Proposed Operating Budget Overview

Transcription

1 City of San José Proposed Operating Budget Overview May 10, 2017

2 City of San José Budget Overview PROPOSED CITY BUDGET 1 : $3.2 billion TOTAL NUMBER OF FUNDS: 116 TOTAL NUMBER OF POSITIONS (FTE): 6,247 Capital Funds, $777 Million, 20% General Fund, $1.2 Billion, 31% Special Funds, $1.8 Billion, 49% 1 An adjustment of $635 million is necessary to arrive at the $3.2 billion net Proposed City Budget to avoid the double-counting of transfers, loans, and contributions between City funds. Slide 1

3 Proposed Budget Overview All funds (General Fund, special and capital funds) brought into balance General Fund projected shortfall of $10.0 million addressed and $20.0 million set aside to cover a portion of the projected shortfall in Targeted investments in: Public Safety and Disaster Preparedness Flood Recovery Investments that Produce Long-Term Savings, Revenues, and Efficiencies Investments that Leverage External Sources of Funding Investments Leveraging Community Energy and Volunteerism: #Beautify SJ Saving and Improving Fiscal Resiliency Positions are up 1.4%, from 6,159 to 6,247 (vast majority offset by revenues/reimbursements/net-zero shifts or added in special/capital funds) Program-level budgeting incorporated into Proposed Budget Slide 2

4 General Fund Forecast Incremental Shortfalls % of Annual Budget General Fund Forecast Incremental General Fund Shortfalls ($10.0 M) ($34.8 M) ($11.5 M) ($17.4 M) ($12.8 M) (0.6%) (1.5%) (0.5%) (0.7%) (0.5%) * Forecast was revised from the $12.4 million shortfall presented in the February 2017 Forecast based on continued analysis. No net impacts associated with the Development Fee Programs are included due to the cost-recovery nature of these programs. Does not include: - Costs associated with services funded on a one-time basis in Costs associated with unmet/deferred infrastructure and maintenance needs - One-time revenues/expenses Slide 3

5 Proposed Budget General Fund Funding Sources Fines, Forfeitures, & Penalties, 1.3% Franchise Fees, 4.3% Transient Occupancy Tax, 1.6% Sales Tax, 19.4% Business Taxes, 5.4% Telephone Line Tax, 1.7% Utility Tax, 8.6% Licenses & Permits, 5.1% Money & Property, 0.5% Local Agencies, 2.2% State & Federal Government, 1.1% Fees, Rates, and Charges, 4.1% Other Revenue, 2.3% Overhead Reimbursements, 4.0% Transfers, 2.0% Reimbursements for Services, 1.5% Encumbrance Reserve, 3.4% Fund Balance - Carryover, 6.8% Property Tax, 24.7% TOTAL GENERAL FUND SOURCES: $1,173,685,078 Slide 4

6 Proposed Budget General Fund Uses Public Safety 51% General Government 8% Reserves 9% Transfers 2% Capital Contributions 1% City-Wide Expenses 8% Community Services 14% TOTAL GENERAL FUND USES $1,173,685,078 Capital Maintenance 7% Slide 5

7 Proposed Budget General Fund Uses by Category Personal Services 70% Encumbrance Reserve 3% Earmarked and Contingency Reserve 6% Transfers Capital 2% Contributions 1% TOTAL GENERAL FUND USES $1,173,685,078 Non- Personal/Equipment 10% City-Wide Expenses 8% Slide 6

8 Budget Balancing Strategy General Framework and Policy Direction Mayor s March Budget Message as approved by the City Council (March 2017) Budget Balancing Strategy Guidelines contained in the City Manager s Budget Request (Five-Year Forecast) as approved by the City Council (March 2017) Guiding Principles for Restoring City Service Levels as approved by the City Council (March 2012) City of San José Budget Principles as approved by the City Council (September 2008) Slide 7

9 Budget Balancing Strategy General Fund Ongoing Total General Fund Shortfall $ (10.0 M) $ (10.0 M) Recommended Balancing Strategy Changes in Sources $ 41.3 M $ 13.9 M Changes in Uses 31.3 M (1.1 M) Total Balancing Strategy $ (10.0 M) $ 15.0 M Remaining Balance $ 0.0 M $ 5.0 M Slide 8

