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Resolution 2016-28RESOLUTION NO. 2016-28 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF GILROY AMENDING THE BUDGET FOR THE CITY OF GILROY FOR FISCAL YEAR 2016 -2017 AND APPROPRIATING PROPOSED EXPENDITURE AMENDMENTS WHEREAS, the City Administrator prepared and submitted to the City Council a budget for the City of Gilroy for Fiscal Years 2015 -2016 and 2016 -2017, and the City Council carefully examined, considered and adopted the same on June 1, 2015; and WHEREAS, City Staff has prepared and submitted to the City Council proposed amendments to said budget for the City of Gilroy in the staff report attached hereto as Exhibit "A" and incorporated herein by this reference, and the City Council has carefully examined and considered the same and is satisfied with said budget amendments. NOW, THEREFORE, BE IT RESOLVED THAT it is hereby ordered that said proposed budget amendments for Fiscal Year 2016 -2017 are approved. PASSED AND ADOPTED this 16th day of May, 2016 by the following roll call vote: AYES: COUNCILMEMBERS: BRACCO, LEROE- MUNOZ, TUCKER, VELASCO and WOODWARD NOES: COUNCILMEMBERS: ABSENT: COUNCILMEMBERS: NONE Fail Q►'ragm:/_ n m APPROVED: 4ero6/(dwa/rd, Mayor RESOLUTION NO. 2016-28 DATE: May 16, 2016 eltv of Offrop 7351 Rosanna Street Gilroy, California 95020 -6197 TO: Gabriel Gonzalez, City Administrator FROM: Barbara J. Voss, Interim Finance Director SUBJECT: Mid Cycle Budget Review Telephone (408) 846 -0250 Facsimile (408) 846 -0421 http://www.ci.gilroy.ca.us Barbara J. Voss Interim Finance Director Recommendation Approval of a resolution by the City Council of the City of Gilroy authorizing changes to the adopted Fiscal Year 2017 (FY 17) City of Gilroy Operating Budget and Capital Improvement Budget. Background On June 1, 2015, the City Council of the City of Gilroy approved the biennial Operating Budget for FY 16 and FY 17 and the Capital Improvement Budget for FY 16 — FY 21. The budget was subsequently adjusted by way of budget amendments approved by City Council as considered from time to time throughout the year. The adoption of a two -year budget demonstrates a commitment to operate the City over the long term with a balanced budget. The two -year budget allows for more systematic long range planning over the budget term and provides efficiencies in the second year of the budget as staff focuses on validation efforts. The proposed changes to the budget are a result of validating the adopted budget amounts and are discussed further below. Discussion Staff has reviewed the adopted revenue amounts for FY 17 and proposes updates to certain projected amounts. Staff has also compiled a list of the potential expenditures for which it requests Council approval. Such expenditure needs and/or requests result from updated information regarding FY 17 costs, contract increases or critical maintenance issues. The City's accumulated annual savings will be used to provide a hedge against any unanticipated revenue or expense fluctuations in FY 17. General Fund (Fund 100) The FY 16 projections for year -end are also summarized in the table below. Operating income is currently projected to reflect significant general fund savings at year end. However, it is prudent to remember that a portion of those savings relate to appropriated dollars that will be carried forward into the next fiscal budget year. The summary below presents the potential impact of amounts which are likely to remain unspent or unearned in the current fiscal year and are subject to carryover. FY 16 FY 16 FY 16 Consider Carryover Projected Potentials* Variance Revenues 49,700,136 50,040,136 340,000 Accumulated Annual Savings 350,000 350,000 0 Expenditures 48,319,672 49,863,887 1,544,215 Operating Income 1,730,464 526,249 (1,204,215) *Carryovers: Revenues: High Speed Rail Expenditures: Economic Strategic Plan, Wayfinding, Discover Gilroy, IT Software Projects, High Speed Rail, Silicon Valley Clean Energy Authority, and General Plan The summary below shows the FY 17 General Fund budget adjusted for the proposed changes. Revenues Accumulated Annual Savings Expenditures Operating Income FY 17 FY 17 Mid -cycle Variance 47,902,857 49,305,719 1,402,862 � 1 111 350,000 48,229,377 49,433,739 1,204,362 23,480 221,980 198,500 FA Summary of General Fund Reserve Balance: (2) (3) Total General Fund Reserves 20,509,793 22,215,073 21,888,553 20,934,338 21,132,838 (1) Excludes Accumulated Annual Savings (2) With Carry-overs and Deferral Amendments from FY16 (3) With Mid -Cycle Adjustments General Fund Revenues The following discussion of the City's General Fund Revenue is generally based on amounts recorded through April 2016. Staff has reviewed the budgeted FY 17 tax revenue compared to the actual receipts in FY 16, as well as information regarding anticipated revenue in FY 17. Based on its review, overall projected tax revenue is anticipated to be slightly higher than FY 17 budgeted tax revenue. Property tax, transient occupancy tax, sales tax and franchise fees are the primary drivers for the increase in projections. The City continues to work closely with the development community in validating its revenue projections. General fund revenues attributable to development activity (planning service charges) typically precede actual construction and are related to advance planning processes, the first step of the entitlement process. This revenue is slightly under budget in FY 16, and is projected to continue to be under budget in FYI 7, due to the deferment of construction activities into future fiscal years. Generally, development project timing does not precisely