HomeMy WebLinkAboutStaff Report 4.A 06/20/2011It "v # 4.A
�ALU
-185
DATE: June 20, 2011
TO: Honorable Mayor and Members of the City Council through City Manager
FROM: Susan Mahoney, Interim Finance Director
SUBJECT: Adoption of Resolution Providing Temporary Appropriations of $50 Million
Dollars to Allow for Normal City Operations Beginning July 1, 2011, and
Resolution Providing Temporary. Appropriations of $20 Million Dollars to Allow
for Normal Operations of the Petaluma Community Development Corporation
Beginning July 1, 2011.
RECOMMENDATION
It is recommended that the City Council and Petaluma Community Development Commission
(PCDC), respectively, adopt resolutions providing temporary funding to allow for City and
PCDC normal operations beginning July 1, 2011.
BACKGROUND
The City Charter requires that an annual budget be prepared and submitted to the City Council
and by fund, department and debt repayment, and adopted by June 30 of each year. The PCDC
also adopts an annual budget with a fiscal year end of June. 30 A resolution is required to
adopt the City and PCDC budgets. In addition, an ordinance for each City fund type is required
to appropriate funds for City expenditures. The City Charter also allows that:
"... Before the annual appropriations ordinance has been passed, the Council may make
temporary appropriations for current department expenses, chargeable to the
appropriations of the year when passed, to [sic] an amount sufficient to cover the
necessary expenses of the various departments, until the annual appropriation is in force.
No other liabilities shall be incurred by any officer or employee .of the city except in
accordance with the provisions of the annual appropriations ordinance, or under
continuing contracts and loans .authorized under the provisions of this Charter."
Council has, in the past, adopted temporary funding appropriations when the unanimous vote to
adopt appropriations ordinances did not occur and those ordinances would not take effect until
after the beginning of a' fiscal year. The Council has also at least once, in 2008, adopted
temporary spending resolutions intended to provide staff with additional time to present a
balanced annual budget.
Agenda Review:
Dept. Director City Attorney Finance Director City Manager
In January, 2011 the City Council received a five -year financial forecast for the General Fund.
The forecast predicted a shortfall of $2.26 million in FY 2011/12 which, if left uncorrected,
increased to a deficit of $14.1 million in FY 2014/15. That forecast was revised in February, as
part of the mid -year review, to take into account adjustments based on the completion of the
City's annual audit and on updated sales tax estimates. The revised forecast projects a 2011/12
deficit of $2.291 million, which increases to approximately $15.14 million through FY 2014/15.
Council was advised that correcting for an amount equal to the projected deficits for 2011 /12 and
2012/13, $3.6 million, appears sufficient. to eliminate deficits throughout the forecast period.
Staff recommended that Council establish a $4 million target, to be reduced in developing the
2011/12 budget, which would eliminate deficits for the duration of the forecast period and
provide an ending reserve of at least $400,000 in the General fund. Council approved that
recommendation, as well as means of achieving those reductions, including:
• Offering one final round of the PERS two -year service credit program
• Maintaining existing vacancies in frozen and unfunded status
• Bargaining elimination of employee salary step advancements
• Bargaining elimination of administrative leave payouts for management and mid -
management employees
• Bargaining continuation of cost of living adjustment deferrals for AFSCME- represented
employees
• Bargaining extended furloughs. This option was not recommended due to
implementation issues, but was included if needed as a means of achieving concession-
based reductions.
• Bargaining increased employee share of health care premiums.
• Bargaining salary reductions; and
• Implementing layoffs to reach the totals necessary to balance.
Although cost savings during the forecast period are expected to be negligible, Council also
asked staff to negotiate a second tier for PERS benefits for future hires.
DISCUSSION
As Council is aware, approximately 80 percent of General Fund costs support Salaries and
Benefits, and that reducing the projected deficit by $4 million requires that the majority of
savings be taken from Salaries and Benefits. This represents not only a significantchallenge
from the standpoint of negotiating concessions with represented employees, eliminating
positions, or a combination of the two; it also impacts budget development. General fund
salaries and benefits are a key component of the budget, not only as they related to that fund, but
as they relate to budgets and funds throughout the City and PCDC budgets.
Earlier in the budget process this year, positions were targeted for lay -off. The number of
positions targeted for lay -off was arrived at by backing into the amount needed to offset a $4
million reduction, after accounting for,revenue and funding allocation adjustments, anticipated
golden handshakes, frozen vacancies, and concession sought from the Firefighters Association
which is subject to different MOU requirements than other bargaining units. Discussions with
bargaining units were initiated earlier this year, with negotiations commencing in early May.