10 Budget Balancing Strategy Changes in General Fund Sources Ongoing Beginning Fund Balance Homeless Rapid Rehousing/Tiny Homes Rebudget $ 2.3 M $ 0 Cultural Facilities Capital Maintenance Reserve 2.0 M 0 Police Department Vacancy Savings 1.6 M Future Deficit Reserve 1.4 M 0 Fire Station 37 Construction Rebudget 1.0 M 0 Other Revenue/Expend Savings/Rebudgets/Reserve Liq. 2.4 M 0 Grants/Reimbursements/Fees Development Fee Programs 9.6 M 9.8 M PRNS Fees (e.g. HHPZ, Lake Cunningham Bike Park) 1.3 M 1.4 M Senior Nutrition Program 1.6 M 0 Other Non-Development Licenses and Permits 1.3 M 1.3 M Other Fee Programs/Reimbursements/Grants 1.4 M 0.3 M Other Revenue PERS Levy Litigation Settlement 12.9 M 0 M Overhead/Transfers from Other Funds 2.5 M 1.1 M Total Change in Funding Sources $ 41.3 M $ 13.9 M Slide 9

11 Budget Balancing Strategy Changes in General Fund Uses Ongoing Future Deficit Reserve $ 15.0 M $ 0 M Development Fee Programs 9.4 M 9.2 M Service Level Enhancements 6.9 M 1.6 M One-Time Funded Services 6.5 M 0.5 M Other Fee Programs/Grants/Reimbursements 5.0 M 2.4 M Unmet/Deferred Technology, Infrastructure, and Maint. 4.5 M 0.2 M Earmarked Reserves (e.g., Essential Services, Air Service) 3.8 M 0.5 M New Infrastructure/Equipment Operations and Maint. 0.4 M 0.5 M Cost Reductions/Service Delivery Efficiencies/Fund Shifts (12.1 M) (6.1 M) Use of Reserves (e.g., Cultural Facilities, Committed Add.) (8.1 M) (9.9 M) Total Change in Funding Uses $31.3 M ($1.1 M) Slide 10

12 Budget Balancing Strategy Revised Forecast with Proposed Actions Revised General Fund Forecast Incremental General Fund Shortfalls* Incremental Shortfalls Budget Actions (Ongoing) Remaining Incremental Shortfalls Future Deficit Reserve** ($10.0 M) ($34.8 M) ($11.5 M) ($17.4 M) ($12.8 M) $10.0 M $5.0 M $0 ($29.8 M) ($11.5 M) ($17.4 M) ($12.8 M) $15.0 M * Forecast assumes each year shortfall is resolved with ongoing solutions. ** One-time funds can be used as a bridge strategy to provide additional time to pursue ongoing solutions to help close the budget gap, as needed. Slide 11

13 Recommended Budget Actions Public Safety and Disaster Preparedness Airport Terminal and Safety Management Staffing Disaster Cost Recovery Manual Update Office of Emergency Services Disaster Preparedness Water Rescue Fire Non-Development Fee Program (Fire Prevention Inspection) Emergency Medical Services Service Delivery Model Analytical Support Community Emergency Response Team Training Program Emergency Medical Services Response Time Improvement Technology Staffing Office of Emergency Services Analytical Staffing Cybersecurity Office Building Code Compliance Staffing Massage Parlor Permit Enforcement Staffing Silicon Valley Regional Communication System Dispatch Consoles Slide 12

14 Recommended Budget Actions Public Safety and Disaster Preparedness (Cont d.) Downtown Police Foot Patrol Program Police Department Recruiting Program Project Hope Pilot Program Reserve Medical Marijuana Transport Tracking Devices Automated External Defibrillators Police Department Backgrounding Temporary Staffing Suspend Temporary Street Closure Permit Fees (Fourth of July-No Fireworks) Walk n Roll Staffing Pedestrian Safety and Neighborhood Traffic Calming Staffing Copper Wire Theft Staffing Slide 13

