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HomeMy WebLinkAboutJANUARY 16,1996 I I I 38:0012 () 110. !:.-<;J ~1I(,q6 CITY COUNCIL PROCEEDINGS ARE TAPE RECORDED AND ON FILE IN TIlE OFFICE OF TIlE CITY C-( CLERK MINUTES CITY COUNCIL OF TIlE CITY OF ARCADIA and the ARCADIA REDEVELOPMENT AGENCY ADJOURNED REGULAR MEETING JANUARY 16, 1996 The City Council and the Arcadia Redevelopment Agency met in an adjourned regular meeting at 5:30 p,m., Tuesday, January 16, 1996 in the Conference Room of the Arcadia City Hall Council Chamber, ROLL CALL PRESENT: ABSENT: Council members Ulrich, Young and Lojeski Councilmember Chang and Mayor Pro tern Kuhn On MOTION by Councilmember Young. seconded by Mayor Lojeski and CARRIED, Councilmember Chang and Mayor Pro tern Kuhn were EXCUSED, Councilmember Chang arrived at 5:36 p, m, l. AUDIENCE PARTICIPATION None 2. REPORT AND DISCUSSION REGARDING MID.YEAR BUDGET REVIEW AND FINANCIAL ALTERNATIVES 0.3.520 - 'S'() The City Manager opened the mid-year budget review and financial alternatives, and stated that by the end of the week Council will have a mid-year status repon on the work programs, A significant number of work programs are on schedule; some have been shifted due to other priorities or ","""nde in the City; some were dropped because of impacts by Slate laws, The report presented to the Council was the basis of the budget which was adopted last June and went into efl'cc:t July 1. 1995, He p1>inted out that last year the City lost its biggest tax base: the Toyola Motor Credit Corporation .... a half million dollars lost. The next highest sales tax producer hu beeII the malL The City Manager had talked with the mall manager who presented what he considered to be good JICWS - mall sales were Oat this year during the holiday season; they did not exceed last year, Throughout the Hahn Corporation, mall sales were down 6 - 10%, So, flat sales were good news for them; not good news for the City, The last couple of years stalf did last minute reductions in programs to effeauate budget changes and amendments to balance the budget The last two years the budget was \):01""""<1, usually at the last moment, by the Slate bailout from PERS, etc, Charts being presented this date will give an indication of staff' 5 perspective of where the City is going. now and in future years, Arcadia is one of the few cities that has not'had a significant reduction in services or employees. or raises in fees and services, The charts to be presented will show how tight the City has been fisca1ly, However, the charts indicate expenditures continually exceed City revenues. The final chan will be I 1/16/96 38:0013 especially illuminating because it shows the consequences of continuing to spend and using up reserves or other assets, Stairs intention tonight was not to paint a picture of gloom and I doom, but to paint reality, There will be options and opponunities to correct these issues, Tonight no action is expected from the Council. A special Council meeting on another date will be scheduled to discuss services, expenditures and costs, In response to a question from Mayor Lojeski as to whether there has been spending on unneces531Y items, the City Manager responded that was not the case, However, when the revenue history and expenditure history are compared, it can be seen thaI. on a conservative basis. if the City continues to have these trends in both categories, there is a breaking point There is no indication that this is a spendthrift type of City, We are very, very conservative and Councils in the present and past years have been very conservative, Many of the impacts resulting in our future problems. have nothing to do with what is happening locally, There have been State bailouts and the gap between revenues and expenditures has widened, Nothing that we have done here has caused that James Dale, the Administrative Services Director, presented the mid-year repon and commented thaI. when this two-year budget was adopted last year, staff recognized the fiscal problems the City was facing, If the City does not find new revenue sources in the future, there are real concerns that ultimately the service levels to the citizens will have to be reduced, Despite some encouraging economic news, the City continues to face serious problems, II is important to understand that in an effort to resolve its own fiscal problems. the State of California has shifted property taxes, reallocated monies, taken monies away from the City, and eliminated certain kinds of monies fonnerly available to the City, The State has also authorized the County to bill the City for items it never paid for before, It is estimated that