Negotiations are ongoing but will not be completed by June 30th of this year. In the meanwhile,
effort is being made to reduce the size of the lay -off list by evaluating proposals that would
create the savings necessary to balance the budget with fewer lay -offs, in the event concessions
are not obtained from the bargaining units. Until all this work is completed, and certainty
regarding salaries and benefits is achieved, an accurate budget cannot be built and presented to
the Council.
In order to continue normal operations of the City and the PCDC, resolutions providing
temporary funding are required for each. These funding allocations are consistent with the
previously quoted section of the Charter, and are based upon FY 2010 -11 appropriations as
revised by year -end budget adjustments approved by Council on June 6, 2011.
It is therefore recommended that the City Council approve a temporary spending plan allocating
$50 million to provide funding for normal City operations beginning July 1, 2011 and a
temporary spending plan approving $20 million for PCDC operations beginning July 1, 2011,
and continuing until the completed budget resolutions and expenditure appropriations are
adopted. It is difficult to predict when negotiations will be completed, although our discussions
with the bargaining groups do not suggest that bargaining will be protracted. Nor will the
analysis necessary to cost various proposals require protracted amounts of time. It appears
reasonable to believe that, if Council is available to meet more than once in that month, that a
budget can be presented, and hearings conducted, in August, 2011.
FINANCIAL IMPACTS
The temporary appropriations resolutions will allow the City to continue operations after June
30, 2011. If not adopted, neither the City nor the PCDC will have spending authorization
beginning July 1, 2011.
ATTACHMENTS
1. Resolution Providing Temporary Appropriations of $50 Million Dollars for Operations to
Allow for Normal City Operations Beginning July 1, 2011
2. Resolution Providing Temporary Appropriations of $20 Million Dollars to Allow for
Normal Operations of the Petaluma Community Development Commission Beginning
July 1, 2011
ATTACHMENT 1
RESOLUTION PROVIDING TEMPORARY APPROPRIA'T'IONS OF
$50 MILLION DOLLARS TO ALLOW FOR NORMAL CITY OPERATIONS
BEGINNING JULY 1, 2011
WHEREAS, Section 60 of the Petaluma City Charter provides that before. the annual
appropriations ordinance has been passed, the Council may make temporary appropriations for
the current department expenses, chargeable to the appropriations of'the year when passed, in an
amount sufficient to cover the necessary expenses of the various departments, until the annual
appropriations is in force; and,
WHEREAS, the City Manager and the Finance Director have determined that
$50,000,000 is sufficient to cover the necessary expenses of the various departments and
maintain the operations of the City beginning July 1, 2011 or until the annual appropriations
ordinance has been passed.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of
Petaluma, that temporary appropriations of $50,000,000 for current department expenses are
hereby authorized to cover the necessary expenses of the various departments and maintain the
operations of the City beginning July 1, 2011 until the annual appropriations ordinance is in
force.
RESOLUTION'TROVIDING TEMPORARY APPROPRIATIONS
OF $20 MILLION DOLLARS TO ALLOW'FOR NORMAL
OPERATIONS OF THE PETALUMA COMMUNITY DEVELOPMENT OF THE:
PETALUMA COMMUNITY DEVELOPMENT COMMISSION CORPORATION
BEGINNING JULY 1, 2011
WHEREAS after public hearing, the Petaluma Community Development Commission
(PCD'C) adopts an annual budget for its 'fiscal year, which begins July P of each year; and
WHEREAS, a key component to the budget "is the cost for'sfaff salaries and benefits; :and
WHEREAS, negotiations with the City's various labor .groups. are currently under way
and it isuanticipated that the negotiations will not be completed by June 30 of this' year; and
,,. WHEREAS, the .PCDC may make temporary appropriations for current expenses
chargeable to the adopted budget�for the year when. passed, in an.amount sufficient to cover the
necessary expenses of the PCDC, until the annual budget is in force; and
WHEREAS, the Executi ve Director and the Finance Director have determined that $20
million is sufficient to cover the. necessary expenses, and maintain the operations of the PCDC
beginning July 1, 2011 until the annual' PCDC budget'i s adopted.
NOW, THEREFORE, BE. IT RESOLVED by the - Petaluma Community Development
Commission that temporary 'appropriations of $20 million. is hereby authorized to maintain the
operations of the, PCDC beginning July 1,, 2011 until the annual budget is adopted..
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