07-02-2018 - Budget Policy - Item No. 1.pdf(
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AGENDA
ITEMNO. 1 ---
AGENDA STAFF REPORT
City of West Covina I Office of the City Manager
DATE: July 2, 2018
TO: Mayor and City Council
FROM: Chxis Freeland
City Manager
SUBJECT: BUDGET POLICY
RECOMMENDATION:
It is recommended that the City Council approve the attached Budget Policy.
BACKGROUND:
On May 6, 2014, the City Council dil'ected staff to pxepare a report that details the process and
cost of a California State Controller's Office (SCO) audit of the City of West Covina (City).
On June 3, 2014, the City Council directed staff to prepare and send a letter to the SCO requesting
an audit of an agreed upon list of items to be examined by the SCO. On June 17, 2014, the City
requested the SCO to conduct an audit of the City's internal control and fiscal management
practices.
The SCO reviewed the City's system of administrative and internal accounting controls for the
period of July 1, 2011, through June 30, 2013.
The SCO found wealmesses in the City's administrative and internal accounting controls system,
resulting in numerous findings that should be addressed and corrected by the City. On September
23, 2015, staff reported to the City Council the City's responses to the SCO's findings.
On June 11, 2018, the City Council directed staff to make changes to the Budget Policy to replace
the word "should" to "shall or must" or similar language as appropriate. City Council can adopt
the updated Budget Policy, or review the changes and provide alternative language.
DISCUSSION:
The City engaged the consultant services of Lance, Soll, and Lunghard to draft the administrative
policies and procedures recommended to be done by the SCO fmdings. Several other
recommended policies and procedures, namely, Cash Management, Revenue and Receivables,
Budget Policy
Page 2 of2 -July 2, 2018
Expenses and Payables, Payroll, Capital Asset Management, Debt Management, and Financial
Reporting have been reviewed, revised as appropriate and approved by the Executive Staff team.
These policies and procedures will be effective July 1, 2018. The Budget Policy is for City
Council's consideration for approval.
The objective of the Budget Policy is to establish a budget process that helps decision makers make
infmmed choices about the provision of services and capital assets. The Budget Policy
(Attachment No. 1) is to provide the most efficient and effective operations of preparing the
budget. The Budget Policy covers four main principles:
1) Establish Broad Goals to Guide Government Decision Making
2) Develop Approaches to Achieve Goals
3) Develop a Budget Consistent with Approaches to Achieve Goals
4) Evaluate Performance and Make Adjustments
The Budget Policy will serve as a guide for maintaining the City's reputation for fairness,
transparency, and integrity of fiscal responsibility in preparation of the annual budget using proper
checks and balances.
OPTIONS:
The City Council has the following options:
1) Approve Staffs recommendation; or
2) Provide alternative direction.
FISCAL IMPACT:
There is no fiscal impact.
Prepared by:
~,~ J y R. ncaster
=:consultant
ATTACHMENTS:
Attachment No. 1 -Budget Policy with mark-ups
Attachment No. 2 -Budget Policy clean version
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City of West Covina
Budget Policy
July 2, 2018
ATTACHMENTN0.1
INTRODUCTION
This document defines the policies and procedures for the budget for the City of West Covina.
The procedures serve as a guide for maintaining the City's reputation for fairness and integrity
of fiscal responsibility in preparation of the annual budget using proper checks and balances.
The budget functions will be conducted using the highest ethical standards.
The objective of the budget policy is to establish a budget process that helps decision makers
make informed choices about the provision of services and capital assets and to promote
stakeholder participation in the process. The term "stakeholder" refers to anyone affected by or
has a stake in the City of West Covina. This term includes, but is not limited to: residents,
customers, elected officials, management, employees and their representatives (such as unions
or other agents), businesses, other governments, and the media. The use of "shall" is
synonymous with will.
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POLICY PURPOSE
Policy and procedures have been established in order to provide the most efficient and effective
operations of preparing the budget. The budget process will cover four main Goals:
1. Establish Broad Goals to Guide City Decision Making
• The City Council does shoola adopt broad goals on an annual basis that provide
overall direction for the City and serve as a basis for decision making.
1. Assess community needs, priorities, challenges and opportunities.
11. Identify opportunities and challenges for City services, capital assets, and
management.
m. Develop and disseminate broad goals.
2. Develop Approaches to Achieve Goals
• The City will utilize should have specific policies, plans, programs, and
management strategies to define how it will achieve its long-term goals.
1. Adopt and review financial policies.
11. Develop programs, services, operating, and capital policies and plans.
111. Develop management strategies.
3. Develop a Budget Consistent with Approaches to Achieve Goals
• A financial plan and budget that moves toward achievement of goals, within the
constraints of available financial resources, is to should be prepared and adopted.
i. Develop a process for preparing and adopting a budget.
ii. Make choices necessary to adopt a budget.
4. Evaluate Performance and Make Adiustments
• Programs and financial performance should will be continually evaluated, and
adjustments made, to encourage progress toward achieving goals.
i. Monitor, measure, and evaluate performance.
ii. Make adjustments as needed.
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1. Goal # 1 -Establish Broad Goals to Guide Citv Decision Making
i. Assess Communitv Needs, Priorities, Challenges, and Opportunities
A. Identify Stakeholder Priorities, Needs, and Concerns
• The City Council meetings are an open forum providing opportunity to
stakeholders to bring forth concerns, needs, and priorities.
• Among other mechanisms that might be considered are special public
hearings, surveys, meetings ofleading residents and resident interest groups,
City strategic planning processes, meetings with City employees, and
workshops involving City administrative staff and/or the City Council.
B. Evaluate Community Condition, External Factors, Opportunities, and
Challengesl
• The City Council should will regularly collect and evaluate information
about trends in community condition, the external factors affecting it,
opportunities that may be available, and problems and issues that need to be
addressed.
• Some mechanisms will involve data gathering from preexisting sources or
through opinion surveys.
• Other mechanisms will be subjective, such as observing physical
characteristics of geographic areas within the community or talking to
residents, experts, business and community leaders, and legislative bodies.
Formal studies of particular issues or trends may also be undertaken.
• The frequency and extensiveness of the evaluation should be consistent with
how frequently the information changes and the relative importance of the
infmmation being gathered.
ii. Identifv Opportunities and Challenges (or Citv Services, Capital Assets, and
Management
A. Assess Services and Programs, and Identify Issues, Opportunities, and Challenges
• The City should shall inventory, identify, and assess the programs and services
that it provides, their intended purpose, and factors that could affect their
provision in the future.
• Identify the changes in community conditions or other factors that may result in
a program or service no longer addressing the needs it was intended to serve.
Also, identify any changes in the operating environment that may affect the cost
or effectiveness of service delivery in the future.
• The review should will involve each department's assessment of the programs'
purposes, beneficiaries and needs served, their success in achieving goals, and
issues, challenges, and opportunities affecting their future provision.
1 The intent ofthls practice is for the City to have up-to-date info1mation with which to evaluate community conditions
and major issues that are integral to the development and achievement of goals. In evaluating community condition, the
City may want to consider local, regional, national, and global factors affecting the community (i.e. economic and
financial factors, demographics, physical or enviromnental factors, changes in technology, etc.).
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1.
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• The inventory of programs and services should shall identify the organization
responsible for service delivery if it is not the City itself. An evaluation of
factors affecting service delivery should also be undertaken, such as funding
issues; changes in technology; economic, demographic, or other factors that
may affect demand; and legal or regulatory changes. These reviews will
typically utilize a variety of information sources.
• Stakeholder involvement in these reviews should be is encouraged, such as
through budget study workshops.
B. Assess Capital Assets, and Identify Issues, Oppo1tunities, and Challenges
• The City should will identify and conduct an assessment of its capital assets,
including the condition of the assets and factors that could affect the need for
or ability to maintain the assets in the future. The capital assets of the City and
their condition are critical to the quality of services provided, and hence are
important in determining whether the needs and p1iorities of stakeholders can
be met.
• The City shall establish a process for inventorying its capital assets and
assessing the need for and the condition of these assets. (See Capital Asset
Management Policy)
• The City should will assess and evaluate issues, challenges, and opp01tunities
affecting the provision of capital assets in the future, such as community needs
and priorities; the impact of deferred maintenance; funding issues; changes in
technology; economic, demographic, or other factors that may affect demand;
and legal or regulat01y changes. This review may be undertaken in conjunction
with an evaluation of the program or service utilizing the particular assets.
• The assessment of capital asset condition should must consider the impact of
any deferred maintenance and needed improvements. Identification or
development of measurement standards for the condition of capital assets
(including what is regarded as acceptable) are a valuable output of this
practice.
C. Assess City Management Systems, and Identify Issues, Opportunities, and
Challenges
• The City should will identify and analyze its organization and management
systems, including system strengths and wealmesses and factors that could
affect these systems in the future. The support systems established to manage
the City are integral to the achievement of goals.
• The City should will inventory management systems by department and
routinely identify, analyze, and address issues related to the City's organization
and management systems and the environment in which these systems operate.
• Each department should will include an examination of strengths and
wealmesses of the organizational structure, interdepartmental communication
and cooperation, communication of goals and directives, motivation of staff,
conflict management, and provision of other internal needs and support
systems.
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• The review slJoold will also include an assessment of management policies,
procedures, and systems that support achievement of goals.
iii. Develop and Disseminate Broad Goals
A. Identify Broad Goals
• The City should is to identify broad goals based on its assessment of the
community it serves and its operating environment. Broad goals define the
priorities and preferred future state of the community or area served. They
provide a basis for making resource allocation decisions during the budget
process and serve as a focal point for assessing and coordinating various long-
range or strategic plans.
• Goals should are to be expressed in written form and should reflect stakeholder
concerns, needs, and priorities as well as factors affecting the community and
the City.
• They must be sufficiently specific to help define the services to be emphasized
and make difficult resource allocation decisions in the budgetprocess.
• Define priorities among goals to improve their usefulness in allocating
resources.
B. Disseminate Goals and Review with Stakeholders
• The City should shall disseminate broad goals and review them with
stakeholders. Disseminating and reviewing goals helps foster participation,
awareness, consensus, pride, and a sense of direction.
• Dissemination may occur by conducting public forums and by publishing
goals in key public documents, such as strategic and other planning
documents and budget documents. Electronic media may also be used
including the City website.