the State of California has taken somewhere in the neighborhood of $1.2 million dollan in property taxes alone, That was not a one-time reduction; that is an on-going reduction forever in our property I taxes, Not only did the State take $1.2 million in property taxes, but the growth the City could have expect:d on that amount of property taxes in future years is gone, In addition to the property taxes, the State just a few ycan ago eliminated the City's share of the cigarette tax, authorized the County to charge an administration fee for collection of property taxes, reallocated significant revenues from fines and forfeitures to the Coun system and authorized the County to start charging municipalities for booking services, The State also has significantly reduced reimbursements to Cities for State mandated costs under the S5-9O State mandate reimbursements program, and in the current fiscal year a change in the law relating to the allocation of sales taxes on leased automobiles will cost the City in excess of $SOO,OOO annually. Many other measures have also been taken which have negatively impacted the City's financial position. Staff est;m.'~ that within the past three to five years, the State has reallocated or reduced annual City revenues between $2 and $3 million dollan. If the City were not faced with trying to resolve the financial problems of the State and County which it has been called upon to do. the City would be in fine shape; could have dealt with the recession and all the problems encountered. and still had enough money for operations, plus money set aside for additional infraslrw:ture improvements, The key thing to remember is thaI. although the recession has dealt An:adia a hard blow, like other cities, the worst problem it has faced in the last five yean has been what the State has done in reducing the City's revenue by $2 - $3 million dollan, Staff fwther explained thaI. although most of the discussion tonight will be with regard to the General Fund, there are other funds, The Administrative Services Director then explained the "Restricted Funds" which can be used only for specific things, j,e" Narcotic Seizure Funds can only be used for Police operations; Water Funds can only be used for water fund operations, Gas I Tax Funds can only be used for street and parkway improvements. The estimated balance of these restricted funds at the end of the first year is $17,736,360, "Designated Funds" refer to those funds which this Council or a previous Council has designated for specific purposes. i,e,. 2 1/16/96 ! I ; \ l . , ~ r I.l~ " \ 1";':1:' 38:0014 I Equipment Replacement Fund in which funds are set aside to buy fire trucks. ambulances. Police cars and all the items it takes to run a City, Also part of the Designated Funds are Emergency Reserve Funds which are specifically reserved for catastrophic events, such as an earthquake or similar type emergency, Insurance Funds are set aside In the event the City has bad claim experiences, Undesignated Funds can be used for any operational purpose, Undesignated funds in the General Fund are about $ I million dollars al present There is a fairly small amount of funds in the Capital Outlay and Facility Construction Fund, However the Library Expansion funds have been taken out of this account StaIf presented a ten year history of general fund revenues and expendilUreS which 'indicated that until the recession occurred, revenues exceeded expenditures by almost $6,5 million dollars, That money was used for Capital Outlay projects. such as the Fire Station, Community Center. and Library, When the recession ocxurred in about 1991 revenue was at a straight line for a long period of time and then tailed of!' because many revenues are tied 10 the economy, Added to that the Stale took property taxes two years in a row so there was a decline in revenue although expendilUreS continued 10 grow. Last )'ear staIf tried to bring the budget back into balance and almost succeeded with about $300,000 difference, This year it is estimated there will be about S6OO,ooo on the short side as far as revenue and expenditures, I StaIf presented information as to how the budget is divided up; with the largest expendilUreS for public safety. Fire and Police Departments nearly 60%; Administrative Services 4%; Library 6%; Recreation 4%, That is a $H,725,983 budget. The majority of the General Fund accounts for salaries and benefits - 80%; Service and Supplies account for 200/0. The Service aDd Supplies category has been held at a steady rate for the last five years. StaIf does not thiDk anything can be cut from the Services and Supplies budget. Any serious cuts would have to