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CC - 2011-33 - Annual Operating and Capital Improvement Budget for the FY 2011-12RESOLUTION NO. 2011 -33 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF ROSEMEAD ADOPTING THE ANNUAL OPERATING AND CAPITAL IMPROVEMENT BUDGET FOR THE 2011 -12 FISCAL YEAR WHEREAS, a proposed annual budget for the City of Rosemead, California for the Fiscal Year commencing July 1, 2011 and ending June 30, 2012 was submitted to the City Council for it's review and consideration and the proposed annual budget is on file in the City Clerk's office; and WHEREAS, on June 28, 2011 and a public hearing was held; and NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF ROSEMEAD, CALIFORNIA DOES RESOLVE AS FOLLOWS: 1. The 2011 -12 Annual Operating and Capital Improvement Program Budget is hereby adopted in the amount of $30,019,800. 2. There is hereby appropriated to each account group set forth in the "Function, Performance Levels and Work Plan" of said budget attached hereto, and made a part hereof as though fully set forth herein, the sum shown for such accolunt groups in the 2011 -12 Adopted Column. 3. The Mayor shall sign and the City Clerk shall certify to the passage and adoption of this Resolution and thereupon the same shall take effect and be in force. PASSED, APPROVED and ADOPTED the 28` day of June, 2011. Steven Ly, Mayor ATTEST: Gloria Molleda, City Clerk APPROVED AS TO FORM: R chel . Richman, City Attorney STATE OF CALIFORNIA ) COUNTY OF LOS ANGELES ) SS. CITY OF ROSEMEAD ) I, Gloria Molleda, City Clerk of the City of Rosemead, do hereby certify that the foregoing Resolution No. 2011 -33 being: A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF ROSEMEAD ADOPTING THE ANNUAL OPERATING AND CAPITAL IMPROVEMENT BUDGET FOR THE 2011.12 FISCAL YEAR was duly and regularly approved and adopted by the Rosemead City Council on the 28th of June, 2011, by the following vote to wit: Yes: Alarcon, Armenta, Clark, Ly No: None Abstain: None Absent: Low -X 5 ria Molleda City Clerk ROSEMEAD CITY COUNCIL, COMMUNITY DEVELOPMENT COMMISSION & HOUSING DEVELOPMENT CORPORATION STAFF - REPORT TO: THE HONORABLE MAYOR AND CITY COUNCIL THE HONORABLE CHAIRMAN AND COMMISSIONERS THE HONORABLE PRESIDENT AND BOARD OF DIRECTORS FROM: JEFF ALLRED, CITY MANAGER A DATE: JUNE 28, 2011 SUBJECT: FY 2011 -12 ANNUAL BUDGET SUMMARY The City Council is presented with a balanced budget for the upcoming 2011 -12 Fiscal Year. Three budget workshops were held and at each, ideas from staff for reducing costs and /or increasing revenues were presented for Council consideration. As a result of this process a number of items were approved by the City Council as viable budget balancing measures and they are incorporated into the budget for the 2011 -12 fiscal year. However, as the State attempts to balance its own budget, the legislature has approved measures that could be severely detrimental to the City's finances, most notably eliminating redevelopment agencies. To acknowledge the potential impacts associated with the State budget crisis, the City Manager has added a revised budget message to this report (Attachment A). With the State's budget in flux, the City's spending plan was prepared using best estimates at the time of its compilation. If the eventual actions of the State leads to City revenue reductions, the City's budget will have to be reconstituted and be amended to reflect those changes in funding levels. Staff Recommendation Staff recommends that the City Council, the Community Development Commission and the Housing Development Corporation Board approve the attached resolutions for the City budget (Attachment B), the Community Development Commission budget (Attachment C) and the Housing Development Corporation budget (Attachment D) for the 2011 -12 fiscal year. APPROVED FOR CITY COUNCIL AGENDA: - ITEM NUMBER: _ __ City Council Meeting June 28, 2011 Page 2 of 2 FINANCIAL REVIEW Financial details of the budgets are presented in the budget book which is on file in the City Clerk's office. PUBLIC NOTICE PROCESS This item has been noticed through the regular agenda notification process. Submitted by: Steve Brisco Director of Finance Attachment A: Attachment B: Attachment C: Attachment D: City Manager's Revised Budget Message City Budget Resolution Community Development Commission Budget Resolution Housing Development Corporation Budget Resolution City of Rosemead City Manager's Message TO: THE HONORABLE MAYOR AND CITY COUNCIL FROM: JEFF ALLRED, CITY MANAGER DATE: JUNE 28, 2011 SUBJECT: BUDGET MESSAGE FOR 2011 -12 FISCAL YEAR Introduction During the past two years the members of the City Council and staff have successfully adhered to a set of Guiding Principles and a comprehensive Strategic Plan in fulfilling our fiduciary responsibilities to the community. The Guiding Principles include the following affirmations: 1. Always live within your means 2. Employ cost recovery when setting fees for "individual services' 3. Use "reserves" only for one -time expenditures