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2.0 Goal # 2 -Develop Approaches to Achieve Goals
i. Adopt and Review Financial Policies
A. Develop Policy on Stabilization Funds
• The City developed policies to guide the creation, maintenance, and
use of resources for financial stabilization purposes. (See Fund
Balance policy2).
• The policy establishes how and when the City builds up stabilization
funds and should will identify the purposes for which they may be
used.
B. Develop Policy on Fees and Chargesl
• The City has established a master fee schedule that identifies the manner in
which fees and charges are set and the extent to which they cover the cost of
the service provided.
• The fee schedules sheuld is-are to be evaluated annually in the budget process
to review all fees and charges, the level of cost recovery for services and the
reason for any subsidy, and the frequency with which cost-of-services studies
will be undertaken.
• Policies on fees and charges sheuld be are publicly available and summarized
in materials used in budget preparation.
C. Develop Policy on Debt Issuance and Management
• The City has established a Debt Management Policy to guide the issuance and
management of debt. Issuing debt commits the City's revenues several years
into the future and may limit the City's flexibility to respond to changing
service priorities, revenue inflows, or cost structures. Adherence to a debt
policy helps ensure that debt is issued and managed prudently in order to
maintain a sound fiscal position and protect credit quality.
• Debt policies sheuld be made are available to the public and other
stakeholders. Because these policies are essential to budget decision making,
particularly capital budgets, they sheuld will be reviewed by decision malcers
during the annual budget process and as an appendix in the budget document.
2 The Fund Balance Policy sheuld be is £H'e reviewed annually to assess the alignment with set goals
established in the budget process. The City should evaluate reserves set in the fund balance policy.
These funds may be used at the City's discretion to address temporary cashjlow shortages, emergencies,
unanticipated economic downturns, and one-time opportunities.
3 Costs of service include direct and indirect costs such as operating and maintenance costs,
overhead, and charges for use of capital. The City may choose not to recover all costs, but it
should must identify such costs. Reasons/or not recoveringfull costs should will be identified
and explained State and local law may govern the establishment of fees and charges.
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Debt Policy should will be reviewed for every debt issuance for compliance.
• The City Council should formally adopt has a debt policy and compiles it with
other financial policies.
D. Evaluate the Use of Unpredictable Revenues
• One-time or short-term revenues should will be identified clearly in the budget
process. Unpredictable revenue sources cannot be relied on as to the level of
revenue they will generate.
• For each major unpredictable revenue source, the City should identifies those
aspects of the revenue source that make the revenue unpredictable. Such as,
grant supported operating costs.
• One-time revenues should will never cover the costs of continuing operating
budgets. One-time revenues will only cover one-time costs such as matching
requirements, one-time purchases, one-time payments to unfunded liabilities,
etc.
E. Develop Policy on Balancing the Operating Budget
• The City defines its Balanced Operating Budget as uses of resources for
operating purposes does not exceed available resources over the budget period,
July 1'1to June 30th.
• The City is committed to a balanced budget under normal circumstances and
will provide disclosures when a deviation from a balanced operating budget is
planned or when it occurs. A balanced budget is a basic budgetary constraint
intended to ensure that the City does not spend beyond its means.
• Operating resources (revenues) includes all taxes, licenses and permits, fines
and forfeitures, use of money and property, charges for services,
interdepartmental charges, miscellaneous revenues and intergovernmental
revenues in the General Fund, Special Revenue Funds, Capital Projects, Debt
Service Funds, and Internal Service Funds.
• Operating uses (expenditures) are personnel service costs, material and service
costs, capital purchases, and interdepartmental allocations.
Develop Programs, Services, Operating, and Capital Policies and Plans
A. Prepare Policies and Plans to Guide the Design of Programs and Services
• Service and programs directly relate to strategies identified by the City to
achieve set goals.
• Each department of the City, such as City Council, City Manager, City Clerk,
Police, etc. identify the programs and services along with groups or
populations to be serviced, service delivery issues, specific programs listed
with standards of performance (including level of service standards or other
measures to gauge success), expected costs, time frames for achievement of
goals, issues pertaining to organization structure, and priorities for service
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provision.
• Each department identifies their goals and achievements by department which
should are4e correlate to overall goals of the City.
• Each department identifies the resources (revenues) used to obtain the goals.
B. Prepare Policies and Plans for Capital Asset Acquisition, Maintenance,
Replacement, and Retirement
• The City will annually evaluate the need to budget for acquisition,
maintenance, replacement, and retirement of capital assets to help ensure that
needed capital assets or improvements receive appropriate consideration in the
budget process and that older capital assets are considered for retirement or
replacement. This is necessary to plan for large expenditures and to minimize
deferred maintenance.
• Annual budget evaluation may address inventorying capital assets and
evaluating their condition, criteria for acceptable condition, criteria for
continued maintenance versus replacement or retirement of an existing asset,
and identification of funding for adequate maintenance and scheduled
replacement of capital assets.
• Any assets identified as coming due for replacement may will be addressed in
multi-year budgets to address replacement and renewal schedules and should
recognize the linkage of capital expenditures with the annual operating budget.
• Plans for addressing deferred maintenance may also be an output of this
practice. Once adopted, which may be included in the Capital Improvement
Program (CIP) Budget, the plan should will be made publicly available,
particularly as set forth in budget, management, and planning documents.
C. Develop Options for Meeting Capital Needs and Evaluating Acquisition
Alternativesi
• The City develops Capital Improvement Program Budgets to address capital
needs that are consistent with financial, programmatic, and capital policies and
should to evaluate alternatives for acquiring the use of capital assets. Capital
project planning is necessary to give adequate consideration to longer-range
needs and goals, evaluate funding requirements and options, and achieve
consensus on the physical development of the community.
• Annually in the budget process the City evaluates alternative mechanisms to
help ensure that the best approach for providing use of a capital asset or facility
is chosen based on the policies and goals of the City.
4 City is to conduct quarterly reviews of existing capital projects in relation to goal attainment
and to maintain, renovate, and replace, City facilities. Various considerations to be part of
evaluation (i.e. costs, impacts on service, funding levels, use of non-General Funds, stakeholder
input, etc.).
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• The City uses the CIP Budget to identify capital projects that are needed to
achieve goals and a general time frame in which these assets will be needed.
D. Develop Performance Measures
• The City should will annually, during the budget process, review and develop
and utilize performance measures for functions, programs, and/or activities.
Performance measures are used for assessing how efficiently and effectively
functions, programs, and activities are provided and for determining whether
program goals are being met.
• Performance measures should may be linked to specific program goals and
objectives.
• The measures should are to be valid, reliable, and verifiable.
• Whenever feasible, they should be expressed in quantifiable tenns.
• Measures should will be reported in periodic reviews of functions and
programs, staff reports, and should be integral to resource allocation decisions.
• They also should are to be reported in the budget document and may be reported
in separate management reports or reports to residents.
• Different aggregations of performance measures may be appropriate for
different audiences.
287 iii. Develop Management Strategies
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289 A. Develop Strategies to Facilitate Attainment of Program and Financial Goals
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• The City should develop has an organizational structure and management
strategies that facilitate attainment of program and financial goals. Goals are
more likely to be achieved if organizational and management strategies are
developed to support and encourage organizational and individual
performance directed toward goal attainment.
• The City should has developed a means to review, improve, and implement
strategies that encourage the City and its employees to work toward
achievement of goals.
• These strategies include both positive incentives and penalties.
• They also include support systems such as technology support, education, and
training.
B. Develop Mechanisms for Budgetary Compliance
• Finance provides monthly budget to actual reports to each department head
and City Manager to ensure proper review for compliance with the adopted
budget. Appropriate management processes and systems allow the City to
detect and correct significant deviation if it occurs.
• On a quarterly basis Finance provides budget to actual reports to department
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heads and City Council.
• These reports provide measures of departments' budget.
• Budgetary compliance is encouraged tln-ough use of data collection and
reporting systems that control disbursements of funds and that facilitate the
evaluation of revenue and expenditure trends and :financial projections.
• City Manager sheald to address any deviation of the budget to actual report
(i.e. budget amendments).
• The City shemd has instituted procedures to review the budget quarterly and
decide on actions to bring the budget into balance, if necessary.
C. Develop the Type, Presentation, and Time Period of the Budget
• The City will annually present the budget, which will cover the fiscal year July
1'' through June 30'h. The type of budget, the time period covered, and the
manner of presenting materials in the budget documents can have a significant
practical impact on the City's approach to planning, control, and overall
management of its programs, services, and finances, and on the quality of
information provided to stakeholders.
• The output of the budget will provide fund level and department level program
information for the full fiscal year. The adopted budget will be provided to all
stakeholders on the City website.
• A formal review will be undetialcen periodically to ensure that the budget type,
time period, and approach to presenting the budget continue to meet the needs
and priorities of the City.
• Such a review will be broadly focused, and not directed simply at the format
of individual pages.
Goal# 3 -Develop a Budget Consistent with Approaches to Achieve Goals
i. Develop a Process for Preparing and Adopting a Budget
A. Develop a Budget Calendar
• The City publishes a comprehensive budget calendar that specifies when
budget tasks are to be completed and that identifies timelines for those tasks.
This includes budget workshops available to the public. Stakeholders need to
be aware of when key budget tasks, events, and decisions will occur so they
have an opportunity to plan and to participate in the process. The preparation
of a calendar helps ensure that all aspects of the budget process have been
considered and that adequate time has been provided.
• Multiple calendars can be produced, each with different levels of detail and
emphasis to meet the needs of the different types of stakeholders. (ie. Internal
Calendar and Public Calendar).
• Calendars sheuld list the dates of key events and deadlines.
• At least one calendar sheald describes the overall budget and planning process
and identify roles, responsibilities, and assignments.
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• To ensure the greatest impact, calendars should will identify when and how
stakeholders can participate in the process.
B. Develop Budget Guidelines and Instructions
• The City will develop annual general policy guidelines and budget preparation
instructions for each budget cycle and accompany the internal budget calendar.
Budget guidelines and instructions help ensure that the budget is prepared in a
manner consistent with government policies and the desires of management
and the City Council. Instructions are necessary so that all participants know
what is expected, thereby minimizing misunderstanding and extra work.
• Budget guidelines are specific to the particular budget under development and
should will incorporate relevant aspects of the City's financial policies.
