STAFF REPORT. Meeting Date: June 13, 2017

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1 STAFF REPORT Meeting Date: June 13, 2017 Agency: City of Belmont and Belmont Fire Protection District Staff Contact: Thomas Fil, Finance Department, (650) , Agenda Title: Adopt Budget and Related Items for Fiscal Year 2018 Agenda Action: Resolutions Recommendation Adopt resolutions approving the Fiscal Year 2018 Budget, approving the Appropriations Limit, authorizing the Special Library Tax for the City of Belmont, and approving revisions to the Master Revenue Schedule. Background On May 23 rd, the City Council was presented a report from staff introducing the FY 2018 Budget, which included presentations by each department. After the presentation, the City Council directed staff to make revisions to the Budget and set June 13 th as the public hearing to adopt the budget. Subsequent to the City Council meeting, the Audit Committee reviewed the Budget on June 5 th and unanimously recommended its approval. In the Budget Brief, the City Manager communicated that the FY 2018 Budget builds on the successes of the past few budgets and continues to stabilize the City s operations. Moreover, the FY 2018 Budget makes considerable progress towards addressing the poor condition of the City s street infrastructure, which according to a recent study prepared by the Metropolitan Transportation Commission for Bay Area Cities, ranks Belmont s streets near the bottom with a pavement condition index of 52, also referred to as At Risk. While making progress, the FY 2018 Budget does not mitigate all the risk from potential failure of the City s aging infrastructure. Consequently, that exposure remains a threat to the success in stabilizing overall operations. To address the problem, the FY 2018 Budget reflects the passage of Measure I (Belmont Streets and City Services Measure), estimated to raise $1.3M annually. The City Council has established a policy of directing those funds to infrastructure, providing significant, ongoing resources to pay for street and storm drainage infrastructure projects. Augmenting Measure I, the Governor s May Revise budget proposal anticipates new funding for streets from the State through the Road Repair and Accountability Act of 2017 which is expected to generate $6.4M for Belmont roadways over the next decade. Additionally, the FY 2018 Budget supplements infrastructure reserves, including a supplemental, one-time transfer in the amount of $1.4 million directed by the City Council at their May 23 rd meeting. Yet, given these actions, the magnitude of the deferred infrastructure costs, estimated to be over $137M and growing (excluding sewers), demands more must be done in a sustainable, recurring way to address potential infrastructure failure. As such, the FY 2018 Budget will continue efforts to engage the community in a conversation about the infrastructure challenge, particularly in the area of storm drainage. Page 1 of 6

2 As for the numbers, consistent with established fiscal policy, the proposed FY 2018 Budget is balanced, operations are stabilized and long term projections for the General Fund are encouraging. In total, the FY 2018 Budget includes revenues of $76.7 million, expenditures of $72.4 million. Breaking those figures down further: the City s Revenue Budget is $64.4 million, Appropriation Budget is $49.1 million, Capital Improvement Program is $12.7 million, and Net Other Uses is $2.5 million; the Belmont Fire Protection District s Revenue Budget is $12.4 million, the Appropriation Budget is $10.7 million, and Net Other Uses is $0.06 million. The City and the District s General Fund are anticipated to end with unrestricted reserves of $9.9 million and $7.8 million, respectively, comparing favorably to the 33% of operations reserve target. Analysis The purpose of the public hearing is to consider testimony regarding the FY 2018 Budget, make adjustments, if any, and adopt the budget. A resolution for this purpose is shown as Attachment C for the City and as Attachment D for the District. Key Elements for Consideration Gann Limit Proposition 4, approved by California voters in 1979, requires cities to calculate and establish an appropriations limit every year. The limit is based on actual appropriations in the fiscal year and is allowed to increase each year to the extent of population growth and inflation. The City s FY 2018 Appropriations Limit is $16,846,899 and the District s FY 2018 Appropriations Limit is $10,740,386. Both FY 2018 Budgets are below the stated limit. The calculations are attached to the implementing resolution, which are shown as Attachment E for the City and as Attachment F for the District. Special Tax for Community Facilities District No (Library Project) Annually, the City Council is required to authorize the annual special tax for the library (Community Facilities District No ). The resolution shown as Attachment G accomplishes this requirement for FY 2018 and requests that the County of San Mateo collect the special tax on the property tax rolls. Master Revenue Schedule As part of the annual budget process, departments review their fee structure to ensure compliance with the City s and District s fee policy that specifies, where possible, the fees recover the full cost (direct and indirect) of providing the service. Consistent with policy, the Master Revenue Schedule has been revised to reflect the following adjustments: Page 2 of 6