or temporary stop -gap measures 4. When in doubt, contract out 5. Provide for transparency Adherence to these Guiding Principles and the Strategic Plan has served the community and the organization well as a balanced budget is again presented for the upcoming 2011 -12 Fiscal Year. In this Budget, or financial plan, it is projected that expenditures for ongoing General Fund operations and services will be completely offset by anticipated revenues. Accordingly, the Budget does not anticipate the need to draw from City's General Fund reserve balance to continue existing service levels; although limited funds will again be drawn from the General Fund balance to honor prior policy commitments such as pre - funding the City's long -term liabilities for post- retirement health insurance benefits, and for bond - funded capital improvement projects. A balanced budget is certainly a significant accomplishment in this day and age as virtually all governmental agencies in our state and nation continue to struggle with the effects of the global Great Recession. Indeed, Rosemead continues to be a bright light in this dark era of deficits affecting so many public agencies throughout our region, state and nation. However, adverse actions by the State could quickly alter this positive picture by creating sharp deficits for most cities including Rosemead. At this point in time, all eyes are on Sacramento... 1 As a factual matter, local governments are among the last sectors of the economy to emerge from the effects of a recession. This is the case because it takes time for revenues to trickle down into the coffers of local agencies. Speaking on this topic in 2009, a leading local economist John Husing projected that cities should prepare for a 10 -year "slog" in their efforts to completely emerge from the lingering effects of the Great Recession. This prognostication is proving to be accurate for Rosemead as overall revenues are projected to achieve minimal gains in FY 2011- 12, while the costs of providing services continue to increase. Consequently, at the beginning of the budget process, the City was faced with a projected General Fund shortfall of $970,000 (a deficit of nearly $1 million) for FY 2011 -12. In order to overcome that initial deficit and achieve a balanced budget, all employees from each of the City's departments were engaged in a process to identify opportunities to reduce costs or generate revenues to maintain high levels of service to the community. This team effort proved to be successful as the City Council was presented with, and acted upon, a long list of potential budget balancing measures. Strategic Plan Continues to Serve as the City's "Blueprint" and Work Plan The Strategic Plan adopted unanimously by the Council in December of 2009 continues to provide direction to the City's commissions and staff. This document has established the long- term vision, statement of values (Brand Platform), and work plan for our community's collective efforts. Through the Strategic Plan the City Council has outlined three Key Organizational Goals, which are to: • Beautify community infrastructure and improve public facilities; • Enhance public safety and quality of life; and • Ensure the City's financial viability. This Budget will continue to focus on the goals and action items established in the Strategic Plan as detailed below. In addition, during the 2011 -12 fiscal year the City Council, commissions and staff will again take actions to review and update this vital document in preparation for 2012 and 2013. Beautify Community Infrastructure and Improve Public Facilities A wise admonition for government in tough financial times is: "In a down economy you should pave, plant, and paint to be ready for the recovery." That is exactly what Rosemead has been doing for the past two years and that is what this Budget contemplates for the 2011 -12 fiscal year. The 2011 -12 Budget includes a continuation of an aggressive Capital Improvement Program (CIP) to enhance community aesthetics and improve public facilities. Among the significant projects are: 2 New Aquatic Centers. This summer the City Council will dedicate and open the Splash Zone at Garvey Park as well as the Rosemead Aquatic Center at Rosemead Park. A $3.15 million competitive grant obtained from the State of California will pay for the Splash Zone project, which features two large slides, a "spray plaza" and a - 2,000 sq. ft. lesson pool. The Rosemead Aquatic Center, which is a "state -of -the art" competitive pool to accommodate water sports as well as recreational swimming for the community, is being paid for by proceeds from a 2010 Redevelopment bond issue. These exciting new facilities are being provided to the community without any costs to the City's General Fund or tax increases for residents and businesses. Rosemead Community Recreation Center Expansion and Downtown Plaza. The Rosemead Community Recreation Center (RCRC) will be expanded with additional - floor space, a new roof and HVAC system along