• Each department is required to provide the Projected Actuals for revenues and
expenditures of the current year for their respective department.
• Each department is required to provide Proposed Revenues and
Appropriations for the upcoming fiscal year for their respective department.
• Guidelines and instructions may set forth financial constraints and key
assumptions that will be used to guide development of the budget, as well as
policy direction.
• Instructions often include sample fonns to be completed by the operating
departments. Guidelines and instructions should be are prepared in a written
format but may also be presented in an electronic format or through training
and/or an oral presentation.
C. Develop Mechanisms for Coordinating Budget Preparation and Review
• The City should has developed mechanisms and assigned responsibilities to
provide for overall coordination of the preparation and review of the budget.
The complete budget process involves many levels, departments, and
individuals in the City, as well as a number of distinct processes and disparate
groups of stakeholders. Coordination is needed to ensure that processes move
forward as planned, to prevent confusion and misinformation, and to ensure
appropriate stakeholders are involved.
• The Finance Department is the single point of coordination for all departments.
• The Finance Department's coordination process will involve a number of
tasks: developing a calendar, identifying responsibilities for completing
various tasks, ensuring that various parts of the budget process are properly
integrated, keeping the process on schedule, producing reports, identifying
issues and problems, and ensuring that other requirements are met and quality
standards aremaintained.
• The Finance Director has ultimate responsibility for coordinating the budget
process and will respond to stakeholder issues and concerns that arise in the
context of the budget process with direction from the City Manager and City
Council.
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D. Develop Procedures to Facilitate Budget Review, Discussion, Modification, and
Adoption
• The City shelild develep and implement a set efproeeEfures that has a process
to facilitate the review, discussion, modification, and adoption of a proposed
budget. Appropriate procedures are needed to resolve conflicts, to promote
acceptance of the proposed budget by stakeholders, and to assist in timely
adoption of the budget.
• ,\ series ef proeesses shelild be de>.'eloped that permit This process allows
stakeholders to be informed of the budget proposal and to allow the legislative
body to achieve consensus and adopt a budget.
o These proeesses shelild be summarized in badget materials er budget
letter. Some examples include: small group meetings, hearings,
workshops, independent analysis, specific decision-making techniques
and procedures, conflict resolution processes, and methods for
presenting pmtions of the budget.
E. Identify Opportunities for Stakeholder Input
• The City shelild provides oppmtunities in the budget process for obtaining
stakeholder input. 5 By definition, stakeholders are affected by the City's
resource allocation plans and service and program decisions. Stakeholders
should have clearly defined opportunities to provide input. This helps ensure
thatstakeholder priorities are identified and enhances stakeholder support for
the approved budget.
• Stakeholder input can be obtained in a number of ways, including public
hearings, advisory commissions, informal conversations, round-table
briefings, televised and live online broadcast, opinion surveys, neighborhood
meetings, office hours, letter writing, telephone calls, and e-mail.
• The budget calendar should identify specific opportunities for resident input
where City officials are available to explain issues and choices and to receive
comments.
ii. Make Choices Necessary to Adopt a Budget
A. Prepare and Present a Recommended Budget
• The City sheuld will prepare and present a recommended comprehensive
program and financial plan (the "budget") for review by stakeholders and
consideration for adoption by the City Council. A complete plan is necessary
5 The budget process should include opportunities for all stakeholders to participate. A general-
purpose public hearing shortly before final decisions are made on the budget is not adequate as the
sole means of soliciting stakeholder input, especially on major issues. The process developed for
obtaining stakeholder input should ensure that information is gathered in a timely and complete
manner to be useful in budget decision making, such as City workshops.
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to allow stakeholders to be informed on how well all of the different aspects of
the plan fit together and whether there is an appropriate balance of resources
and assigned uses.
• The proposed budget will consist of a set of recommended actions regarding
programs and services to be funded, including service level, quality, and goals
to be achieved.
• It will also identify funding requirements and sources of funds, and provide
the supplemental information necessary to review the plans.
• The budget she1c1Id is to be consistent with policies and goals set by the City.
• The recommended budget must also comply with any statutory requirements.
B. Present the Budget in a Clem·, Easy-to-use Format
• Budget documents and related materials made available to stakeholders should
is to be presented in a clear and readily comprehensible format. The budget is
the guide that determines the direction of the City. It is arguably the single
most important document routinely prepared by the City. To be usable, it not
only must contain the appropriate information, but must also be prepared in a
mmmer that is clear and comprehensible.
• Some items in a budget document that will assist the reader include: a table of
contents, summaries, a consistent format, high-level summary information that
describes overall funding sources and the organization as a whole, a
description of the overall planning and budgeting process and the
interrelationships of those various processes, supplementary information about
the City and the area for which it has responsibility, charts and graphs to better
illustrate important points, succinct and clearly-written summaries,
uncluttered pages, and detailed information placed in appropriate locations so
that it does not overwhelm the reader.
• Similar requirements apply to the non-written means ( e.g., audio, video) of
presenting budget material to stalceholders at various times during the budget
process.
C. Adopt the Budget
• The City should adopt a budget that meets all statutory requirements prior to
the beginning of the fiscal year. 6 The timely adoption of a budget permits the
City to proceed with implementing programs and services that further the
achievement of goals.
• The adopted budget slio1c1Id will clearly present the financial, operating, and
capital plan.
• It shoHld includes all operations and funds, although not necessarily at the same
level of detail.
• Non-appropriated funds, revolving funds, and any other plmmed revenues and
6 If there are delays in adopting the budget, actions sheuld are to be taken to minimize uncertainty
when the new budget period starts, as appropriate. A continuing appropriation may be legally
required
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expenditures are also should be included.
• Whenever feasible, the adopted budget should include (though not necessarily
in a single document) all statutorily required materials such as the
appropriation ordinance.
• Legally required documents that otherwise do not contribute to an
understanding of the budget may be included as an appendix.
Goal# 4-Evaluate Performance and Make Adjustments
i. Monitor. Measure. and Evaluate Performance
A. Monitor, Measure, and Evaluate Program Performance
• The City should quarterly evaluate the performance of the programs and
services it provides. The City functions, programs, and activities should will
also be periodically reviewed to determine whether they are accomplishing
intended program goals and making efficient use ofresources.
• Performance measures, including efficiency and effectiveness measures,
should are to be presented in basic budget materials, including the operating
budget document, and should be is available to stakeholders.
• Performance measures should be reported using actual data, where possible.
• At least some of these measures should document progress toward
achievement of previously developed goals and objectives.
• More formal reviews and documentation of those reviews should be carried
out as part of the overall planning, decision-making, and budget process.
B. Monitor, Measure, and Evaluate Budgetary Performance
• At a minimum, the City should will, on a quarterly basis, evaluate its financial
performance relative to the adopted budget. Regular monitoring of budgetaiy
performance provides an early warning of potential problems and gives
decision makers time to consider actions that may be needed if major
deviations in budget-to-actual results become evident. It is also an essential
input in demonstrating accountability.
• Budget-to-actual or budget-to-projected actual comparisons of revenues,
expenditures, cash flow, and fund balance should will be reviewed quarterly
during the budget period. Staffing levels should are also he monitored.
• Comparisons for at least the current year should will be included in the budget
document and be generally available to stakeholders during discussions related
to budget preparation and adoption.
C. Monitor, Measure, and Evaluate Financial Conditions
• The City should will monitor and evaluate its financial condition at least
quarterly ammally. The financial health of the City is critical to its ability to
meet the needs of stakeholders. Financial condition should be evaluated to
identify potential problems and any changes that may be needed to improve
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performance over both the short and long terms.
• Financial indicator measures often are developed to monitor financial
condition and achievement of explicitly set financial goals.
• Indicators to monitor factors that affect financial performance are also reported.
• A report on financial condition should will be periodically prepared and
updated.
• The report may be a separate document or incorporated into other relevant
documents, including the budget document.
D. Monitor, Measure, and Evaluate External Factors
• The City is to constantly should monitor and evaluate external factors that may
affect budget and financial performance and achievement of goals at least
annually quarterly. Factors outside the City's control, such as the national or
regional economy, demographic changes, statutory changes, legislation,
mandates, and weather, may affect achievement of stated goals. Monitoring
these factors helps the City to evaluate and respond to the effect of these
external influences on goals, programs, and financial plans.
• External factors that are likely to be important in achieving goals should are
to be identified and monitored regularly.
• The results of this analysis should will be factored into the assessment of
program and financial performance and considered in maldng adjustments to
these programs.
• Trends and significant issues may be described in reports to stalceholders
discussing program, budget, and financial performance.
• The assessment of external factors should is to be reported, at least in summary
form, and available to stakeholders.
E. Monitor, Measure, and Evaluate Capital Improvement Program Implementation
• The City should will monitor, measure, and evaluate capital improvement
program implementation at least quarterly. Monitoring the status of capital
projects helps to ensure that projects progress as planned, problems (such as
delays in key milestones and cost overruns) are identified early enough to take
corrective action, funds are available when needed, and legal requirements are
met.
• Reports on capital project implementation should will be prepared for decision
makers and other stakeholders.
• Surnmaty information should is to be considered for projects that are
progressing as planned.
• Project milestones, such as dates for completion of such tasks as planning,
land acquisition, engineering and design, and construction, should be
identified and progress in meeting these milestones should be reported at least
annually, and as available.
• The City should will monitor quality compliance and financial performance.
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ii. Make Adiustments as Needed
A. Adjust the Budget
• The budget should may be adjusted during the budget period should
unforeseen events require changes to the original budget plan. The budget is
a plan based on a set of assumptions that may not always match actual
experiences during the execution phase. The City should watch for significant
deviations from expectations and make adjustments so that the plan is
consistent with revised expectations.
• The City should have has procedures in place to determine when deviations
from the budget plan merit adjustments to the budget.
• Budget adjustments, whether to programs or to revenues and expenditures,
should are to be made as appropriate. 7
• Any FiB.a-l changes to the budget should are to be reported.
• The timing and manner in which this is done depends on the stakeholder group
and the level of materiality of the changes.
B. Adjust Policies, Plans, Programs, and Management Strategies
• The City should may adjust its policies, plans, programs, and management
strategies during the budget period, as appropriate. Changing conditions or
programs and services that are not producing the desired results or efficiently
utilizing resources may require adjustments in order for the City to continue
to meet the needs of stalceholders and to meet its own goals.
