01-07-2003 - 2002/2003 Budget Update•
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TO: Andrew G. Pasmant, City Manager
FROM: Tom Bachman, Director of Finance
SUBJECT: 2002-03 Budget Update
RECOMMENDATION:
Receive and file report
DISCUSSION:
City of West Covina
Memorandum
AGENDA
Item No.':
Date:
H-2
January 7, 2003
This item is in response to a request by Councilmember Miller that it be placed on the agenda.
The City adopted the fiscal year 2002-03 Budget that contained a general fund gap of
approximately $3.3 million. Since the time the budget was adopted, staff has identified the
following items that have the potential to significantly reduce the current budget gap.
• Based on current fiscal year expenditures to date, most departments are 3% - 4% below
their budgeted expenditures. Based on this experience, departments have been directed to
maintain the current spending levels and spend only 97% of their general fund budget
accounts during the current fiscal year. A 3% reduction in expenditure levels for the
current year will generate approximately $1.2 million in budget savings.
• The fire department has recently been awarded approximately $148,000 in grant funds
that will replace general funds that were appropriated for the replacement of breathing
apparatus.
• City staff is currently evaluating approved general fund capitalimprovement projects and
determining which ones can be deferred. These recommendations will be brought back
to the City Council very shortly. Deferring projects will result in a minimum of
$200,000 plus general field savings. These projects could include the enclosure of the
City Hall lobby and the lease payments on the finance system software system.
• The suspension on portions the commercial landlord business license tax has been
removed. This, along with the C.P.I. adjustment to all business licenses should generate
an additional $400,000 in unbudgeted business license taxes.
• The fees for many City programs and services have not been adjusted since 1994. As a
result the general taxpayer has been subsidizing certain programs and services at a higher
level than the rates previously set by the City Council. Adjustments to those fees to
recover the amounts previously determined as appropriate by the City Council will be
brought before the City Council in the near future. Fee increases could generate an
additional $100,000 in the current year.
The total of these items is approximately $2.05 million. This would reduce the current year
budget gap to $1.25 million, which is the amount of capital improvement projects funded by the
general fluid in the current year. Staff continues to evaluate vacant positions for restructuring
opportunities and has delayed hiring of certain positions. All departments have also been
directed to present other options to either reduce expenditures or raise revenues.
At the state level, the governor proposed a series of budget reductions and adjustments for the
current fiscal year totaling $10.2 billion on December 6, 2002. This proposal was based on
updated projections for deficits in the state budget for both the current year and the 2003-04
fiscal year. While no action was taken on this proposal by the legislature at this time, it did
contain items that would affect the City and the Redevelopment Agency. Additionally, the
governor's budget for the state for 2003-04 is due out the middle of January, which will give
further indication of what areas of potential impact the state is looking at. Current revenue
sources being looked by the state include:
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• Vehicle License Fees — The 2002-03 budget estimate is $5.9 million, of which
approximately $4 million comes from the state budget to backfill the reduction in license
fees to vehicle owners.
• Transportation Funding — The governor's current year reduction proposal included
eliminating 75% of these funds, which would reduce capital project finding by
approximately $143,000.
• Redevelopment Low and Moderate Income Housing reserve finds - The governor's
current year proposal included the taking of unencumbered housing finds: There is much
confusion over the term "unencumbered" and staff is attempting to define what is meant
by the governor's proposal. The City Attorney's office is also working to identify ways
to protect these funds.
The state has in the past also looked at property taxes and public safety funds as a source to help
balance their budget. Staff believes it would- be°inappropriate .to guess what. the. impact, of state
actions could,be. At this time it would'be prudent•to educate our legislators and revisit'how local
government is financed.. As the City Council- is. aware, 71% oflhe�.City's $41.3-.million general
find budget goes to public safety. Some serious discussions regarding policy issues will need to
occur once we know what the governor's proposal . is. , Obviously, dependent -upon what the state
does, it could have great impacts on service and staffing levels and create a need to restructure
what services the City provides.
, FISCAL'IMPACT:
Prepared by:
Tom Bachman
Director of Finance