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REVIEW AND DISCUSS MEASURE A PROPOSED BUDGET FOR FISCAL YEAR 2018-19
recommended action
Informational item only
Review and discuss the City Manager’s Fiscal Year (FY) 2018-19 Proposed Annual Budget for the use of Measure A proceeds and make recommendations to the City Council.
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Summary
The FY 2018-19 Annual Budget assumes Measure A revenues of approximately $31.5 million. The proposed budget includes Police Department expenditures of approximately $23.6 million and the Office of Violence Prevention expenditures of $996,388 from Measure A revenues.
Background
The Measure A Citizens’ Advisory Committee may make recommendations to the City Council regarding the proposed budget for Measures A and B before adoption pursuant to the Measure A ordinance, and the Committee’s charter and bylaws.
Ordinance 2013-7-09-1601
“The City Council shall appoint a seven-member Citizens’ Advisory Committee, which shall meet at least annually to review the expenditure of revenues generated by the tax imposed by this Ordinance and to make recommendations to the City Council regarding those expenditures.”
City of Stockton Transactions and Use Tax Ordinance Citizens’ Advisory Committee Charter
“2.2.4-Budget Recommendation. The City will propose a budget for the use of Measure A proceeds to the Committee with sufficient time for it to formulate a recommendation to the City Council before it deliberates on that same budget in the annual budget adoption process.
(a) The Committee shall present to the City Council, in public session, their recommendation on the proposed budget.”
Measure A Advisory Committee By-Laws
Section 7 (Informational Materials): “At least quarterly, financial reports -- including proposed Budgets and Actuals with detailed supporting schedules will be sent to each Committee member. The reports will show revenue generated by Measure A, detailed line-item expenditures as presented in the annual budget relative to Measure B (public safety) …”
Section 8b (meetings): “...the Committee will meet…to review budgets for Measure A revenues and Measure B (public safety) expenditures before the City Council’s public sessions on the upcoming annual budget.”
Section 9 (Authorized Activities): “The City will propose a budget for the Measure A sales tax revenues and related uses of funds for the upcoming fiscal year which will be presented to the Committee members before City Council consideration and approval of the City’s annual budget. The Committee will consider the proposed budget in accordance with all City rules, regulations and policies and may make recommendations regarding the proposed budget for Measures A and B to the City Council in a public session.”
Present Situation
The City Manager released the FY 2018-19 Proposed Annual Budget to City Council and the public on May 15, 2018. The Budget assumes Measure A revenues of approximately $31.6 million. The Measure A-funded portion of the proposed Police budget is approximately $23.6 million, while the Measure A-funded portion of the Office of Violence Prevention is just under $1.0 million. Measure A continues to fund 120 sworn positions, 33 Police non-sworn positions and 7 Office of Violence Prevention positions. The Police budget includes a vacancy savings assumption of 5%; the same rate as General Fund based on normal staff attrition. Fifteen of the Police sworn positions continue to be partially funded by the 2014 Federal COPS Hiring grant.
The adopted budgets in the three fiscal years following the approval of Measure A included purchases of equipment and vehicles in support of the new positions funded by Measure A. The City completed or encumbered most of these purchases by the end of FY 2016-17. As is the case in the current year, the FY 2018-19 Measure A budget is primarily used to support ongoing operational costs of the added services. The most significant increase from the FY 2017-18 budget is in salaries and benefits as a result of merit increases, retirement benefit cost increases, and reduced vacancy savings.
Measure A is a general tax and a component of the City’s General Fund. The voter-approved Measure B is an advisory measure that recommends the City spends at least 65% of Measure A revenues on law enforcement and crime prevention services such as the Marshall Plan over a ten-year period. In the FY 2018-19 Proposed Annual Budget, Marshall Plan expenses are 78% of the projected annual Measure A revenues. This is an increase from 71% in the FY 2017-18 Adopted Budget. Measure A funds not spent on the Marshall Plan can be spent on other services or contribute to the City’s long-term financial sustainability through Plan of Adjustment commitments and General Fund reserves. Approximately $6.9 million of Measure A revenues will be used towards those purposes in FY 2018-19.
One example of a use related to fiscal sustainability is a cost associated with the court-approved Plan of Adjustment that was part of exiting bankruptcy and restructured the City’s General Fund debt obligations. Upon exit from bankruptcy, the City entered into a settlement agreement with Assured Guaranty. The settlement agreement required the City to compensate Assured Guaranty if actual revenues rebounded more than projected in the Plan of Adjustment. Recent revenue receipts have triggered this provision, and the City plans to pay a total of $4.7 million ($3.1 million General Fund) in FY 2018-19. The revenue based component of the payment to Assured Guaranty is $2.1 million in FY 2017-18 and $1.8 million in FY 2018-19. This provision, which the City has incorporated into the Long-Range Financial Plan (L-RFP), will be a draw on General Fund resources annually for the next 34 years.
The City has deliberately held the expansion of new ongoing services to a minimum for the last few years, in light of the L-RFP. As can be seen below, increasing costs, particularly from the CalPERS system, will begin to exceed General Fund revenues, including Measure A. Beginning in approximately FY 2022-23, and continuing for approximately 7-10 years, the City will have to gradually expend its reserves until the picture begins to improve again.
Thanks to the prudent and conservative fiscal practices adopted by the City Council, Measure A revenues have contributed to the City’s accumulation of General Fund reserves of approximately $89.0 million as of June 30, 2017. The City will continue to build reserves to ensure its long-term financial sustainability. These reserves will enable the City to maintain services during future recessions and projected CalPERS cost increases, which are all assumed in the City’s L-RFP.
The full FY 2018-19 Proposed Annual Budget can be found on the City’s website at <http://www.stocktonca.gov/government/departments/adminservices/budCurYear.html>.
The document includes the Measures A and B budget on page C-1 and more information on the Long-Range Financial Plan starting on page C-9.
Attachment A - Measures A and B FY 2018-19 Proposed Annual Budget
Attachment B - FY 2018-19 Proposed Annual Budget - Budget Message