align to the City's defined fiscal year. Other development revenue will fall into a similar timing pattern (engineering and building plan check fees), as these revenue sources are received as developments move through the entitlement process and construction commences. The aforementioned reductions in budgetary expenditures are offset by certain other development revenues (building permits and inspection fees) that are far exceeding budgeted projections for both FY 16 and FYI 7. The upturn in these types of revenues correlates with an increasing number of established homeowners choosing to renovate and rehabilitate their homes. Adopted Projected Adopted Projected Projected Budget Year End Budget Budget Budget Carryover Mid -cycle Fund Balance - Reserves: Incl. Adj. 2015 -16 2015 -16 2016 -17 2016 -17 2016 -17 Projected Ending Fund Balance (1) 20,509,793 22,215,073 21,888,553 20,934,338 21,132,838 Economic Stability Reserve 7,198,573 7,247,951 7,234,407 7,466,039 7,646,693 Minimum General Fund Reserve 11,997,622 12,079,918 12,057,344 12,443,398 12,744,488 Remaining Unrestricted Fund Balance 1,313,599 2,887,204 2,596,802 1,024,901 741,657 (2) (3) Total General Fund Reserves 20,509,793 22,215,073 21,888,553 20,934,338 21,132,838 (1) Excludes Accumulated Annual Savings (2) With Carry-overs and Deferral Amendments from FY16 (3) With Mid -Cycle Adjustments General Fund Revenues The following discussion of the City's General Fund Revenue is generally based on amounts recorded through April 2016. Staff has reviewed the budgeted FY 17 tax revenue compared to the actual receipts in FY 16, as well as information regarding anticipated revenue in FY 17. Based on its review, overall projected tax revenue is anticipated to be slightly higher than FY 17 budgeted tax revenue. Property tax, transient occupancy tax, sales tax and franchise fees are the primary drivers for the increase in projections. The City continues to work closely with the development community in validating its revenue projections. General fund revenues attributable to development activity (planning service charges) typically precede actual construction and are related to advance planning processes, the first step of the entitlement process. This revenue is slightly under budget in FY 16, and is projected to continue to be under budget in FYI 7, due to the deferment of construction activities into future fiscal years. Generally, development project timing does not precisely align to the City's defined fiscal year. Other development revenue will fall into a similar timing pattern (engineering and building plan check fees), as these revenue sources are received as developments move through the entitlement process and construction commences. The aforementioned reductions in budgetary expenditures are offset by certain other development revenues (building permits and inspection fees) that are far exceeding budgeted projections for both FY 16 and FYI 7. The upturn in these types of revenues correlates with an increasing number of established homeowners choosing to renovate and rehabilitate their homes. General Fund Expenditures Public Works and Community Development Staffing - $74,303- General Fund (Development Impact and Enterprise funds — remaining $74,303- total $148.6K) Due to the increase in development activity, staff requests a budget amendment to cover the cost of changing a currently filled temporary Budget Analyst position (one year assignment) to a full - time, on -going analyst position. This additional staff support is pivotal in meeting the increased demands associated with the development activities in the Public Works and Community Development departments. Administration Department Staffing - $17,366 The Administration department is proposing a minor reorganization to provide a higher level of management support to the City Administrator. The proposal is to eliminate the current vacant Executive Secretary to the City Administrator and replace it with a Management Analyst position. The Management Analyst position will provide a higher level of analytical support versus an administrative function. Joint Funding for a School Resource Officer with Gilroy Unified School District- $83,775 A Memorandum of Understanding (MOU) between the Gilroy Unified School District ( "GUSD ") and the City of Gilroy ( "City ") to provide fiscal support for a second School Resource Officer ( "SRO ") assigned to GUSD was completed in March 2016. The City and GUSD have agreed that each entity will provide 50% of the funding necessary to pay the full cost of the SRO position for the 2016 -2017 school year. Domestic Violence Detective Funding- $16, 000 The Morgan Hill Police Department (MHPD) and the Gilroy Police Department are partners in a domestic violence grant which provides for a full -time detective to investigate and assist in the prosecution of domestic violence offenders. This detective currently follows up and contacts all victims of domestic violence within the City of Gilroy, provides domestic violence training to GPD, and provides staffing coverage at the "drop -in" family violence center. Grant funding for this position has been reduced; therefore the City of Morgan Hill is requesting that the City of Gilroy contribute an additional $16,000 towards the cost of this full -time detective. AFSCME Salary Study - $40, 000 Within the Memorandum of Understanding between the City of Gilroy and the AFSCME, AFL - CIO, Local 101, Gilroy Chapter, (period of November 1, 2015 through December 31, 2016) the City has agreed to perform a classification and compensation study of representative classifications in the General and Supervisory bargaining units. The City will complete this study in the Fall of 2016, with an approximate cost of $40K, necessitating a mid -cycle adjustment to accommodate this endeavor. 