City of Chino
CA

Staff Report

Approve and adopt City Budget for Fiscal Year 2017-18.

Information

Department:Finance DepartmentSponsors:
Category:Report

Attachments

  1. Printout
  2. Budget Adoption Reso 2017-034 (This file has not yet been converted to a viewable format)
  3. Budget Adoption Appropriations Reso 2017-035 (This file has not yet been converted to a viewable format)
  4. Resolution No. 2017-036 2017 Salary Tables (This file has not yet been converted to a viewable format)
  5. Salary Tables Exhibit A - Management
  6. Salary Tables Exhibit A - Full-Time Non Management
  7. Salary Tables Exhibit A - Part-Time

Budget String

Revenue: Expenditure: Transfer In: Transfer Out:

Body

BACKGROUND

Presented for consideration is the Fiscal Year (FY) 2017-18 City Budget. The budget incorporates the City operating budget and the five-year Capital Improvement Program. The budget contains detailed financial data pertaining to the ongoing operations of the City for the next fiscal year.

On Thursday, May 11, 2017, the City Council held a public workshop to review and discuss the preliminary budget document which was developed by staff. At that workshop, an overview of the City’s financial condition was presented and staff responded to questions from the City Council regarding specific projects and programs contained in the budget.

ISSUES/ANALYSIS

Staff is pleased to present the FY 2017-18 City of Chino Proposed Budget as well as the     Five-Year Capital Improvement Program (CIP) Budget.  These budgets contain detailed financial data pertaining to the ongoing operations of the City for the next fiscal year. As in prior years, the FY 2017-18 Budget presents information pertaining to the Successor Agency as “information only.” 

CHANGES INCORPORATED SINCE THE MAY 11, 2017 BUDGET WORKSHOP

The following changes have been made to the proposed budget since the Budget Workshop:

·         Development revenue for 2016-17 was increased by $1.4 million due to actual payments received after the budget workshop.

·         5 Year Capital Improvement Program has been expanded to include proposed projects for Fiscal Years 2018-19 to 2021-22.

·         Revenues from the recently passed SB 1 (RMRA funding) and the Waste Management alley and street rehabilitation contributions have been added to the 5 Year Capital Improvement Program as funding sources for FY 2017-18 street projects. 

·         Additional expenditures for landscape maintenance totaling $176,000 has been added to the FY 2017-18 budget.

·         Interest earnings revenue for FY 2017-18 has been updated.

·         Additional appropriations approved by the City Council after the Budget Workshop have been included in the FY 2016-17 Projections.

·         The official allocation was released from HUD for the CDBG Action Plan increasing the total amount by $3,586.

FY 2016-17 FINAL GENERAL FUND BUDGET ESTIMATE

For FY 2016-17, the original adopted budget identified a General Fund operating gain of       $1.1 million for the year.  In addition, the City identified a net one-time use of General Fund reserves of $7 million, resulting in a decrease in the General Fund reserves of $5.9 million. The Adopted FY 2016-17 Budget showed ending General Fund reserves to be $37.1 million at         June 30, 2017.

Based on the current projections contained in the Proposed FY 2017-18 Budget, General Fund reserves are now projected to be $46 million at June 30, 2017. This increase in reserves is due to the operating surplus increasing to $3.3 million from the adopted amount of $1.1 million, an increase of $2.2 million. Additionally, one-time use of reserves were budgeted to be $7 million for 2016-17, but are ending the fiscal year at only $809,000. This reduction in the use of one-time reserves is mostly due to the Street Rehab Projects being phased into the Proposed FY 2017-18 Budget year.

FY 2017-18 PROPOSED GENERAL FUND BUDGET

For FY 2017-18, the City’s General Fund is proposed to have an operating deficit of $2.2 million. When compared to the Adopted FY 2016-17 budgeted surplus of $1.1 million, this is a change of $3.3 million dollars. This change is due primarily to three factors: 1) a projected decrease in development revenues of $1.5 million from the prior year’s adopted budget; 2) an increase of    $1.5 million in salary cost from the implementation of the third year of the four-year Memorandum of Understanding with employee groups; and 3) an increase of $1.6 million in contractual services due primarily to an increase of $900,000 in the contractual agreement with the Chino Valley Independent Fire District, due mostly to the elimination of the 20% RDA cost-sharing provision agreed to with the Fire District from the loss of the RDA in 2012.