• The City's management team should will evaluate their monthly budget to
actual report for review, decision making, and implementation of changes to
policies, plans, programs, and management strategies during the budget period.
• Adjustments should be are based on findings obtained from monitoring and
assessing program and financial results, stakeholder input, and external
circumstances.
• Regular briefings to management and elected officials on the contents of the
reports permit timely adjustments as needed to the plan or program activities.
C. Adjust Broad Goals, if Appropriate
• The City sho1c1ld will modify or change its broad goals if conditions change
sufficiently that these goals are no longer appropriate. Goals may need to be
adjusted in response to new information about program results, stakeholder
needs, and external circumstances in order to be more relevant for the
community or more practically attainable.
• The City department heads meet to evaluate performance or changes in the
7 Budget adjustments may be administrative or legislative depending on the adjustment needed and
on statutory requirements such as the legal level of control of the budget appropriations. City
Manager may make adjustment within the fund across departments as long as the overall
appropriation is not changed.
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annual budget plan to ensure that goals are reviewed during the budget period
and adjusted when appropriate.
• Adjustments are based, in part, on findings obtained from monitoring and
assessing program and financial results, stakeholder input, and external
circumstances.
• Opportunities and challenges facing the City are also should to be considered.
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City of West Covina
Budget Policy
July 2, 2018
ATTACHMENT NO. 2
INTRODUCTION
This document defines the policies and procedures for the budget for the City of West Covina.
The procedures serve as a guide for maintaining the City's reputation for fairness and integrity
of fiscal responsibility in preparation of the annual budget using proper checks and balances.
The budget functions will be conducted using the highest ethical standards.
The objective of the budget policy is to establish a budget process that helps decision malcers
make informed choices about the provision of services and capital assets and to promote
stalceholder participation in the process. The term "stakeholder" refers to anyone affected by or
has a stalce in the City of West Covina. This termincludes, but is not limited to: residents,
customers, elected officials, management, employees and their representatives ( such as unions
or other agents), businesses, other governments, and the media. The use of "shall" is
synonymous with will.
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POLICY PURPOSE
Policy and procedures have been established in order to provide the most efficient and effective
operations of preparing the budget. The budget process will cover four main Goals:
1. Establish Broad Goals to Guide City Decision Making
• The City Council does adopt broad goals on an annual basis that provide overall
direction for the City and serve as a basis for decision making.
1. Assess community needs, priorities, challenges and opportunities.
11. Identify opportunities and challenges for City services, capital assets, and
management.
111. Develop and disseminate broad goals.
2. Develop Approaches to Achieve Goals
• The City will utilize specific policies, plans, programs, and management strategies
to define how it will achieve its long-term goals.
1. Adopt and review financial policies.
11. Develop programs, services, operating, and capital policies and plans.
iii. Develop management strategies.
3. Develop a Budget Consistent with Approaches to Achieve Goals
• A financial plan and budget that moves toward achievement of goals, within the
constraints of available financial resources, is to be prepared and adopted.
i. Develop a process for preparing and adopting a budget.
ii. Make choices necessary to adopt a budget.
4. Evaluate Performance and Make Adiustments
• Programs and financial performance will be continually evaluated, and
adjustments made, to encourage progress toward achieving goals.
i. Monitor, measure, and evaluate performance.
ii. Make adjustments as needed.
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1. Goal # 1 -Establish Broad Goals to Guide Citv Decision Making
i. Assess Community Needs, Priorities, Challenges, and Opportunities
A. Identify Stakeholder Priorities, Needs, and Concerns
• The City Council meetings are an open fornm providing opportunity to
stakeholders to bring forth concerns, needs, and priorities.
• Among other mechanisms that might be considered are special public
hearings, surveys, meetings of leading residents and resident interest groups,
City strategic planning processes, meetings with City employees, and
workshops involving City administrative staff and/or the City Council.
B. Evaluate Community Condition, External Factors, Opportunities, and
Challengesl
• The City Council will regularly collect and evaluate information about
trends in community condition, the external factors affecting it,
opportunities that may be available, and problems and issues that need to be
addressed.
• Some mechanisms will involve data gathering from preexisting sources or
through opinion surveys.
• Other mechanisms will be subjective, such as observing physical
characteristics of geographic areas within the community or talking to
residents, experts, business and community leaders, and legislative bodies.
Formal studies of particular issues or trends may also be undertaken.
• The frequency and extensiveness of the evaluation should be consistent with
how frequently the information changes and the relative importance of the
information being gathered.
ii. Jdentifv Opportunities and Challenges for City Services, Capital Assets, and
Management
A. Assess Services and Programs, and Identify Issues, Opportunities, and Challenges
• The City shall inventory, identify, and assess the programs and services that it
provides, their intended purpose, and factors that could affect their provision in
the future.
• Identify the changes in community conditions or other factors that may result in
a program or service no longer addressing the needs it was intended to serve.
Also, identify any changes in the operating environment that may affect the cost
or effectiveness of service delivery in the future.
• The review will involve each department's assessment of the programs'
1 The intent of this practice is/or the City to have up-to-date information with which to evaluate community
conditions and major issues that are integral to the development and achievement of goals. In evaluating
community condition, the City may want to consider local, regional, national, and global factors qjfecting
the community (i.e. economic and financial factors, demographics, physical or environmental factors,
changes in technology, etc.).
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purposes, beneficiaries and needs served, their success in achieving goals, and
issues, challenges, and opportunities affecting their future provision.
• The inventory of programs and services shall identify the organization
responsible for service delivery if it is not the City itself. An evaluation of
factors affecting service delivery should also be undertaken, such as funding
issues; changes in technology; economic, demographic, or other factors that
may affect demand; and legal or regulatory changes. These reviews will
typically utilize a variety of information sources.
• Stakeholder involvement in these reviews is encouraged, such as through
budget study workshops.
B. Assess Capital Assets, and Identify Issues, Opportunities, and Challenges
• The City will identify and conduct an assessment of its capital assets, including
the condition of the assets and factors that could affect the need for or ability
to maintain the assets in the future. The capital assets of the City and their
condition are critical to the quality of services provided, and hence are
important in dete1mining whether the needs and priorities of stakeholders can
be met.
• The City shall establish a process for inventorying its capital assets and
assessing the need for and the condition of these assets. (See Capital Asset
Management Policy)
• The City will assess and evaluate issues, challenges, and opportunities
affecting the provision of capital assets in the future, such as community needs
and priorities; the impact of deferred maintenance; funding issues; changes in
technology; economic, demographic, or other factors that may affect demand;
and legal or regulatory changes. This review may be undertaken in conjunction
with an evaluation of the program or service utilizing the particular assets.
• The assessment of capital asset condition must consider the impact of any
deferred maintenance and needed improvements. Identification or
development of measurement standards for the condition of capital assets
(including what is regarded as acceptable) are a valuable output of this
practice.
C. Assess City Management Systems, and Identify Issues, Opportunities, and
Challenges
• The City will identify and analyze its organization and management systems,
including system strengths and weaknesses and factors that could affect these
systems in the future. The support systems established to manage the City are
integral to the achievement of goals.
• The City will inventory management systems by department and routinely
identify, analyze, and address issues related to the City's organization and
management systems and the environment in which these systems operate.
• Each department will include an examination of strengths and weaknesses of the
organizational structure, interdepartmental communication and cooperation,
communication of goals and directives, motivation of staff, conflict
management, and provision of other internal needs and support systems.
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• The review will also include an assessment of management policies, procedures,
and systems that support achievement of goals.
iii. Develop and Disseminate Broad Goals
A. Identify Broad Goals
• The City is to identify broad goals based on its assessment of the community
it serves and its operating environment. Broad goals define the priorities and
preferred future state of the community or area served. They provide a basis
for making resource allocation decisions during the budget process and serve
as a focal point for assessing and coordinating various long-range or strategic
plans.
• Goals are to be expressed in written form and should reflect stakeholder
concerns, needs, and priorities as well as factors affecting the community and
the City.
• They must be sufficiently specific to help define the services to be emphasized
and make difficult resource allocation decisions in the budgetprocess.
• Define priorities among goals to improve their usefulness in allocating
resources.
B. Disseminate Goals and Review with Stakeholders
• The City shall disseminate broad goals and review them with stakeholders.
Disseminating and reviewing goals helps foster participation, awareness,
consensus, pride, and a sense of direction.
• Dissemination may occur by conducting public forums and by publishing
goals in key public documents, such as strategic and other planning
documents and budget documents. Electronic media may also be used
including the City website.
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2.0 Goal # 2 -Develop Approaches to Achieve Goals
i. Adopt and Review Financial Policies
A. Develop Policy on Stabilization Funds
• The City developed policies to guide the creation, maintenance, and
use of resources for financial stabilization purposes. (See Fund
Balance policy2).
• The policy establishes how and when the City builds up stabilization
funds and will identify the purposes for which they may be used.
B. Develop Policy on Fees andCharges1
• The City has established a master fee schedule that identifies the manner in
which fees and charges are set and the extent to which they cover the cost of
the service provided.
• The fee schedules are to be evaluated annually in the budget process to review
all fees and charges, the level of cost recovery for services and the reason for
any subsidy, and the frequency with which cost-of-services studies will be
undertaken.
• Policies on fees and charges are publicly available and summarized in
materials used in budget preparation.
C. Develop Policy on Debt Issuance and Management
• The City has established a Debt Management Policy to guide the issuance and
management of debt. Issuing debt commits the City's revenues several years
into the future and may limit the City's flexibility to respond to changing
service priorities, revenue inflows, or cost structures. Adherence to a debt
policy helps ensure that debt is issued and managed prudently in order to
maintain a sound fiscal position and protect credit quality.
• Debt policies are available to the public and other stakeholders. Because these
policies are essential to budget decision making, particularly capital budgets,
they will be reviewed by decision makers during the annual budget process
and as an appendix in the budget document. Debt Policy will be reviewed for
every debt issuance for compliance.
2 The Fund Balance Policy is reviewed annually to assess the alignment with set goals established in
the budget process. The City should evaluate reserves set in the fund balance policy. These funds may
be used at the City's discretion to address temporary cashjlow shortages, emergencies, unanticipated
economic downturns, and one-time opportunities.