2 Discipline Appeal Hearing and Arbitration Appeal Hearing - $75,000 Two employee discipline appeal cases are currently pending hearing. One will be before the Personnel Commission and will occur in the June /July timeframe and the second appeal is scheduled for arbitration in October. Given the timing of the appeals and the legal fees, court reporter fees, and arbitration fees associated with the discipline appeal process provided by the applicable labor contract and/or Human Resources Rules and Regulations, additional funds are needed to cover costs. General Election Ballot Costs- $50, 000 The estimated cost for full signature verification of the recently submitted UGB initiative petition is approximately $20K (3,600 x $5.50), for which existing general funds will be utilized. If the ballot initiative is certified as sufficient in content and signature count, the costs to place the measure on the General Election ballot on November 8, 2016 are estimated at $50,000. Staff recommends that the General Fund provide $50K in FY 17 to accommodate these costs. Body Worn Camera Replacement Project- $20, 000 The Gilroy Police Department was one of the first agencies in our region to implement the usage of body worn cameras. Many of the 65 cameras deployed are reaching their end of life cycle, and the technology of the existing cameras has become outdated, falling behind current trends and industry standards. The newer generation body worn cameras will provide critical features including infra -red technology, pre -event recording capabilities, integration with vehicle video systems, and enhanced durability. Total general fund contributions through the mid -cycle adjustment would provide for 20 replacement cameras, with the remaining 45 camera replacements funded through other sources such as grant funding, budget savings and asset seizure funds. Contractual Support to Eliminate Occupational Exposure- $5,000 In order to reduce or eliminate the hazards of occupational exposure to blood borne pathogens, especially related to first responders, staff is recommending that the City engage a professional contractor to provide appropriate remediation at all scenes where these types of biohazardous materials are present. Special Revenue Funds Gas Tax Funds- Fund 213- Net Fiscal Impact- $0 The 213 Fuel Tax revenue, which is identified in the Streets and Highways Code as section 2103 (Prop 42 /Congestion Relief Replacement) funding, has updated projections which will reduce the anticipated funding for the City by approximately $112K for FY 17. This reduction in revenue will be offset by a corresponding reduction in budgeted capital improvement expenditures, primarily associated with the Luchessa street overlay project, for which current projections are significantly lower than budgeted. There will be no anticipated fiscal impact with this update. 5 Recreation Department Reorganization — $18,348- General Fund Impact With the recent retirement of two positions in the Recreation Department, the Recreation Department Director evaluated the current staffing levels and programs to identify opportunities for staffing efficiency. Rather than filling the recently vacated Administrative Secretary and a Recreation Supervisor position, the proposal is to instead replace these positions with a Recreation Manager and a Management Analyst. This will result in the Recreation Department receiving a higher level of analytical support, as well as institute a succession plan. The Management Analyst, under the supervision of the Recreation Department Director, will perform a variety of budget, project/program management, administrative and research work. The Recreation Manager, under the supervision of the Recreation Department Director, will be responsible for training and staff development, commission management, promotion and marketing of programs, activities and special events, and community outreach. Internal Service Funds VOIP Server Project- $15, 000 The City's phone system has been used well beyond a reasonable life span. The server hardware is approaching 10 years of age, and the software is 8 years old. The Police Department has a device called an Analog Voice Gateways that handles the fax lines. This equipment is no longer supported by Cisco. We have purchased a replacement Gateway, but it will not work with the old phone system. Should this equipment fail it will cause a critical outage for the Police Department. To ensure continuity of the City's telecommunication services it is recommended that the phone system be upgraded as soon as possible. The general fund portion of this project is approximately $12K, with the enterprise funds contributing the remainder. Cradlepoint (QPCS) Cellular Connection Mobile Antennas- $58,331 The Public Safety mobile computers require an external connection for the vehicle mounted antenna for cellular service. Previously we had been able to purchase wireless vendor (Verizon, Sprint, etc.) specific interface cards that included the external connection. The vendors are no longer offering these, so alternative equipment is needed. We have reviewed alternatives and recommend the Cradlepoint network modem as it provides the greatest flexibility in mobile device and telecommunication connection options. The total cost of the project will be funded by the general fund Safety departments. Cyber Security Audit- $58,825 Staff recommends that a vendor be engaged to perform a review of the City's overall