with reconstruction and expansion of the parking lots providing improved pedestrian linkage between the RCRC, the Library and City Hall. This project will also be funded largely by the 2010 Redevelopment bond issue supplemented by various non - General Fund sources. The improved RCRC and Downtown Plaza will serve as a community gathering place and as a catalyst for improvements to come in Rosemead's Downtown along Valley Boulevard between Rosemead Boulevard and Walnut Grove Avenue. Future New Parks. Through agreements being negotiated with Southern California Edison (SCE), plans are underway to acquire land for the development of neighborhood parks near the transmission lines adjacent to San Gabriel Boulevard as well as on SCE - owned parcels adjacent to Hellman Avenue as well as Stallo and Rockhold Avenues. Funding for the future Jay Imperial Park south of Garvey Avenue bordering along San Gabriel Boulevard and Pine Street will come from a Rivers & Mountains Conservancy (RMC) grant and the Community Development Commission's (CDC) repayment of a redevelopment loan from the City's General Fund. The future park at Hellman Avenue between Stallo and Rockhold Avenues will also be funded by the repayment of the CDC redevelopment loan to the City's General Fund. Parks Improvements. The CIP in the 2011 -12 Budget also includes several projects to improve and upgrade existing parks within Rosemead. Significant improvements are proposed for Zapopan Park on Garvey Avenue adjacent to the Public Safety Center, which include construction of a walking path, expanded parking, new playground equipment and new restroom facilities. Other projects include improved ball field lighting and Gymnasium improvements at Garvey Park as well as funds for a possible skate park at a site yet to be determined. Also, funds are allocated for new playground equipment and safety fencing near the play school facility at Rosemead Park. Streets and Sewer Improvements. Over $8 million is allocated in the CIP for several infrastructure projects, all funded by sources outside of the General Fund. These projects 3 include road resurfacing, safe routes to school improvements, street signs replacement, traffic flow congestion relief, and sewer system upgrades. The 2011 -12 fiscal year will also see the completion of the public right -of -way beautification and improvement projects near each of the I -10 Freeway off -ramps in Rosemead. The Budget's aggressive CIP program will enable residents to enjoy new programs and services and to take greater pride in their community. Full scale replacements and renovations to public facilities will also result in significant reductions to ongoing operating and maintenance costs through the installation of up -to -date energy efficient technologies. Finally, to be able to maintain our community's infrastructure, the existing complement of full - time employees in the City's Public Works Department will be retained. These efforts include the critical function of constant and timely removal of graffiti on a daily basis. Enhance Public Safety and Quality of Life The number one priority of the City continues to be law enforcement to ensure the safety of our residents and businesses. This priority is reflected by an overall budget allocation that approaches nearly one -half of the City's General Fund expenditures. The budget allocation for Public Safety constitutes an increase of $186,000 over the previous fiscal year primarily due to a 3.07% increase in the annual costs of the Sheriff contract. Continued Success of the Rosemead Public Safety Model Rosemead's unique model of designating the Los Angeles County Sheriff Lieutenant as the Chief of Police continues to have dramatic impacts on the effectiveness of the Public Safety Department and the overall safety of the community. This organizational change has brought about a "unity" of command and purpose between the contracted sworn Sheriff personnel, contracted probation officers, City code enforcement officers and other civilian personnel. The Department's success is evidenced by Rosemead's continually decreasing crime rate and significant arrests of dangerous criminals. These reductions in serious crime have occurred despite actions of the State correctional system to systematically provide early releases to thousands of convicted felons back to the streets in Los Angeles County. In addition to various statistical evidences, the energized efforts of the Sheriffs deputies and civilian support personnel are apparent in the form of increased public participation programs and the recent arrests and incarceration of many repeat offenders within our community. Continuation of Deployment Levels on the Streets and in Schools The 2011 -12 FY budget continues to provide funding for Sheriff's Deputies and motorcycle officers to patrol our streets and for six Special Assignment Deputies. In addition, two full -time School Resource Officers (SROs) and two full -time Probation Officers will continue to focus primarily on youth in the