15 Recommended Budget Actions Flood Recovery City Damages and Costs (Capital funding addresses some of the most immediate needs)/various Capital Programs Unfair Business Practices Legal Staffing ($200,000)/Office of the City Attorney 2017 Flood-Building Permit and Inspection Fee Waivers ($200,000)/City- Wide Expenses Flood-Related Parks Capital Projects Manager ($133,000)/Parks, Recreation and Neighborhood Services Department Slide 14

16 Recommended Budget Actions Investments that Produce Long-Term Savings, Revenues and Efficiencies Street Pavement Maintenance Airport Remote Gate Shuttle Service Airport Business Development Division Staffing Planning Division Legal Transactions Staffing Planning and Environmental Services Legal Staffing Business Development and Economic Strategy Activities City Manager s Budget Office, Finance, and Human Resources Information Systems Staffing and Hyperion Budget System Phase II Implementation San José Regional Transportation Hub Project Storefront Activation Grant Program Talent Recruitment Initiative Single Family Dwelling Waste Materials Processing -Phase IV South Bay Water Recycling System Infrastructure Improvements Slide 15

17 Recommended Budget Actions Investments that Produce Long-Term Savings, Revenues and Efficiencies (Cont d.) Request for Proposal Software Development Fee Programs Workers Compensation Program Temporary Staffing Technology Equip Replacement to Converged or Hyper-Converged Infrastructure Portfolio and Project Management Office Library Technical Services Unit Materials Processing Leisure and Recreation of City Kids (ROCK) Programs Happy Hollow Park and Zoo Corporate Rentals and Animal Staffing Business Permit Process Improvement Bootcamp Policy and Ordinance Support Staffing City Facilities Infrastructure and Deferred Maintenance Cultural Facilities Capital Maintenance Special Assessment District Landscape and Infrastructure Projects Residential Parking Pilot Program Slide 16

18 Recommended Budget Actions Investments that Leverage External Sources of Funding Office of Immigrant Affairs Homeless Rapid Rehousing Rebudget/Tiny Homes Project San Jose Works: Youth Job Initiative San José Learns San Jose Sports Authority SJ Promise Cinequest Film and Virtual Reality Festival Silicon Valley Talent Partnership Homeless Rapid Rehousing Funding Shift San Jose Environmental Sustainability Plan Implementation Staffing Clean-Slate Tattoo Removal Program (San Jose BEST Rebudget) Japantown Creative Center for the Arts Transportation Improvements Senior Nutrition Program Placemaking and Parks Activation Downtown Ice Rink Improvements Slide 17

19 Recommended Budget Actions Investments that Leverage Community Energy and Volunteerism: #BeautifySJ Beautify SJ Grants Beautify SJ Single-Family Dwelling Junk Pick-Up Beautify SJ Days Illegal Dumping Rapid Response Team Staffing Customer Relationship Management Maintenance and Feature Additions (Neighborhood Dashboard) Partners in Reading Adult Literacy Program Library Promotional Materials Translation Services Early Education Summer Bridge Program for Developing and Struggling Readers Neighborhood Parks Maintenance Beautify SJ Volunteer Activation and Service Credits Slide 18

20 Recommended Budget Actions Saving and Improving Fiscal Resiliency Future Deficit Reserve Essential Services Reserve Police Staffing/Operations Reserve Elimination Cultural Facilities Capital Maintenance Reserve Eliminate tie to Transient Occupancy Tax growth; establish ongoing allocation of $450,000 Slide 19

21 New Program Level Budgeting Implemented program-level budgeting to complement the City s performance-based core service-level budgeting Allows the City Council and the public to lift the hood and have a more in-depth knowledge of how City resources are used. Aligns the budget with how departments manage their resources. Provides program managers with tools to manage their budgets and understand the resources associated with particular programs. Allows decision makers to have a clearer understanding of the base level of services offered by the City and the resources allocated to delivering those programs. Currently, this information is provided only at the core service level. Police Department Example: 5 Core Services 38 Programs Slide 20

22 Recommended Budget Actions Fee and Charges Adjustments Utilities: Storm Sewer Service Fee: No increase Sewer Service and Use Charge Fee: 7.0% increase Recycle Plus Rates: 2.5% increase for multi-family dwellings and 4.5% for single-family dwellings Municipal Water System Rates: average 9.0% increase to cover increased operating costs (rates will vary by user) Development Fee Programs: Fee increases aligned to fee study Other Fee Programs: Fee changes to generally maintain cost recovery Slide 21