network security. Such audit would include vulnerability assessment and penetration testing, network/server access permissions research, reviews of policies and procedures, and social engineering testing. One of the primary objectives of this initiative would be to ensure PCI Compliance as well as our adherence to the Center for Internet Security (CIS) Critical Security C1 Controls for Effective Cyber Defense. The general fund portion of this project is approximately $50K, with the enterprise funds contributing the remainder, $8,825. Finalize Radio Purchases for SVRIA- $127,774 The Silicon Valley Regional Interoperability Authority (SVRIA) plans for the county -wide interoperable project to go live mid -year FYI 7. The City of Gilroy is part of a JPA that oversees compliance with these interoperability requirements. To conform to standards, additional funds are required to upgrade the City's remaining inventory of radios /portables that are not yet compliant, as these will become inoperable when the system is fully integrated. The general fund portion of this project is approximately $79.5K, with the remainder spread out amongst other funds. Liability and Property Insurance - $210, 000 Staff estimates that the City's liability and property insurance will increase by approximately $210K for FY 17. This adjustment is due to an increase of rates, plus the shift to the new risk pool with increased coverage. Provided Gilroy does not have any large claims in the next year, the liability rate should reduce for FY 18. The general fund portion of this amount is approximately $109.2K. The remainder portion will be spread amongst the various operating funds. Withdrawal of City of Gilroy from ABAG Plan Program- $200, 000 Prior to July 1, 2015, the City was a member of the ABAG Plan Corporation insurance pool, a nonprofit public benefit corporation organized under Section 5110, et seq. of the Corporations Code of California. ABAG Plan coverage applies to occurrences /claims prior to July 1, 2015. Subsequent to July 1, 2015, the City became a member of the Municipal Pooling Authority (MPA) to manage its insurance coverage going forward. The City is currently operating under a five year withdrawal agreement with ABAG Plan due to unresolved claims that have not yet closed. It is expected that all Gilroy claims will close over the five year withdrawal agreement time period. It is recommended that $200K be set aside in the general fund to accommodate the assessment potential from ABAG for FY 17. Workers Compensation - $166,230 The City is self - insured for the first $500,000 of each workers' compensation claim. The City belongs to the Local Agency Workers Compensation Excess ( LAWCX) joint powers authority, established pursuant to California Government Code Sections 990.4 — 990.8 and 6500 et seq., for the purpose of workers compensation excess coverage. LAWCX coverage is for individual workers' compensation claims in excess of $500,000 up to $5,000,000. Staff estimates that the City's workers compensation insurance and administrative fees will increase by approximately $37.9K for FY 17. During FY 16, a significant claim was closed out via the Compromise and Release process with the final settlement of the claim ($119K) to be paid out by August 1, 2017. The bulk of the settlement represents the statutory workers compensation permanent disability payment, but also 7 removes the claim from the City's open indemnity claims eliminating all future exposure for costly medical expenses. In addition, given that the city is self - insured for workers compensation, the State of California mandates payments to the Self- Insurance Fund and related programs. The mandates from the state are expected to increase by approximately $9K for FY 17 based on the fees charged in FY 16. The general fund portion of the changes related to workers' compensation amount to approximately $134.4K. The remaining portion will be spread amongst the various operating funds. Sewer Enterprise Fund SCRWA — Member City Contributions- $349,573 Revenues in SCRWA's operations budget is primarily derived from reimbursements according to user share by the member agencies. Such operating contributions from the members (Cities of Morgan Hill & Gilroy) are updated annually, based upon actual flow data for each respective City. A 3% change in budgeted percentages, based upon 2015 actual flow data, is required to bring the FY 17 budgeted totals in line with current calculations. For the City of Gilroy, this will represent an increase of approximately $349.5K in contributions from the Sewer Enterprise fund. Unfunded Liabilities The mid -cycle budget does not account for funding the City's unfunded liabilities currently hindering the City's long -term financial sustainability. To this end, staff will propose to Council a topic- focused Council study session to discuss the prioritization and funding strategies to begin addressing the unfunded liabilities. Fiscal Impact Staff requests that Council adopt the above budget amendments and proposed changes for FY 17 and then appropriate the funds via adoption of a resolution. I, SHAWNA FREELS, City Clerk of the City of Gilroy, do hereby certify that the attached Resolution No. 2016 -28 is an original resolution, or true and correct copy of a city Resolution, duly adopted by the Council of the City of Gilroy at a regular meeting of said Council held on the 16'h day of May, 2016 at which meeting a quorum was present. IN WITNESS WHEREOF, I have hereunto set my hand and affixed the Official Seal of the City of Gilroy this 18t` d4"f May, 2016. ShawWreels, MMC\-7 - - City Clerk of the City of Gilroy (Seal)