be related to personnel and that would then be services, Also presenled was a graph showing General Fund budgeted revenues: Sales Tax is the No, I revenue source; Utility Tax is No.2; and Property Tax is No, 3, Those three logether represent 63% of the General Fund revenue, Revenue From Other Agencies 11%; Licenses and Permits 8%; Charges for Services 6%; Use of Money and Property 2%; Transfers [n 7%; and Fines and Penalties 1%; Miscellaneous Revenue 2%.. The Administrative Services Director reviewed the ten year history of the largest revenue source which is the Sales Tax. Projections show approximately $70,000 above the initial projections for FY 1995-96, but could flanen of!' in the second year. because of what is heard from the mall. and from news about the economy, There will be a very slow recovery, So this revenue source will not keep up with expenditure inc:reases each year, Further. staIf foresees no new generation of sales tax. The Administr.ttive Services Director then reviewed the ten year history of the Utility Tax. which has been a very stable revenue source, because utility costs generally go up each year, and that means the City's 5% tax portion goes up al:COrdingly, Unfortunately deregulation occurred. Pacific Bell informed stafI' that they have reduced their rates as much as 400/0; revenue from Pal:TeI is down 13% over last year; AT&T is down 250/0; Sprint down 250/0; and MCI down 12%, In addition, The Gas Company recently announced a reduction efl'ective January I, 1996. Edison has announced they are going to reduce rates over the next five years, This all impacts the City's revenue, We are down nearly $240,000 from staff's projections in this fiscal year, I The Administrative Services Director then reviewed the len year history of the Property Tax. The State took property tax monies from the City for two years, The State has nOl taken any property tax money this year from Arcadia. Revenue will probably not reach stalI's projections, Property foreclosures are the highest in history according to staff. Also, property tax revenue has been seriously hurt by appeaIs from property owners to the County for reduction in assessed 3 1/ 16/96 38:00l5 values, particularly for commercial propenies, Some propeny owners are getting their propenies reassessed down eveI}' year, It would be prudent for the Ciry 10 redllCC propeny lax projections for the nextlWo years, I The Administrative Services Director reviewed the ten year history of the Motor Vehicle in-lieu fees, It is hoped that there will be an increase over the initial projection, New car sales may be up somewhat in California this year, Also revenue is received from the car leasing market, The Business License lax revenue will essentially remain as projected, The Building PennilS revenue is significantly below the $690,000 projection. Staff now projects $425,000 for FY 1995-96, There has been absolutely no increase; most of the activiry as far as building pennilS are concerned involves small modifications; renovations to homes. etc" so this revenue is at a ten year low, The Franchise Fee revenue is usually fairly steady, Here again deregulation has occurred, Residents are paying less for utiliry costs and franchise fees are based upon gross receipt.> for the utility - electric, gas and cable, The Transient Occupancy Tax has perfonned belleI' than anticipated. In 1994 the City increased the lax from 8% to 10%, The Arcadia hotels are doing good business. The Administrative Services Director then presented a grapb showing a ten year comparison of revenues vs, expenditures . starting wi!b fiscal year 1991-92, After reducing some of the estimates for future years, !be gap between revenues and expenditures continually widens, The City has to close !be gap by increasing revenues in some manner or decreasing expenditures, The Administrative Services Director presented a list of potential revenue sources: I) I Implement a 5% franchise fee on residential refuse haulen; 2) Impose a 2% utility lax on cable TV; 3) Increase propeny transfer lax: 4) Implement a City-wide lighting and landscape assessment district; 5) Increase the utility lax by 1%; 6) Increase the transient occupancy lax by 1%; 7) Develop and adopt a libr.uy assessment district or parcel lax ($107,00 per parcel); 8) Develop and adopt a police and/or fire safety assessment district; 9) Adopt a mandatory paramedic subscription program; and 10) Develop and adopt an assessment in conjunction wi!b the implementation of \be National Pollutanl Discharge Elimination System Program, Considerable discussion ensued regarding these potential revenue sources, In SIIl1ImaJy, the Administrative Services Director stated, in part. if the City does nothing and the projections, whicb are fairly conservative. are correct, and if !be City utilized all the funds that were described as "designated' - reserves left in the General Fund; Emergency Reserve Fund; reserves in the Equipment Replacement Fund and the Capital Outlay and Facility Construction Fund, the City could continue on that way until !be year 2003, Then !be City would be out of blLci..