'Costs of service include direct and indirect costs such as operating and maintenance costs, overhead,
and charges for use of capital. The City may choose not to recover all costs, but it must identify such
costs. Reasons for not recovering full costs will be identified and explained. State and local law may
govern the establishment of fees and charges.
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• The City Council has a debt policy and compiles it with other financial
policies.
D. Evaluate the Use of Unpredictable Revenues
• One-time or short-term revenues will be identified clearly in the budget
process. Unpredictable revenue sources cannot be relied on as to the level of
revenue they will generate.
• For each major unpredictable revenue source, the City identifies those aspects
of the revenue source that make the revenue unpredictable. Such as, grant
supported operating costs.
• One-time revenues will never cover the costs of continuing operating budgets.
One-time revenues will only cover one-time costs such as matching
requirements, one-time purchases, one-time payments to unfunded liabilities,
etc.
E. Develop Policy on Balancing the Operating Budget
• The City defines its Balanced Operating Budget as uses of resources for
operating purposes does not exceed available resources over the budget period,
July 1'1to June 3ot11.
• The City is committed to a balanced budget under normal circumstances and
will provide disclosures when a deviation from a balanced operating budget is
planned or when it occurs. A balanced budget is a basic budgetary constraint
intended to ensure that the City does not spend beyond its means.
• Operating resources (revenues) includes all taxes, licenses and permits, fines
and forfeitures, use of money and property, charges for services,
interdepartmental charges, miscellaneous revenues and intergovernmental
revenues in the General Fund, Special Revenue Funds, Capital Projects, Debt
Service Funds, and Internal Service Funds.
• Operating uses (expenditures) are personnel service costs, material and service
costs, capital purchases, and interdepartmental allocations.
ii. Develop Programs, Services, Operating, and Capital Policies and Plans
A. Prepare Policies and Plans to Guide the Design of Programs and Services
• Service and programs directly relate to strategies identified by the City to
achieve set goals.
• Each department of the City, such as City Council, City Manager, City Clerk,
Police, etc. identify the programs and services along with groups or
populations to be serviced, service delivery issues, specific programs listed
with standards of performance (including level of service standards or other
measures to gauge success), expected costs, time frames for achievement of
goals, issues pertaining to organization structure, and priorities for service
provision.
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• Each department identifies their goals and achievements by department which
should correlate to overall goals of the City.
• Each department identifies the resources (revenues) used to obtain the goals.
B. Prepare Policies and Plans for Capital Asset Acquisition, Maintenance,
Replacement, andRetirement
• The City will annually evaluate the need to budget for acquisition,
maintenance, replacement, and retirement of capital assets to help ensure that
needed capital assets or improvements receive appropriate consideration in the
budget process and that older capital assets are considered for retirement or
replacement. Tiris is necessary to plan for large expenditures and to minimize
defenedmaintenance.
• Annual budget evaluation may address inventorying capital assets and
evaluating their condition, criteria for acceptable condition, criteria for
continued maintenance versus replacement or retirement of an existing asset,
and identification of funding for adequate maintenance and scheduled
replacement of capital assets.
• Any assets identified as coming due for replacement will be addressed in
multi-year budgets to address replacement and renewal schedules and should
recognize the linkage of capital expenditures with the annual operating budget.
• Plans for addressing deferred maintenance may also be an output of this
practice. Once adopted, which may be included in the Capital Improvement
Program (CIP) Budget, the plan will be made publicly available, particularly
as set forth in budget, management, and planning documents.
C. Develop Options for Meeting Capital Needs and Evaluating Acquisition
Alternativesi
• The City develops Capital Improvement Program Budgets to address capital
needs that are consistent with financial, programmatic, and capital policies and
to evaluate alternatives for acquiring the use of capital assets. Capital project
planning is necessary to give adequate consideration to longer-range needs and
goals, evaluate funding requirements and options, and achieve consensus on
the physical development of the community.
• Annually in the budget process the City evaluates alternative mechanisms to
help ensure that the best approach for providing use of a capital asset or facility
is chosen based on the policies and goals of the City.
• The City uses the CIP Budget to identify capital projects that are needed to
achieve goals and a general time frame in which these assets will be needed.
4 City is to conduct quarterly reviews of existing capital projects in relation to goal attainment and to
maintain, renovate, and replace, City facilities. Various considerations to be part of evaluation (i.e.
costs, impacts on service, fending levels, use of non-General Funds, stakeholder input, etc.).
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D. Develop Performance Measures
• The City will annually, during the budget process, review and develop and
utilize performance measures for functions, programs, and/or activities.
Performance measures are used for assessing how efficiently and effectively
functions, programs, and activities are provided and for detennining whether
program goals are being met.
• Performance measures may be linked to specific program goals and objectives.
• The measures are to be valid, reliable, and verifiable.
• Whenever feasible, they should be expressed in quantifiable terms.
• Measures will be repmied in periodic reviews of functions and programs, staff
reports, and should be integral to resource allocation decisions.
• They also are to be reported in the budget document and may be reported in
separate management reports or reports to residents.
• Different aggregations of performance measures may be appropriate for
different audiences.
iii. Develop Management Strategies
A. Develop Strategies to Facilitate Attainment of Program and Financial Goals
• The City has an organizational structure and management strategies that
facilitate attainment of program and financial goals. Goals are more likely to
be achieved if organizational and management strategies are developed to
support and encourage organizational and individual performance directed
toward goal attainment.
• The City has developed a means to review, improve, and implement strategies
that encourage the City and its employees to work toward achievement of
goals.
• These strategies include both positive incentives and penalties.
• They also include support systems such as technology support, education, and
training.
B. Develop Mechanisms for Budgetary Compliance
• Finance provides monthly budget to actual reports to each department head
and City Manager to ensure proper review for compliance with the adopted
budget. Appropriate management processes and systems allow the City to
detect and correct significant deviation if it occurs.
• On a quarterly basis Finance provides budget to actual reports to department
heads and City Council.
• These reports provide measures of departments' budget.
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• Budgetary compliance is encouraged through use of data collection and
reporting systems that control disbursements of funds and that facilitate the
evaluation of revenue and expenditure trends and financial projections.
• City Manager to address any deviation of the budget to actual report (i.e.
budget amendments).
• The City has instituted procedures to review the budget quarterly and decide
on actions to bring the budget into balance, if necessary.
C. Develop the Type. Presentation. and Time Period of the Budget
• The City will annually present the budget, which will cover the fiscal year July
pt through June 30th. The type of budget, the time period covered, and the
manner of presenting materials in the budget documents can have a significant
practical impact on the City's approach to planning, control, and overall
management of its programs, services, and finances, and on the quality of
information provided to stakeholders.
• The output of the budget will provide fund level and department level program
information for the full fiscal year. The adopted budget will be provided to all
stakeholders on the City website.
• A formal review will be nndertaken periodically to ensure that the budget type,
time period, and approach to presenting the budget continue to meet the needs
and priorities of the City.
• Such a review will be broadly focused, and not directed simply at the fonnat
of individual pages.
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3.0 Goal# 3 -Develop a Budget Consistent with Approaches to Achieve Goals
i. Develop a Process for Preparing and Adopting a Budget
A. Develop a Budget Calendar
• The City publishes a comprehensive budget calendar that specifies when
budget tasks are to be completed and that identifies timelines for those tasks.
This includes budget workshops available to the public. Stakeholders need to
be aware of when key budget tasks, events, and decisions will occur so they
have an opportunity to plan and to participate in the process. The preparation
of a calendar helps ensure that all aspects of the budget process have been
considered and that adequate time has been provided.
• Multiple calendars can be produced, each with different levels of detail and
emphasis to meet the needs of the different types of stakeholders. (ie. Internal
Calendar and Public Calendar).
• Calendars list the dates of key events and deadlines.
• At least one calendar describes the overall budget and planning process and
identify roles, responsibilities, and assignments.
• To ensure the greatest impact, calendars will identify when and how
stakeholders can participate in the process.
B. Develop Budget Guidelines and Instructions
• The City will develop annual general policy guidelines and budget preparation
instructions for each budget cycle and accompany the internal budget calendar.
Budget guidelines and instructions help ensure that the budget is prepared in a
manner consistent with government policies and the desires of management
and the City Council. Instructions are necessary so that all paiticipants !mow
what is expected, thereby minimizing misnnderstanding and extra work.
• Budget guidelines are specific to the particular budget under development and
will incorporate relevant aspects of the City's financial policies.
• Each department is required to provide the Projected Actuals for revenues and
expenditures of the current year for their respective department.
• Each department is required to provide Proposed Revenues and
Appropriations for the upcoming fiscal year for their respective department.
• Guidelines and instructions may set forth financial constraints and key
assumptions that will be used to guide development of the budget, as well as
policy direction.
• Instructions often include sample forms to be completed by the operating
departments. Guidelines and instructions are prepared in a written format but
may also be presented in an electronic format or tlnough training and/or an oral
presentation.
C. Develop Mechanisms for Coordinating Budget Preparation and Review
• The City has developed mechanisms and assigned responsibilities to provide
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for overall coordination of the preparation and review of the budget. The
complete budget process involves many levels, departments, and individuals
in the City, as well as a number of distinct processes and disparate groups of
stakeholders. Coordination is needed to ensure that processes move forward
as planned, to prevent confusion and misinformation, and to ensure
appropriate stakeholders are involved.
• The Finance Department is the single point of coordination for all departments.
• The Finance Department's coordination process will involve a number of
tasks: developing a calendar, identifying responsibilities for completing
various tasks, ensuring that various parts of the budget process are properly
integrated, keeping the process on schedule, producing reports, identifying
issues and problems, and ensuring that other requirements are met and quality
standards aremaintained.
• The Finance Director has ultimate responsibility for coordinating the budget
process and will respond to stalceholder issues and concerns that arise in the
context of the budget process with direction from the City Manager and City
Council.
D. Develop Procedures to Facilitate Budget Review, Discussion, Modification, and
Adoption
• The City has a process to facilitate the review, discussion, modification, and
adoption of a proposed budget. Appropriate procedures are needed to resolve
conflicts, to promote acceptance of the proposed budget by stakeholders, and
to assist in timely adoption of the budget.
• This process allows stakeholders to be informed of the budget proposal and to
allow the legislative body to achieve consensus and adopt a budget.
o Some examples include: small group meetings, hearings, workshops,
independent analysis, specific decision-making techniques and
procedures, conflict resolution processes, and methods for presenting
portions of the budget.