In addition to the $2.2 million use of reserves for on-going operations, this Proposed General Fund Budget recommends a net use of $6.2 million of reserves for one-time capital projects. The Capital Improvement Projects being funded with reserves include: street projects ($5.9 million), park projects ($198,000), and American with Disabilities Projects ($150,000). Therefore, the proposed ending General Fund reserves would be $36.7 million at June 30, 2018.

FY 2017-18 PROPOSED GENERAL FUND REVENUES

The General Fund’s primary revenue sources are sales tax, property tax, and development related revenue. Retail sales activity in the City of Chino is well-diversified and spread across general consumer goods, construction, restaurants, and commercial and industrial businesses. The City is expecting to see an average of 4.4% growth over FY 2016-17 projected revenue in these categories. Therefore, sales tax is budgeted at $24.5 million for FY 2017-18.

Property tax revenue is projected to be $20.9 million for FY 2017-18. Property tax includes the Ad Valorem tax (the 1% Proposition 13 tax), property taxes from the RDA elimination, and property tax in-lieu of VLF. While Ad Valorem and Property Tax in-lieu of VLF are increasing from both new construction and Proposition 13 CPI increases, RDA elimination is projected to decrease due to items claimed on the 2017-18 ROPS. Therefore, these three sources of property taxes are projected to only increase $352,000 for FY 2017-18. 

Development revenue is projected to be $9.1 million for FY 2017-18. This is a decrease of          $1.5 million from the FY 2016-17 Adopted Budget. Development revenue over the last two years has come in under budget by $3.6 million and $1.8 million for FY 2015-16 and               FY 2016-17 respectively. While development has remained strong for many years now, some larger development projects continue to be delayed from one year into the next.

FY 2017-18 PROPOSED GENERAL FUND EXPENDITURES

The Proposed FY 2017-18 General Fund expenditure budget is being presented with no new full-time positions. Salary expenditures are increasing $1.5 million in FY 2017-18 due to the previously approved Memorandum of Understanding (MOU) with employee groups. The FY 2017-18 MOU states that all employees receive a 3% salary increase with the exception of sworn officers, who receive a 4% increase. The MOU also increases employee contributions towards their pension benefits. Miscellaneous and Safety Employees under the “Classic” pension program will pick up an additional 1% and 1.25% respectively towards their pension benefits, which reduces the City’s pension expense obligation.

In addition to the salary expenditure increases, expenditures associated with outside contractual services are also increasing. The City’s contract with the Chino Valley Independent Fire District is proposed to increase $900,000 due to increasing property values throughout the City; as well as the expiration of the cost sharing provision that the City and the Fire District worked out when the RDA was eliminated in 2012. Additionally, the need for contractual services for development activity has increased as developers continue to submit plans for plan checking services. Therefore, outside contractual services costs have increased a total of $1.6 million over the          FY 2016-17 budget.

Each department has worked hard to keep their operating costs consistent with last year’s adopted budget. This effort has resulted in the lowest possible General Fund use of reserves going into FY 2017-18.

As we look to the future, the City is facing increasing expenditure pressure from two main sources. The first is the pension expense increases beginning in FY 2018-19. CalPERS has implemented a policy to lower the discount rate from its current 7.5% to 7.0% over a three-year period. In addition, CalPERS has increased required contributions to lower the City’s current Unfunded Liability. The City’s Unfunded Liability was $61 million at June 30, 2015 (latest information available). The changes being implemented by CalPERS will cause the City’s annual pension expense to increase from the current $8.3 million in FY 2017-18 to a projected $13.8 million in  FY 2022-23. This is a 67% increase in five years.

In response to the coming pension expense increases, the City established a “rate stabilization” reserve of $450,000 in FY 2015-16 and is proposing to add another $500,000 in the Employee Benefits Fund during FY 2017-18 to this reserve. This will bring the total reserve amount to $950,000. This money will be used at Council’s direction to reduce the impact of pension expense increases or pay towards reducing the balance of City’s Unfunded Liabilities.