-., in a sense, The City Manager stated. in part. this would mean the City would not build one lIJOre building. would not purchase one more piece of rolling stoCk. and would use the emerge~ funds. If there is no change in expenditures and all reserves are used. in 2003 !be City would be close to insolve~, We need to be creative in bow we close !be gap - by raising revenue or reducing expenditures. There is no new revenue on the horizon, except, potentially the race tracl< project. If and when it is approved and if and wben it is built and opened. is potentially three to four years down the road. So monies from that project will not be coming in rapidly, if it's approved. So !be gap really will not close until !bere is some significant change in tenns of the Slate giving the City a buge bailout permanently, or the City can find some permanent casb flow, The Administrative Services Director also said that next year !be City may be looking at a $1.5 or $1.6 million dollar shortfa1l, Iust for reference that would relate to I thiny positions, whicb would be about 6% of the City's work force, 4 1116/96 '\ I I I :',1"1 It', "", ' 38:0016 The City Manager added that Supplies and Services in this year's budget have been cut back to a 1990-91 level, The City has reached an 80-20 ratio between employees against supplies and services. If supplies are cut more, employees will not have enough equipment to do the work, Then: is a breaking point there, The City Manager met with the department heads this week to urge them to be more creative in tenns of reducing costs, The questions raised are, can revenue be raised and will that close the gap, It is necessary that staJf have a special study session with the Council so staJf will know how Council wishes to proceed SlaJf needs to work on next year's budget now, Councilmember Ulrich suggested the category of ovcnime could be addressed. SlaJf responded sometimes there is a cycle to overtime, Councilmember Young agreed with Councilmember Ulrich that cutting ovenime would essentially be cutting services, The City Manager said that the City's true cost of services is not being charged in some of the fees, Some revenues can legitimately be raised. On the other hand. some fees are too high. and those should be lowered. Some time should be spent going through all the accounts, Decisions must be made, The long tenn issues must be addressed. The City still has a Police facility to be addressed. City Hall modification is necessary, It will also be necessary to address the issue of the infrastructure - water, sewer, stonn drains, Construction money in the past has usually come from race track revenues. but those funds have been going down. The City has a capital fund need of between ten and twenty-five million dollars. There is huge list of needs against a not so optimistic revenue projection. Councilmember Chang also thought the ovenime expenditure should be stUdied; and he thinks corrections can be made The Cuy Manager replied that ovenime has been reduced each year for the past two yean, But in the Public Safety depanmenlS, if there is an emerg~ncy or crisis. the City has to pay, The Police Oepanmcnt has race track duty, Changes can be made, It will require meet.and-confer with the associations. There are operating conditions this City has had for many yean if not decades, To change thai course should involve deliberate and focused discussions. In response to a question from Counci1member Chang. staJf responded that the figures given in the report on the Gener:JJ Fund revenues VI. expenditwes, including the $600,000 shortfall. are mid-year projections; the expenditures are fairly accurate; the revenue figure is projection. Christmas season sales tax figures are not in yet. Franchise fees have not been received. CounciImember Ulricll would like to have information as to where the increase in expenditures occuned in FY 1994-9' and FY 199'.96, SlaJf will provide this information. It was the consensus of Council that a budget study session be scheduled, Friday, February 9, 1996 at 8:00 a. m. at the Community Center, ADJOURNMENT At 6:32 p, m. the adjowned regular meeting ADJOURNED sine die, ~ of the City of Arcadia Dennis A. Lojesk . ATTEST: , 1116196 -^