E. Identify Opportunities for Stalceholder Input
• The City provides opportunities in the budget process for obtaining stakeholder
input. 5 By definition, stakeholders are affected by the City's resource
allocation plans and service and program decisions. Stakeholders should have
clearly defined opportunities to provide input. This helps ensure that
stakeholder priorities are identified and enhances stakeholder support for the
approved budget.
• Stakeholder input can be obtained in a number of ways, including public
hearings, advisory commissions, informal conversations, round-table
5 The budget process should include opportunities for all stakeholders to participate. A general-purpose
public hearing shortly before final decisions are made on the budget is not adequate as the sole means of
soliciting stakeholder input, especially on major issues. The process developed for obtaining stakeholder
input should ensure that information is gathered in a timely and complete manner to be usefal in budget
decision making, such as City workshops.
Page 13 of 18
briefings, televised and live online broadcast, opinion surveys, neighborhood
meetings, office hours, letter writing, telephone calls, and e-mail.
• The budget calendar should identify specific opportunities for resident input
where City officials are available to explain issues and choices and to receive
comments.
ii. Make Choices Necessarv to Adopt a Budget
A. Prepare and Present a Recommended Budget
• The City will prepare and present a recommended comprehensive program
and financial plan (the "budget") for review by stakeholders and
consideration for adoption by the City Council. A complete plan is necessary
to allow stakeholders to be informed on how well all of the different aspects of
the plan fit together and whether there is an appropriate balance of resources
and assigned uses.
• The proposed budget will consist of a set of recommended actions regarding
programs and services to be funded, including service level, quality, and goals
to be achieved.
• It will also identify funding requirements and sources of funds, and provide
the supplemental information necessary to review the plans.
• The budget is to be consistent with policies and goals set by the City.
• The recommended budget must also comply with any statutory requirements.
B. Present the Budget in a Clear, Easy-to-use Format
• Budget documents and related materials made available to stakeholders is to
be presented in a clear and readily comprehensible format. The budget is the
guide that determines the direction of the City. It is arguably the single most
important document routinely prepared by the City. To be usable, it notonly
must contain the appropriate information, but must also be prepared in a
manner that is clear and comprehensible.
• Some items in a budget document that will assist the reader include: a table of
contents, summaries, a consistent format, high-level summary information that
describes overall funding sources and the organization as a whole, a
description of the overall planning and budgeting process and the
interrelationships of those various processes, supplementary information about
the City and the area for which it has responsibility, charts and graphs to better
illustrate important points, succinct and clearly-written sunnnaries,
uncluttered pages, and detailed information placed in appropriate locations so
that it does not overwhelm the reader.
• Similar requirements apply to the non-written means ( e.g., audio, video) of
presenting budget material to stakeholders at various times during the budget
process.
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C. Adopt the Budget
• The City should adopt a budget that meets all statutory requirements prior to
the beginning of the fiscal year. 6 The timely adoption of a budget permits the
City to proceed with implementing programs and services that further the
achievement of goals.
• The adopted budget will clearly present the financial, operating, and capital
plan.
• It includes all operations and funds, although not necessarily at the same level
of detail.
• Non-appropriated funds, revolving funds, and any other planned revenues and
expenditmes are also included.
• Whenever feasible, the adopted budget should include (though not necessarily
in a single document) all statutorily required materials such as the
appropriation ordinance.
• Legally required documents that otherwise do not contribute to an
understanding of the budget may be included as an appendix.
6 If there are delays in adopting the budget, actions are to be taken to minimize uncertainty when the new
budget period starts, as appropriate. A continuing appropriation may be legally required.
Page 15 of 18
4.0 Goal# 4-Evaluate Performance and Make Adjustments
i. Monitor, Measure, and Evaluate Performance
A. Monitor, Measure, and Evaluate Program Performance
• The City quarterly evaluate the perfmmance of the programs and services it
provides. The City functions, programs, and activities will also be periodically
reviewed to determine whether they are accomplishing intended program goals
and making efficient use ofresources.
• Performance measures, including efficiency and effectiveness measures, are
to be presented in basic budget materials, including the operating budget
document, and be available to stakeholders.
• Performance measures should be reported using actual data, where possible.
• At least some of these measures should document progress toward
achievement of previously developed goals and objectives.
• More formal reviews and documentation of those reviews should be carried
out as part of the overall planning, decision-making, and budget process.
B. Monitor, Measure, and Evaluate Budgetary Performance
• At a minimum, the City will, on a quarterly basis, evaluate its financial
perfotmance relative to the adopted budget. Regular monitoring of budgetary
performance provides an early warning of potential problems and gives
decision makers time to consider actions that may be needed if major
deviations in budget-to-actual results become evident. It is also an essential
input in demonstrating accountability.
• Budget-to-actual or budget-to-projected actual comparisons of revenues,
expenditures, cash flow, and fund balance will be reviewed quarterly during the
budget period. Staffing levels are also monitored.
• Comparisons for at least the current year will be included in the budget
document and be generally available to stakeholders during discussions related
to budget preparation and adoption.
C. Monitor, Measure, and Evaluate Financial Conditions
• The City will monitor and evaluate its financial condition at least qumierly.
The financial health of the City is critical to its ability to meet the needs of
stakeholders. Financial condition should be evaluated to identify potential
problems and any changes that may be needed to improve performance over
both the short and long terms.
• Financial indicator measures often are developed to monitor financial
condition and achievement of explicitly set financial goals.
• Indicators to monitor factors that affect financial performance m·e also repmied.
• A report on financial condition will be periodically prepared and updated.
• The report may be a separate document or incorporated into other relevant
documents, including the budget document.
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D. Monitor, Measure, and Evaluate External Factors
• The City is to constantly monitor and evaluate external factors that may affect
budget and financial performance and achievement of goals at least quarterly.
Factors outside the City's control, such as the national or regional economy,
demographic changes, statutory changes, legislation, mandates, and weather,
may affect achievement of stated goals. Monitoring these factors helps the
City to evaluate and respond to the effect of these external influences on goals,
programs, and financial plans.
• External factors that are likely to be important in achieving goals are to be
identified and monitored regularly.
• The results of this analysis will be factored into the assessment of program and
financial performance and considered in making adjustments to these
programs.
• Trends and significant issues may be described in reports to stalceholders
discussing program, budget, and financial performance.
• The assessment of external factors is to be reported, at least in summary form,
and available to stakeholders.
E. Monitor, Measure, and Evaluate Capital Improvement Program Implementation
• The City will monitor, measure, and evaluate capital improvement program
implementation at least quarterly. Monitoring the status of capital projects
helps to ensure that projects progress as planned, problems (such as delays in
key milestones and cost overruns) are identified early enough to talce corrective
action, funds are available when needed, and legal requirements are met.
• Reports on capital project implementation will be prepared for decision
malcers and other stakeholders.
• Summary information is to be considered for projects that are progressing as
planned.
• Project milestones, such as dates for completion of such tasks as planning,
land acquisition, engineering and design, and construction, should be
identified and progress in meeting these milestones should be reported at least
annually, and as available.
• The City will monitor quality compliance and financial performance.
ii. Make Adiustments as Needed
A. Adjust the Budget
• The budget may be adjusted during the budget period should unforeseen
events require changes to the original budget plan. The budget is a plan based
on a set of assumptions that may not always match actual experiences during
the execution phase. The City should watch for significant deviations from
expectations and make adjustments so that the plan is consistent with revised
expectations.
Page 17 of18
• The City has procedures in place to determine when deviations from the
budget plan merit adjustments to the budget.
• Budget adjustments, whether to programs or to revenues and expenditures, are
to be made as appropriate. 7
• Any changes to the budget are to be reported.
• The timing and manner in which this is done depends on the stakeholder group
and the level of materiality of the changes.
B. Adjust Policies, Plans, Programs, and Management Strategies
• The City may adjust its policies, plans, programs, and management strategies
during the budget period, as appropriate. Changing conditions or programs and
services that are not producing the desired results or efficiently utilizing
resources may require adjustments in order for the City to continue to meet the
needs of stakeholders and to meet its own goals.
• The City's management team will evaluate their monthly budget to actual
report for review, decision making, and implementation of changes to policies,
plans, programs, and management strategies during the budget period.
• Adjustments are based on findings obtained from monitoring and assessing
program and financial results, stakeholder input, and external circumstances.
• Regular briefings to management and elected officials on the contents of the
reports permit timely adjustments as needed to the plan or program activities.
C. Adjust Broad Goals, if Appropriate
• The City will modify or change its broad goals if conditions change
sufficiently that these goals are no longer appropriate. Goals may need to be
adjusted in response to new information about program results, stakeholder
needs, and external circumstances in order to be more relevant for the
community or more practically attainable.
• The City department heads meet to evaluate performance or changes in the
annual budget plan to ensure that goals are reviewed during the budget period
and adjusted when appropriate.
• Adjustments are based, in part, on findings obtained from monitoring and
assessing program and financial results, stakeholder input, and external
circumstances.
• Opportunities and challenges facing the City are also to be considered.
7 Budget adjustments may be administrative or legislative depending on the acijustment needed and on
statutory requirements such as the legal level of control of the budget appropriations. City Manager may
make acijustment within the fimd across departments as long as the overall appropriation is not changed.
Page 18 ofl8
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AGENDA
ITEMNO. 2
AGENDA STAFF REPORT
City of West Covina I Office of the City Manager
DATE: July 2, 2018
TO:
FROM:
Mayor and City Council
Chris Freeland
City Manager
SUBJECT: RESOLUTION TO CONTINUE FISCAL YEAR 2017-18
APPROPRIATIONS
RECOMMENDATION:
It is recommended that the City Council adopt the following resolution:
RESOLUTION NO. 2018-96 -A RESOLUTION OF THE CITY COUNCIL
OF THE CITY OF WEST COVINA, CALIFORNIA, TO CONTINUE
APPROPRIATIONS CONSISTENT WITH THE ADOPTED FISCAL YEAR
2017-18 CITY OF WEST COVINA AND THE SUCCESSOR AGENCY TO
THE FORMER WEST COVINA REDEVELOPMENT AGENCY
OPERATING BUDGETS AND THE CAPITAL IMPROVEMENT
PROGRAM UNTIL THE ADOPTION OF THE FISCAL YEAR 2018-19
ANNUAL BUDGET.