community. Earlier in the Budget process it was contemplated that members of the Rosemead Special Assignment Team could be 51 deployed to work in patrol on a one -shift per week basis in order to reduce costs. This deployment change would have produced significant cost savings for the City. However, after discussions with the Temple Station Captain and Rosemead's Chief of Police, the idea has been abandoned to ensure that there will be no loss of momentum in the current efforts and successes to combat crime in Rosemead. Contributing to this decision not to compromise the strength of the Rosemead Team was a recent decision of the United States Supreme Court ordering the State of California to release another 33,000 convicted felon inmates back to the streets. Community Outreach Monthly Public Safety meetings will continue to be held on the third Thursdays of each month in the Public Safety Center on Garvey Avenue to engage citizens in crime prevention presentations on various topics. In addition, the Public Safety CONNECTIONS forum will continue to meet with citizens and community -based organizations on the last Thursdays of the month at the Public Safety Center to combat the influences of substance abuse, which is the root cause of so many crimes plaguing today's society. Also, the Public Safety Department will continue to lead the City's efforts in emergency preparedness for disaster planning. By empowering our Sheriff Lieutenant to function in the department head capacity of Chief of Police, Rosemead is maximizing the financial benefits and service delivery advantages of being a "contract city ". At the same time, the City Council's ability to exercise local control to address problems and challenges unique to our community is enhanced. The end result is, and will continue to be, high levels of quality public safety service delivery to our community. As stated in the City's Strategic Plan, special events foster a sense of community and quality of life for residents and businesses. Towards this end, this Budget continues funding for a full array of major special events, including the Independence Day parade, carnival and fireworks show, the third annual Lunar New Year Family Festival, Summer Concerts in the Park, and the second annual Fall Fiesta celebration. This year a major community celebration is scheduled for September 11, 2011 commemorating the 10 anniversary of terrorist attacks on the United States. Rosemead is one of a few select communities in California that have been able to obtain an artifact from the World Trade Center ruins, which is being incorporated into a 9/11 Memorial for display in the Downtown Plaza. As a tribute to the patriotism and spirit of our community, funding for the 9/11 Memorial is being generated through donations and fundraising events. Ensure the City's Financial Viability The Budget for 2011 -12 will enable the City to continue a longstanding tradition of providing high quality services to the community while adhering to fiduciary principles of fiscal conservatism and responsibility. Notwithstanding this prudent approach to financial management, the City has struggled for a number of years to overcome structural deficits 5 between recurring revenues and escalating expenditures. Key points in this effort include the following issues. Staff Reductions Through Attrition Four years ago in fiscal year 2007 -08, the City expanded its workforce by adding 25 more authorized full -time positions. This massive influx brought the total number of authorized full -time positions to an historic high of 67, giving rise to the ongoing structural budget imbalance that continues to this day. Over the past two fiscal years, the City has made concerted efforts to reduce ongoing operating costs. Key components of these cost cutting efforts have been actions to eliminate full - time positions where possible through "attrition ". The result of this effort has been a- 13.5% reduction in the full -time workforce achieved through the elimination of 8 full - time positions, bringing us to the current total of 59 authorized full -time positions. Going forward as full -time positions become vacant, the positions will not automatically be refilled. Rather, efforts will be made to analyze and evaluate the particular circumstances to determine if further expenditure reductions can be realized through attrition management. Pension Reform and Limitation of Long -term Liabilities In fiscal year 2010-1 the City implemented a "two- tier" retirement system for all new hires. This program established a lower Ca1PERS pension formula for new hires and eliminated a supplemental PARS pension plan for new hires who achieve 20 years of service with the City. The City Council has also previously taken action to eliminate post- retirement health insurance payments for employees hired after July 1, 2007. Through a related action, the Council has directed that existing and future liabilities associated with post- retirement health benefits be "pre- funded" over a period 5 