The second impending expenditure increase is associated with staffing levels. As The Preserve and annexations expand the City’s service areas, the City needs to plan for additional staffing to serve the new population, facilities and infrastructure. It is recommended the City host a future workshop to identify the additional needs and prepare for the eventual build out of the City. Planning now for these expenditure impacts will allow the City to remain financially healthy into the future.

CAPITAL PROJECTS

The FY 2017-18 Proposed Budget includes $2.1 million of new money and $3.7 million of unspent money carried over into FY 2017-18 for street projects.  The commitment of General Fund reserves for street projects will ensure that Chino roadways are properly maintained.

The Capital Improvement Program (CIP) contains new and ongoing projects that are being funded through a combination of development impact fees, grants, contributions from other agencies, Measure I funds, and other restricted sources.  These major projects are outlined in the Capital Improvement Program Budget and include items such as:

§         El Prado Reconstruction Project                            (El Prado between Central/Kimball)

§         Prior Year Street Rehab Projects                            (Various locations)

§         Water Line Rehabilitation Projects              (Various locations)

§         Storm Drain Projects                                          (Various locations)

§         Ramona Ave Reconstruction                            (North of Philadelphia)

§         Ayala Park Meter Project                                           (Ayala Park Electrical Meter)

§         Traffic Signal Modification                                          (Various locations)

The California Legislature passed The Road Repair and Accountability Act in April. This legislation provides for additional revenues for cities and counties for infrastructure improvements. This legislation is effective November 1, 2017. Therefore, first year revenue estimates are for a partial year, and the City is currently estimated to receive $98,325 in additional Highway User Tax funds and $495,558 of Road Maintenance Rehabilitation Account (RMRA) funds. In FY 2018-19 (the first full year), the City of Chino is estimated to receive $98,325 in additional Highway User Tax funds and $1,476,165 of RMRA funds. These revenues have been included as funding sources for street projects in the 5 Year CIP schedule.

POSITION CHANGES

The following full-time position changes have been included in the Proposed FY 2017-18 Budget. These position changes result in a net salary savings to the City.

Department

Existing Position

New Position/Status

Impact on Salary Expense

Administration

City Attorney

Abolish

Decrease

Community Development

Associate Planner

Planning Technician

Decrease

Community Development

Housing Technician

Management Assistant

Increase

Finance

Buyer

Management Aide

Decrease

Finance

Payroll Supervisor

Abolish

Decrease

Police

Admin Secretary

Clerk Typist II

Decrease

Public Works

Maintenance Worker

Abolish

Decrease

FY 2017-18 PROPOSED BUDGET CONCLUSION

The FY 2017-18 Proposed Budget shows beginning General Fund reserves of $46 million. The City is proposing to use $2.2 million of reserves to maintain current on-going operation, a net $6.2 million of reserves for one-time projects, and $961,000 for prior year carry-over expenditures. This leaves the General Fund with $36.7 million in reserves at the end of FY 2017-18. Staff continues to look for opportunities to increase revenues and reduce expenditures in order to bring on-going operations into balance.

The appropriations limit for the FY 2017-18 for the City of Chino is $1.874 billion. Tax revenue budgeted for this fiscal year that is subject to the appropriations limit is $58.8 million, which places the FY 2017-18 City budget $1.81 billion under the limit. The difference represents the amount of tax revenue that the City could appropriate if the revenue was available. Resolution No. 2017-035 sets the City’s Appropriations Limit (“Gann Limit”) for FY 2017-18.

 

RB:hm

 

Attachments:              Resolution No. 2017-034

Resolution No. 2017-035

                            Resolution No. 2017-036

 

Please Click Here to view the Proposed Fiscal Year 2017-2018 Budget

Meeting History

Jun 20, 2017 7:00 PM Video City Council Regular Meeting
draft Draft
RESULT:APPROVED [UNANIMOUS]
MOVER:Gary George, Council Member
SECONDER:Earl C. Elrod, Council Member
AYES:Gary George, Eunice M. Ulloa, Tom Haughey, Earl C. Elrod