DISCUSSION:
The City ofW est Covina Operating and Capital Improvement Budget for Fiscal Year 2018-19 will
not be brought fmward to the City Council for approval until sometime in late July to mid-August.
Departments will be operating with funding up to the same level as the adopted Fiscal Year 2017-
18 as directed by the City Manager, until the new budget is adopted. No new hires in personnel,
and new items in the operating budget, capital purchases, and capital improvement projects
proposed as part of the Fiscal Year 2018-19 budget are not authorized to proceed and will not have
funding without City Council approval.
Resolution No. 2018-79 was approved by the City Council effective July 1, 2018 to July 2, 2018.
Pursuant to the City Council direction, Staff has prepared Resolution No. 2018-96 for City
Council's approval to continue appropriations in a manner consistent with the adopted Fiscal Year
2017-18 City and Successor Agency to the former West Covina Redevelopment Operating
Budgets and Capital Improvement Program commencing July 3, 2018 and ending August 31,2018.
Resolution to Continue FY 2017-18 Appropriations
Page 2 of2-July2, 2018
Adoption of the attached resolution will allow normal City operations to continue until the Fiscal
Year 2018-19 City of West Covina and Successor Agency to the former West Covina
Redevelopment Operating and Capital Improvement Budget is adopted.
FISCAL IMP ACT:
While some new projects may be delayed, the continuing resolution will not have a significant
fiscal impact.
Prepared by:
~;i?~ J . caster
=onsultant
ATTACHMENT:
Attachment No. 1-ResolutionNo. 2018-96
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ATTACHMENT NO. I
RESOLUTION NO. 2018-96
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF WEST
COVINA, CALIFORNIA, TO CONTINUE APPROPRIATIONS
CONSISTENT WITH THE ADOPTED FISCAL YEAR 2017-18 CITY OF
WEST COVINA AND THE SUCCESSOR AGENCY TO THE FORMER
WEST COVINA REDEVELOPMENT AGENCY OPERATING BUDGETS
AND THE CAPITAL IMPROVEMENT PROGRAM UNTIL THE
ADOPTION OF THE FISCAL YEAR 2018-19 ANNUAL BUDGET.
WHEREAS, the budget adoption date has been delayed beyond June 30, 2018 to allow
for the completion of the budget development process; and
WHEREAS, the City and Successor Agency to the fonner West Covina Redevelopment
Agency should approve resolutions to continue the prior year's budgets to ensure our ability to
conduct municipal business.
NOW, THEREFORE, the City Council of the City of West Covina does
resolve as follows:
SECTION 1. Said appropriations as approved in the adopted Fiscal Year 2017-18
City and Successor Agency to the former West Covina Redevelopment Agency Operating
Budgets and Capital Improvement Program are hereby continued in a manner consistent with the
prior year's adopted budget except for new personnel and new items in the operating budget,
capital purchases and capital improvement projects; and
SECTION 2. There are hereby appropriated for obligation and expenditure by the City
Manager the amounts consistent with the prior year's adopted budget for the portion of the
2018-19 Fiscal Year commencing July 3, 2018 and ending on August 31, 2018; and
SECTION 3. All obligations and expenditures shall be incuned and made in the
manner provided by the provisions of State law and City resolutions applicable to purchasing
and contracting; and
SECTION 4. No warrant shall be issued or indebtedness incurred which exceeds
the unexpended balance of fund and project appropriations herein, unless such has been
amended by a supplemental appropriation duly enacted by resolution of the City Com1cil; and
SECTION 5. That the City Clerk shall certify to the adoption of this resolution and the
same shall be in full force in effect immediately upon adoption.
APPROVED AND ADOPTED this 2"'1 day of July, 2018
ATTEST:
Nickolas S. Lewis, City Clerk
Lloyd Johnson
Mayor
I, NICKOLAS S. LEWIS, HEREBY CERTIFY that the foregoing Resolution No. was duly
adopted by the City Council of the City of West Covina at a regular meeting thereof, held on the
2nd of July, 2018, by the following vote of the Council;
AYES:
NOES:
ABSENT:
ABSTAIN:
Nickolas S. Lewis, City Clerk
APPROVED AS TO FORM:
Kimberly Hall Barlow, City Attorney
AGENDA STAFF REPORT
City of West Covina | Office of the City Manager
DATE: July 2, 2018
TO: Mayor and City Council
FROM: Chris Freeland
City Manager
SUBJECT: FISCAL YEAR 2018-19 THIRD PRELIMINARY BUDGET WORKSHOP
RECOMMENDATION:
It is recommended that the City Council provide Staff direction on the various City priorities
related to the Fiscal Year 2018-19 Operating and Capital Improvement Program Budget.
BACKGROUND:
On January 30, 2018, the Finance Department held a Fiscal Year (FY) 2018-19 budget kickoff
meeting with City of West Covina staff to begin the development of the FY 2018-19 budget. All
department budgets were turned into the Finance Department by March 1, 2018, and reviewed
with the City Manager over the course of the following weeks. The Finance Department is
responsible for the development of the preliminary and final budget preparation.
As part of the FY 2018-19 Operating and Capital Improvement Program (CIP) Budget preparation,
one Community Budget Workshop was held on May 7, 2018. A FY 18-19 Preliminary Budget
Workshop was held on May 14, 2018, and a Second Preliminary Budget Workshop was held on
June 11, 2018.
At the first Community Budget Workshop, staff provided a Budget 101 to the residents to learn
the basics of municipal financing, including terminology, sources of revenues, use of funds, types
of funds, and reserves.
On May 14, 2018, Staff shared information on the various funds that make up the City of West
Covina’s Budget, department responsibilities and discussed the current financial state of the City.
Staff requested feedback from the City Council regarding the proposed budget priorities. In
addition, Staff sought direction from the City Council on various measures that will help close the
AGENDA
ITEM NO. 3
Third Preliminary Budget Workshop
Page 2 of 8 – July 2, 2018
FY 2018-19 General Fund deficit of $8.7 million and to discuss options to replenish the City’s
General Fund reserves to 20% of the FY 2018-19 operating expenditures.
On June 5, 2018, the City Council approved Resolution 2018-64 to change the Fund Balance
Reserve Policy. The Fund Balance Reserve Policy states that the City shall maintain a minimum
unassigned fund balance of at least 17% of General Fund operating expenditures. If the reserve
level ever falls below 17%, the City must amend this policy with a plan to rebuild it within three
years. At the fiscal year end close, the annual excess revenue over expenditures in the City’s
General Fund will be automatically allocated as follows, unless the transfer is overridden by an
action of the City Council: 25% stays in the General Fund Balance reserves, 50% is transferred to
the City’s Capital Projects Fund, and 25% goes to pay down the City’s Other Post Employment
Benefit (OPEB) liability.
On June 11, 2018, Staff requested direction from the City Council on various measures that will
help close the FY 2018-19 General Fund deficit and options to replenish the City’s General Fund
reserves to 17% of the FY 2018-19 operating expenditures.
In addition, each City department was given a directive by the City Manager to prepare a list of
10% across the board expenditure cuts for City Council consideration, which were presented
during the budget presentation.
The City Council approved Staff’s recommendation to take advantage of the CalPERS unfunded
liability pre- payment option and to utilize the balance in the Section 115 Trust, which is
approximately $320,000, toward this pre-payment. Rather than make monthly payments towards
the City’s unfunded liability, the City can make a pre-payment of $10,060,883 in July 2018, which
will save approximately $364,393 over the course of the year for the General Fund and
approximately $684,393 across all City funds.
Continuing Budget Resolution
On June 19, 2018, the City Council approved Resolution 2018-79 to continue appropriations up to
July 2, 2018 consistent with the FY 2017-18 City of West Covina and the Successor Agency to
the Former West Covina Redevelopment Agency operating budgets and capital improvement
program. City Council directed Staff to bring back this item on the 3rd Preliminary Budget Meeting
for further City Council consideration.
Preliminary Budget Information as of May 14, 2018
As of May 14, 2018, estimated FY 2018-19 revenues (including transfers in) on an all funds basis
are $119,470,643. Many funds make up the total budget amount, with the largest being the General
Fund in the amount of $61,795,577, or 52% of the City’s total budget.
Estimated expenditures (including transfers out) for all budgeted funds are estimated at
$127,611,584. Many funds make up the total budget amount, with the largest being the General
Fund in the amount of $70,468,677, or 55% of the organization’s total.
Third Preliminary Budget Workshop
Page 3 of 8 – July 2, 2018
Personnel costs inclusive of all City funds are anticipated to increase by $6.3 million from $58.3
million for FY 2017-18 to $64.6 million for FY 2018-19. The majority of the increase is a result
of Public Employment Retirement System (PERS) rate increases for pension benefits, increased
medical costs, funding for Fire Engine No. 4, and the elimination of the $1.5 million managed
savings for Public Safety.
General Fund
The City’s principal financial goal is to provide an appropriate level of municipal services with
the ability to adapt to local and regional economic changes, while maintaining and enhancing the
sound fiscal condition of the City. The City’s General Fund has been negatively impacted in the
past number of years by the economic recession, increases in pension costs, the State’s elimination
of redevelopment, and the State’s raid of local revenues.
General Fund Revenues:
Total General Fund revenues are projected to be $61,795,577, a decrease of $1 million or 1.6%
from the prior year adopted budget. The decrease is due to a decrease in Sales Tax revenues and
a decrease in Charges for Services such as the Emergency Medical Service Assessment Fee,
Planning Filing Fees, and Fire Plan Check/Inspection Fees.
General Fund Expenditures:
General Fund expenditures for FY 2018-19 are projected to be $70,468,677. This equates to an
increase in expenditures of 12%, or $7,558,093 when compared to the adopted budget for FY
2017-18. The increase is due to a $5.6 million increase in personnel costs and a $2 million increase
in materials and services. Personnel increases are due to rising PERS and medical costs,
maintaining Fire Engine No. 4, and the elimination of the $1.5 million managed savings for Public
Safety that was budgeted in FY 2017-18. Increases in materials and services include a $567,148
transfer to the Capital Projects Fund for residential street rehabilitation in order to meet the City’s
required maintenance of effort under Senate Bill 1, an increase in Property & Liability Insurance
charges, a transfer to cover the anticipated Police Service Group deficit, increases in contract costs,
utilities, and legal expenses, and expenditures related to the upcoming election.