years. In FY 2011 -12 the third annual contribution will be made from General Fund reserves in the amount of $644,548 to cover these future liabilities. Finally, to avoid large payoffs for accumulated vacation hours upon employee separations that have plagued other cities, a "cap" on vacation accruals has been negotiated with employee groups and will be implemented on July 1, 2011. Revenues During the past few years as the effects of the economic recession have been felt, the City realized reductions in key sources of revenue including sales tax and property tax. Fortunately, as a glimmer of light, projections are showing modest increases in the major revenue categories of property tax and sales tax. In fiscal year 2011 -12, it is projected that sales tax receipts will increase by 3.2% and property tax revenues will increase by 1.7 %. However, other sources of revenue continue to decline, i.e., Transient Occupancy Tax (TOT) -9.4 %, franchise fees -7.3 %, investment interest earnings -33 %, vehicle license fees (VLF) -19 %, and recreation program registrations - 20 %. Also, the State has eliminated COPS funding for law enforcement services entirely resulting in a revenue loss of $100,000. To make up for these shortfalls, actions have been taken to bolster lagging revenues, including fee adjustments for "individualized" 0 services that do not benefit the general tax payers at large. Also, adjustments to certain penalty fees have been implemented to ensure that the City's costs to provide these services are adequately covered. For example, for the first time in many years, adjustments have been made to illegal parking citation fees to recover a large portion of proceeds that are being captured by other governinental entities. It is noteworthy, however, that even after the fee adjustments Rosemead's parking citation fees will continue to be lower than those of any of the surrounding West San Gabriel Valley cities. Also, to generate additional one -time General Fund revenues, the City will seek to exchange $300,000 of surplus Proposition A Transportation funds with other jurisdictions for unrestricted funds. Overall, total General Fund revenue projections of $16,296,000 constitute an increase of only 0.7% over budgeted amounts in FY 2010 -11. Expenditures The 2011 -12 fiscal year Budget proposes General Fund operating expenditures of $16,122,500, which will provide the City with a small surplus. To offset rising costs in a number of areas, this Budget factors expenditure reductions in a number of areas as follows: • While the number of full -time positions will remain constant at-59 at the onset of the 2011 -12 fiscal year, the number of part-time positions in the organization has been reduced. This means that some work that was previously performed by part- time employees will be absorbed by full -time staff members-. To make this possible, the hours of some frill -time employees will be flexed to cover weekends or periods of peak demand. • The tuition reimbursement program has been suspended for the current fiscal year. • The Recreation Brochure /City Newsletter will be published three times per year instead of quarterly. • The Rosemead Community Recreation Center will be closed during remodeling resulting in temporary cost savings for part-time staff demands • The City will implement a "kinder, gentler" administrative citation program in lieu of processing misdemeanor citations for municipal code violations, which will reduce legal fees to prosecute code offenses. • The City will be able to temporarily suspend its contributions to the Los Angeles County Liability Trust Fund for Sheriff Department liability claims. Due to a lack of available financial resources, employee salary ranges will not be increased during the 2011 -12 fiscal year. However, those employees whose salaries have not yet progressed to the top of their respective salary ranges will be eligible for merit salary adjustments in conjunction with the City's merit -based compensation system. General Fund Reserves The City Council- adopted Fund Balance Reserve Policy calls for the City to set aside funds for a General Fund Operating Reserve and an Equipment ►I Replacement Reserve Fund. Under that self - imposed fiscal policy, the City is obligated to set aside an amount equal to at least 31% of the General Fund annual operating revenues in a reserve account for unforeseen expenditures and emergencies. For the 2011 -12 FY, that 31% amount equals approximately $5 million and is well exceeded through this proposed spending plan. Furthermore, the City Council's fiscal policy includes the establishment of an Equipment Replacement Reserve Fund to set aside money for ultimate replacement of every piece of equipment used by the City, including vehicles, computers and servers. For the 2011 -12 FY, the Budget contemplates making a full annual contribution to that reserve fund as well. The bottom line is that the City's total General Fund reserve fund balance will be maintained in a healthy condition that far exceeds