23 Next Steps May 8 th through 22 nd May 10 th through 15 th May 16 th /June 12 th June 2 nd June 13 th June 20 th Community Budget Meetings City Council Budget Study Sessions Public Budget Hearings Mayor s June Budget Message Released Council Review/Approval of Mayor s June Budget Message and Budget Adoption of the Budget and Fees and Charges Slide 22

24 City of San José Economic Forecast May 10, 2017

25 Local Economy: SJ Economy Indicators Total Payroll Jobs 393, % Unemployment Rate 3.90% 0.30% Labor Force 545, % Population with Bachelor s Degree 38.80% 0.60% Foreign Born Population 39% 0.10% Tech Worker Residents 65, % Office Vacancy 9.00% 0.10% R&D Vacancy 11.50% 0.90% Industrial Vacancy 4.30% 3.30% Slide 24

26 Jobs: Continued job growth 400,000 Payroll Jobs in San Jose vs. City Unemployment Rate , , , , , , , , , , H Jobs Unemployment Rate Slide 25

27 Real Estate: Recently completed projects are elevating vacancy Currently Under Construction: Office: 1,027,000 SF R&D: 480,000 SF Type Base Vacancy R&D 42.2M SF 11.5% Office 27.8M SF 9% Industrial 23.5M SF 4.3% Warehouse 16.9M SF >1% Slide 26

28 Sales Tax: Growth, but slowing 12 Sales Tax Revenue Over Time by Type ($ Millions) Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q3 GENERAL RETAIL BUSINESS TO BUSINESS TRANSPORTATION FOOD PRODUCTS CONSTRUCTION Slide 27

29 Sales Tax: Consumer spending continues to dominate Sales Tax Revenue by Category Q % 13% 25% 22% 22% GENERAL RETAIL BUSINESS TO BUSINESS TRANSPORTATION FOOD PRODUCTS CONSTRUCTION Slide 28

30 Driving Industries: Transition to the service economy, middle skill job base growing 55,000 50,000 45,000 40,000 35,000 30,000 25,000 20,000 15,000 50,474 39,422 29,924 16,182 Employment by Quarter 51,185 44,247 24, Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q2 Construction Health Care Manufacturing Tech/STEM Slide 29

31 Driving Industries: Recent wins in key industries Tech: Splunk & Broadcom Innovation: WeWork & NextFlex Manufacturing: Velodyne, Space Systems Loral & Jabil Slide 30

32 Year Ahead: Slowing but potential for continued growth However The national context Where will growth come from? Are all boats rising at the same rate? Slide 31

33 The National Context: Uncertainty in Tech Sector Immigration, Regulation, Tax Policy Uncertainty in Health Sector Opportunity for Manufacturing? Slide 32

34 Net Job Migration to Surrounding Cities: Slide 33

35 Labor Force as a Driver of Economic Growth: R&D Vacancy = ± 15,000 jobs Office Vacancy = ± 10,000 jobs Built Capacity: 25,000 Jobs Labor Force = 545, % Unemployment = ± 21,000 jobs Adjusted for JER = ± 17,000 jobs Available Labor Force: 17,000 Employees Slide 34

36 Attracting Employers & Employees: Downtown as Silicon Valley s City Center Urban Villages Coming into Focus West San Jose as a Growth Area North San Jose as a Place Transit Infrastructure Growth Slide 35

37 High Cost of Living: Barrier to middle/low skilled job growth Average Apartment Rent $2, % Apartment Vacancy Rate 5.40% 1.10% Single Family Home Median Sales Price $980, % 180% National Average 250% National Average Slide 36

38 Income Inequality: Widening gap between Tier 1 and Tier 3 Average Income Tier 1 Jobs: $123,000 Median Income: $102,300 Average Income Tier 3 Jobs: $29,500 Slide 37

39 Opportunities FY17/18: Balancing Growth Integrating residential and employment uses in growth areas Encourage employment at all skill levels Attract employers & employees Attract new investment Slide 38

40 City of San José Proposed Operating Budget Overview May 10, 2017