sales tax, which is 25% of general fund revenue, has remained fairly flat in recent
years.
Departments funded by the general fund look for creative ways to generate revenue,
which in some circumstances is appropriate, but in some cases the City as a whole
should be paying for the services. The City has been providing the same level of
service by delaying infrastructure investments. Even if our reserves were at optimum
level today, Council would be faced with unmet infrastructure needs. The infrastructure
needs are reaching a critical level and looking at the five year outlook, without a change,
services will be sacrificed to fund infrastructure expenses. A Levy Lid Lift could be the
change.
Budget Cuts:
Budget cuts have been mentioned by two Council members during this process. Staff
has undergone and sustained budget reductions almost yearly but these measures
along with the rising costs have left departments quite lean and have reduced the
amount of money recovered at the end of the year. Budget cuts at this point would
either need to be programmatic cuts or deferring infrastructure improvements.
Additional items for consideration
Liability Insurance: Today we met again with the City's insurance broker on liability
insurance for 2020. The next policy period begins December 1st and liability insurance
quotes from various carriers have not been finalized. The liability insurance market is
challenging at this time, and it is anticipated that there will be a higher premium and
deductible amount. Our broker understands our need for a firm figure for the budget
process.