3 Type Description Amount CPI To reflect general increase in cost of service Greater than or when not specifically based on level of equal to 3.5 % effort. Hourly Rate To reflect increase or decrease in productive Various hourly rates for service provided Markup To reflect increase or decrease in markup for No change staff time and related costs to manage consultant work Level of Effort To reflect increase or decrease in level of effort to complete one unit of service Various The Council has previously directed staff to follow-up on several fees. Those items along with staff s recommendation follow: Development Review Fees: Certain Fee Reductions & No Overall Increases In conjunction with implementing the City Council Priority for a more streamlined, efficient, and reasonable Single Family Home Remodel process, the associated Development Review fees were reviewed for potential modification. Based on recent process improvements, the level of effort has been reduced, resulting in a proposed reduction in certain fees. In addition, no overall increases are proposed for the balance of Development Review fees as they were recently reviewed by the City Council. Sustainability Recognition: Fee Reduction The City Council has formed a subcommittee to explore methods of rewarding applicants that attempt to conserve energy and other resources (such as water) with their building design/installation choices. There are various methods of rewarding applicants, such as a reduction of fees or reduced review time; the matter warrants further study and analysis. However, there are two areas where immediate action could be taken: California Energy Code Plan Review The State has a goal to reach "zero-net" energy consumption for new construction by the year To that end the conservation requirements and the mandatory inclusion of renewable energy features have been steadily increasing with each three year code cycle. The State allows the City to collect a commensurate fee to cover the increasing costs of plan review. Currently the fee equals 40% of the cost of the building permit. Staff is recommending that this fee be reduced to 25% of the cost of the building permit. This reduction rewards all applicants for their efforts in this regard, without significantly impacting workload/revenues as it has been observed that the fees collected for the plan review regularly exceeds the effort to perform the task. Electric Vehicle Chargers and Energy Storage Devices There has been an increase in permit activity for electric vehicle chargers and energy storage devises (batteries). While the charger installations have been around for several years, battery installations are a new development. Staff is recommending reducing the fees for both of these types of installations by eliminating the unit fee amount of $40 and only charging the base electrical permit fee of $141. This is the current policy for electric service upgrades and the amount covers the administrative and inspection costs. Page 3 of 6

4 Housing Impact/Commercial Linkage Fees Market Comparison Keyser Marsten Associates (KMA) conducted a market comparison of Belmont s adopted non-residential housing impact fees. The analysis showed that while Belmont charges a comparable housing impact fee for retail development, the fees charged for hotel and office development are generally lower than those charged by neighboring jurisdictions. However, it was the opinion of KMA that Belmont s existing housing impact fee amounts are appropriate, market feasible, and help to encourage new development within the City. Consequently, staff is not recommending any change to these fees at this time. Area Standard Wage Policy The City Council has expressed interest in considering a reduction of housing impact fees for projects that provide area standard wages. Staff is preparing a stand-alone, area standard wage policy that will be presented to the Council for consideration at a future date. Fee for Maintenance Tree Removal The City currently collects a $75 fee for removal of a protected private tree. The fee covers about half the cost of the arborist whom issues approximately 200 permits per year, about 3/4 ths of which are for trees noted as being in poor health. The City Council expressed interest in eliminating the $75 fee if the tree being removed is in poor health (diseased or dead). Staff is recommending if the arborist makes a determination in the field that a tree is in poor health, no tree removal fee would be charged. This proposal would not effect the tree replanting requirements, and in instances where a resident is removing multiple trees under one permit involving trees of good and poor health, a removal fee would still be assessed. Development Impact Fees Update Not long ago, the City adopted Park Impact Fees which are now subject to an annual CPI rate increase for the first time. To facilitate the City Council/Board s review of the proposed changes, both the current and proposed fees are shown in the exhibit with Attachment H for the City and Attachment I for the District to implement these resolutions. Permanent Staffing Plan Consistent with previous fiscal years, the proposed FY 2018 Budget includes a permanent staffing plan for City Council consideration and approval. In order to facilitate the City Manager s responsibility to address organizational change, the budget resolution includes language authorizing the City Manager to revise the permanent staffing plan provided that the total number of full-time, regular personnel does not exceed the total number of City Council authorized positions consistent with the Belmont City Code and the Personnel Rules and Regulations. The permanent staffing plan for FY 2018 Budget is proposed at full time equivalent positions for the City and 24.0 for the District. The City Council is also asked to confirm the FY 2017 staffing at full time equivalent positions for the City and 24.0 for the District, as well as the classifications shown in the plan. Page 4 of 6