General Fund Reserves:
The General Fund ending unassigned fund balance, or reserve, is equivalent to a “savings account”
to cover unexpected costs or significant economic changes. The intent is to not use this for normal
operating expenses. Unless changes are made to this preliminary budget, the General Fund ending
unassigned fund balance is projected to be $1.6 million, which is 2.27% of operating expenditures.
Capital Improvement Program (CIP):
Staff is recommending a number of CIP projects for FY 2018-19, with the majority of them being
funded from special revenue funds. These projects are listed on Attachment No. 2 and include an
Energy Efficiency for City Buildings project, which staff is proposing to have funded through a
City loan, Sewer Main Replacement, upgrades to the Azusa sewer lift station, major and residential
street rehabilitation, and Citywide Schools Crosswalk Improvements. Two projects are being
Third Preliminary Budget Workshop
Page 4 of 8 – July 2, 2018
funded by the General Fund for a total of $657,148. The two General Fund CIP projects are for a
Historic Resources Study Update and the City’s Senate Bill 1 Maintenance of Effort portion of the
Residential Rehab project.
As of May 14, 2018, the General Fund budget deficit was $8.7 million. To replenish reserves to
meet the City’s Fund Balance Policy of 20% of operating expenditures, an additional $3.6 million
is needed, for a total of $12.3 million.
Revisions to the May 14, 2018 Preliminary Budget
Since the May 14, 2018 Preliminary Budget Workshop, staff made a number of revenue and
expenditure revisions to the budget. The revenue adjustments are based on new information from
the Department of Finance and to bring various revenue projections in line with projected actuals
for the current fiscal year. The expenditure adjustments are based on new information from the
Department of Health Care Services (DHCS) regarding the recent Ground Emergency Medical
Transport (GEMT) audit, to correct the chargebacks, and Fire personnel budgets. These revisions
include:
Revenue Adjustments
1) Increase Ambulance Service revenues 443,227
2) Increase Parking Fine revenues 75,000
3) Increase State Mandated Claims 74,500
4) Increase Towing Franchise revenues 50,000
5) Increase Cell Tower Rent 10,000
6) Increase Waste Management revenues 5,000
7) Adjust Successor Agency Admin Allowance (119,608)
Total Revenue Adjustments $538,119
Expenditure Adjustments
1) Correct Property & Liability Insurance Chargebacks 15,152
2) Correct Fire personnel budget 95,211
3) Add 3 Firefighters to the Quint 355,832
4) Payment to DHCS for GEMT Audit 357,000
Total Expenditure Adjustments $823,195
The net effect of these revisions is an increase of $285,076 to the General Fund Operating Deficit.
In addition, in accordance with the adoption of Resolution 2018-64 (Fund Balance Reserve
Policy), the 17% of operating expenditures as a minimum for unassigned fund balance has been
applied.
Third Preliminary Budget Workshop
Page 5 of 8 – July 2, 2018
May 14, 2018 City Council Direction
At the May 14, 2018 Preliminary Budget Workshop, the City Council provided direction to
incorporate the following revenue enhancements in the Preliminary Budget:
Revenue Adjustments
1) Business License – Commercial Rental clean-up 385,000
2) Towing Industries 200,000
3) Annexations – South Hills and Shadow Oak 100,000
4) Transfer of fund balance from Vehicle Replacement Fund 140,000
5) Sale of City/Successor Agency Properties 163,000
(AAA and MLC Properties)
Total Revenue Items $988,000
In addition, the City Council provided direction on the following expenditure cuts to be
incorporated into the Preliminary Budget:
Expenditure Adjustments
1) Make PERS Pre-payment and deplete Section 115 Trust 613,450
2) Eliminate vacant positions:
a. Community Services Coordinator 68,157
b. Finance Accounting Technician 67,719
3) Cut Commission/Treasurer/City Clerk stipends 19,927
Total Expenditure Items $769,253
Based on these recommendations, the General Fund estimated revenues are projected to be
$63,321,696 and the General Fund expenditures are projected to be $70,522,619. The General
Fund budget deficit decreased from $9 million to $7.2 million. An additional $1.6 million is
needed to meet the City’s 17% reserve requirement, for a total of $8.8 million still needed.
The City Council also gave direction to incorporate the addition of a new Technology Fee into the
City’s Fee Schedule. If approved, this fee is estimated to generate approximately $230,000 per
year in revenues to the City. However, these revenues would be set aside into a separate account
to be used specifically for technology upgrades related to Building and Engineering, and thus
would have no impact on the General Fund.
In addition, the City Council provided direction for staff to increase fees on the City’s Fee
Schedule, for an estimated $113,000 in additional revenues. However, due to the City’s financial
condition and anticipated delays in adopting the FY 2018-19 Budget, estimated increases to
existing fees may not be fully realized, and thus were not incorporated. The City’s fees are based
on a number of factors and potential restructuring in various departments could drastically change
fee amounts.
Third Preliminary Budget Workshop
Page 6 of 8 – July 2, 2018
June 11, 2018 City Council Direction
At the June 11, 2018 Second Preliminary Budget Workshop, the City Council provided direction
to incorporate the following revenue enhancements and expenditure cuts into the Preliminary
Budget. These revisions include:
Revenue Enhancements
1) Crossing Guard Cost Sharing with School District 100,000
Total Revenue Enhancements $100,000
Expenditure Cuts
1) Increase Commission stipends back to 2012 amounts (9,260)
Stipends were eliminated entirely as part of May 14th Mtg
2) Cuts to City Council / City Manager budget 169,393
3) Cuts to City Clerk budget 36,168
4) Cuts to Finance budget 26,150
5) Cuts to Information Technology budget 96,449
6) Cuts to Human Resources budget 83,972
7) Cuts to Planning budget 17,894
8) Cuts to Public Works budget 295,152
9) Cuts to Community Services budget 132,516
10) Cuts to Special Events 100,000
Total Expenditure Cuts $948,434
Based on these approved adjustments, the General Fund estimated revenues are projected to be
$63,421,696 and the General Fund expenditures are projected to be $69,574,185. The General
Fund budget deficit decreased from $7.2 million to $6.2 million. An additional $1.4 million is
needed to meet the City’s 17% reserve requirement, for a total of $7.6 million still needed.
DISCUSSION:
Since the June 11, 2018 Second Preliminary Budget Workshop, staff made a number of revenue
and expenditure revisions to the budget. These revisions include:
Revenue Adjustments
1) Increase to Finance revenues 30,000
2) Increase to Animal Control revenues 50,000
3) Increase to Traffic Citation revenues 100,000
4) Decrease to Franchise Fees due to updated projections (64,000)
Total Revenue Items $116,000
Third Preliminary Budget Workshop
Page 7 of 8 – July 2, 2018
Expenditure Adjustments
1) Increase personnel budget due to Misc. MOU Amendments (167,094)
2) Update Fire personnel budget (15,933)
3) Adjust Comm Svcs budget due to Orangewood Daycare closure 78,502
4) Increase Police overtime budget (1,619,250)
5) Decrease Fire overtime budget 863,600
6) Increase Animal Control costs (242,200)
7) BICEP Insurance Premium increase (109,567)
8) Increase professional services for Accounting Services (86,900)
9) Eliminate GF transfer to Police Service Group (non-operating) 460,314
Total Expenditure Items $(838,528)
A timeline of the General Fund deficit is illustrated below:
Pending Items
There are still a number of labor contracts that are expired as of the date of this Third Preliminary
Budget Meeting. At the June 19, 2018 City Council Meeting, City Council approved Amendments
to the Memorandum of Understanding (MOU) for the NonSworn Safety Support Association
PRELIMINARY
BUDGET
1st
Preliminary
Budget Wrkshp
CC DIRECTION
2nd
Preliminary
Budget Wrkshp
ADJUSTMENTS
2nd
Preliminary
Budget Wrkshp
CC DIRECTION
PRELIMINARY
BUDGET
SUBTOTAL
as of 6/11/18
3rd
Preliminary
Budget Wrkshp
ADJUSTMENTS
PRELIMINARY
BUDGET
ADJUSTED TOTAL
as of 7/2/18
5/14/2018 6/11/2018 6/11/2018 7/2/2018
Revenue 61,795,577 988,000 538,119 100,000 63,421,696 116,000 63,537,696
Expenditures (70,468,677)769,253 (823,195)948,434 (69,574,185)(838,528)(70,412,713)
Operating Deficit (8,673,100)(6,152,489)(6,875,017)
Replenish GF Reserves per
Reserve Policy
(3,633,864)1 2,234,676 2 (1,399,188)(1,619,991)2
Total Preliminary GF Deficit (12,306,964)(7,551,677)(8,495,008)
UNASSIGNED FUND BALANCE:
7/1/18 Proj F/B & Adjmnt to
Non-Spendable Reserve
10,250,216 10,250,216 10,250,216
Operating Deficit (8,673,100)(6,152,489)(6,875,017)
6/30/19 Adjusted Proj F/B &
Adj to Non-Spendable
Reserve
1,577,116 4,097,727 3,375,199
Required Unassigned Reserve 13,884,080 11,649,404 11,870,207
Note 1 : 20% General Fund Reserve Policy
Note 2 : 17% General Fund Reserve Policy
Third Preliminary Budget Workshop
Page 8 of 8 — July 2,2018
through June 30, 2017, and the Confidential Employees' Association, General Employees'
Association, Maintenance and Crafts Employees' Association and Mid-Management Employees'
Association MOU' s through June 30,2019. Negotiations for other labor unions are still in progress
and the costs for amending these outstanding contracts are unknown at this time. The contracts
that are currently expired are as follows:
• Department Heads — expired June 30, 2017
• NonSwom Safety Support — expired June 30, 2017
• Fire Management Association — expired June 30, 2016
• Firefighters' Association — expired December 31, 2016
• Police Officers' Association — expired December 31, 2016
FISCAL IMPACT:
Each of the proposed department cuts will impact City Services to varying degrees. Freezing of
vacant positions or other similar cuts to the organization staffing levels will increase the workload
on current employees; will impact wait times at public counters and processing times for service
requests; and likely increase response times from Public Safety on emergency and non-emergency
calls. City staff will make every effort to continue to provide the best quality service to the
community with the resources available.
Prepared by:
iebggitait