the City Council - adopted policy amounts. At the end of the 2011 -12 fiscal year, the General Fund balance is projected to be at $14.4 million. Economic Development The admonition to "pave, plant, and paint" is spurring economic vitality and growth in Rosemead. Property owners and retailers are expressing enthusiasm to locate new businesses in our community as a result of the City's efforts to beautify community infrastructure and improve public facilities. During the upcoming fiscal year the City will refine and act on strategies to facilitate future "citizen sensitive" economic development projects at key opportunity sites such as the vacant Auto Auction property, the former Barr Lumber property, as well as on vacant properties on San Gabriel north of Garvey Avenue and along Valley Boulevard east of Temple City Boulevard. In addition, a number of commercial projects are currently in various stages of the development process including the planned expansion of the Doubletree Hotel and construction of an Olive Garden restaurant on a nearby parcel. Other important projects in progress include the sale of the former Glendon Hotel property (currently in escrow) by the Community Development Commission and the installation of Downtown infrastructure improvements along Valley Boulevard between Rosemead Boulevard and Walnut Grove Avenue. Trash & Recycling Franchise Agreement The expiration of the existing Consolidated Disposal Services, Inc. franchise agreement in 2013 presents a key opportunity to enhance the financial position of the City. The current franchise agreement does not provide the City with franchise fees, which is highly uncommon in this day and age. The City is entitled to receive franchise fees that are not passed on to the ratepayers as just compensation for the wear and tear that trash trucks cause to the City's streets and infrastructure. During the upcoming fiscal year, the City will develop a comprehensive strategy in this regard that will result in a significant infusion to the City's General Fund. Community Development Commission The CDC budget is also balanced for the upcoming fiscal year. However, the Governor has advocated the elimination of 0 redevelopment agencies and the State legislature has passed legislation in support of the Governor's proposal. As of this writing, deliberations continue in Sacramento in an effort to resolve the State budget crisis. Needless to say, the condition of the State budget has cast a dark cloud over the futures of all cities throughout California. The effects of these threatened State actions would be devastating to the City's budget. Conversely, the State Legislative Counsel has issued an opinion that actions by the State legislature and the Governor to eliminate redevelopment agencies would violate the State constitution. Consequently, if such actions are taken, the League of California Cities and the California Redevelopment Association are poised to file a lawsuit against the State on behalf of cities and redevelopment agencies. Also, of primary concern at this point is the fact that the redevelopment project area along the Garvey Avenue corridor is scheduled to expire in 2013, which will substantially reduce future redevelopment revenues and opportunities to remove blight and spur economic activity in that portion of Rosemead. In addition, various legislative bills to reform redevelopment law have been introduced in Sacramento. During the upcoming fiscal year, as the dust settles, staff will study the available options and make appropriate recommendations. Conclusion Once again, the City Council and staff can take great pride and satisfaction in overcoming a structural deficit to adopt a balanced budget. However, adverse actions by the State could completely alter the situation and cause the City to make significant budget cuts. Absent Draconian actions by the State, this document will serve as both a financial and management plan that will enable the continuation of the full scope of high quality municipal services that the community has come to expect. In addition to the continuation of high service levels, this Budget will again fund and facilitate major improvements to public infrastructure and facilities that will enhance quality of life in our community. With strategic vision and leadership provided by the City Council, and the work performed by the City's commissions and staff, the organization has a clear understanding of our community's values, sense of purpose and identity as Today's Small Town America. As stated in the Strategic Plan, Rosemead is a community comprised of people and businesses who seek the charms of a small town, in the heart of an urban environment. It is a place where neighbors share the traditional values and commitment to community that makes small town life so appealing, without losing big city advantages. This Budget will enable Rosemead to continue its traditions as a welcoming and thriving community that honors tradition, unites in diversity and evolves for the future. W