5 Subsequent Matters Requiring Change to the Budget Subsequent to the publication of the FY 2018 Budget, staff identified a minor change requiring approval. The FY 2018 Budget Appropriation has been amended to reflect an additional $75 thousand in the professional/technical services for the Solid Waste Fund, Solid Waste Management Division, which was inadvertently excluded. While cross referencing balances in the Fund Recap, an improvement of $400 thousand to the District s ending fund balance was identified. This improvement carries forward into the District s financial forecast. Staff has also made several nomenclature revisions throughout the Budget reflecting retitling of funds (e.g. Infrastructure Fund) and other name changes. To facilitate reader understanding, the above changes, including the supplemental, one-time transfer in the amount of $1.4 million from the General Fund to the Infrastructure Fund are reflected in the FY 2018 Budget Revision pages shown in Attachment B. Once the City Council adopts the Budget, a comprehensive set of updates will be distributed. Planning Commission FY 2018 Budget CIP General Plan Conformity Review On June 6 th, pursuant to California Government Code Section 65401, the Planning Commission adopted a resolution finding the projects in the FY 2018 Capital Improvement Program were consistent with the Belmont General Plan. Audit Committee Budget Review On June 5 th, the Audit Committee performed a review of the FY 2018 Budget. At the conclusion of the meeting, the Audit Committee unanimously recommended that the FY 2018 Budget be adopted by the City Council/Board, including the transfer of $1.4 million in excess reserves from the General Fund to the Infrastructure Fund. The Audit Committee considered, but did not take action on, earmarking $1 million in reserves from the Infrastructure Fund as a match to the Measure I funds devoted to street repairs. The Audit Committee is available to elaborate on their recommendations. Budget Adoption Implementing Resolutions Attached for the Council/Board s review and approval are the following resolutions implementing the FY 2018 Budget: Resolutions Establishing the Base Revenue, Appropriations (expenditure), Capital Improvement Program Budget, and Permanent Staffing Plan for the Year (City - Attachment C and BFPD - Attachment D). Resolutions Approving Article XIIIB Appropriations (Gann Limit) (City - Attachment E and BFPD - Attachment F) Resolution Establishing the Special Tax for Community Facilities District No (Library Project) (Attachment G). Resolutions adopting Master Revenue Schedule (City - Attachment H and BFPD Attachment I) Page 5 of 6

6 Follow Up 1. Revise documents as directed. 2. Publish budget. 3. Update website. Alternatives 1. Amend the resolution(s) and adopt an alternative budget. 2. With direction, refer the budget to staff for further consideration. Attachments A. Presentation-FY 2018 Proposed Budget Adoption B. FY 2018 Budget Revisions C. FY 2018 Budget Resolution (City of Belmont) D. FY 2018 Budget Resolution (Belmont Fire Protection District) E. Appropriations Limit Resolution (City of Belmont) F. Appropriations Limit Resolution (Belmont Fire Protection District) G. Library CFD Resolution (City of Belmont) H. Master Revenue Resolution and Schedule (City of Belmont) I. Master Revenue Resolution and Schedule (Belmont Fire Protection District) Fiscal Impact No Impact/Not Applicable Funding Source Confirmed: Establish the City of Belmont s Base revenue budget at $64,362,252, appropriation budget at $49,061,175, and Capital Improvement Program budget at $12,687,300, Net Other Sources (Uses) at ($2,516,585), permanent staffing at full time equivalents. Establish the Belmont Fire Protection District s revenue budget at $12,368,948, appropriation budget at $10,673,642, and Net Other Sources (Uses) at ($63,233), permanent staffing at 24 full time equivalents. Source: Purpose: Public Outreach: Council Statutory/Contractual Requirement Posting of Agenda Staff Council Vision/Priority Other Citizen Initiated Discretionary Action Other Plan Implementation* *A notice of the Public Hearing was published in the newspaper and posted to the City s website. Page 6 of 6