Title:
Title
FY2019/20 Proposed Budget Overview and Funding Options for Inclusive Economic Development [To Be Delivered]
End
FileID
File ID: 2019-00514
Location
Location: Citywide
Recommendation:
Recommendation
Receive and consider for final budget adoption.
Contact: Howard Chan, City Manager, (916) 808-7488, Office of the City Manager; Dawn Holm, Director, (916) 808-5574, Daniel Choe, Interim Budget Manager, (916) 808-5049, Department of Finance
Body
Presenter: Dawn Holm, Director, (916) 808-5574, Department of Finance; John Colville, City Treasurer, (916) 808-8297; and Susana Alcala Wood, City Attorney, (916) 808-5346
Attachments:
1-Description/Analysis
2-Attachment 1_Budget and Audit Proposed Budget Overview Report
3-Attachment 2_General Fund 5-Year Forecast
4-Attachment 3_Measure U 5-Year Forecast
5-Attachment 4_Innovation and Growth 5-Year Forecast
6-Attachment 5_Goldman Sachs Revenue Bond Estimates
Description/Analysis
Issue Detail: The City Charter, Article IX Section 111, requires the City Manager to deliver budget recommendations to the City Council no later than 60 days prior to the start of the new fiscal year. This report transmits the FY2019/20 Proposed Operating Budget (Budget) and the 2019-2024 Capital Improvement Program (CIP), which includes the FY2019/20 CIP budget. These documents are available at <http://www.cityofsacramento.org/finance/budget>. The Budget was presented to the Budget and Audit (B&A) Committee on April 30, 2019 (Attachment 1). As proposed, the Budget serves as a framework for the City’s efforts to successfully bolster and expand the delivery of vital core services while also focusing on Council’s commitment to inclusive economic development and increased youth programming.
On April 30, the B&A Committee directed staff to prepare separate forecasts for the General and Measure U Funds. Those forecasts, provided as Attachments 2 and 3, also identify the City Manager’s recommended investments in key Council priorities:
• Inclusive Economic Development
• Investment in Youth
• Public Safety
• Essential Core Services
• Homeless Services
It is important to note that the Measure U forecast has been updated to reflect the growth of the original Council approved Measure U restorations as well as the additional positions approved as part of the FY2018/19 Midyear Budget Report (February 5, 2019). In prior forecasts, growth above revenues was transferred to the General Fund in order to maintain budget sustainability (expenditures below revenues) over the term of the forecast. In prior years 50.5 FTE were transferred from Measure U into the General Fund resulting in increased costs of approximately $4.9 million annually in the General Fund. In addition, the General Fund has absorbed $5.1 million in labor growth for Measure U Police and Fire grant funded FTE (SAFER and COPS). As such, General Fund costs are overstated by $10 million and conversely Measure U costs are understated by a like amount.
The B&A Committee also requested that the City Manager consider alternative means to provide funding for an Inclusive Economic Development Program. In addition to the $51.9 million in one-time resources identified in the Budget, the following resources could be directed to this initiative:
• Innovation and Growth Fund - available one-time resources ($28.3 million) as reflected in the five-year forecast (Attachment 4) and new revenues net of budgeted expenditures; and
• Year-end Resources - budgetary resources not needed to close the year including the redirection of annual labor savings previously directed to the City’s OPEB Trust.
The use of the resources outlined above provides flexibility for the City to ensure sustainability in the event of an economic slow-down. This does not include any resources gained as a result of the work underway by Management Partners to identity and implement citywide efficiencies.
However, should the Council choose to consider issuance of debt for one-time resources the City Treasurer has provided preliminary estimates of debt service and available proceeds for both taxable and tax-exempt debt. Information on the potential debt service obligations and associated proceeds is provided in $5 million increments up to $25 million in Attachment 5. The City Treasurer estimates that it will take 4-6 months to complete the appraisals on City assets necessary to support the financing at a cost of approximately $200,000-$250,000. After the appraisal process has been completed it is anticipated that completion of the financing will take an additional 4-6 months.
Policy Considerations: Consistent with the Measure U ballot language as reflected in Chapter 3.27 of the City Code, the transactions and use tax revenue from Measure U are reflected in the City’s General Fund. The following table depicts the five-year forecast for the General/Measure U (G/MU) Funds.
The Budget is balanced and reflects the Council’s adopted Budget Policies and Guidelines, with a focus on long-term sustainability. The Budget includes continued resources for Council priorities related to inclusive economic development, youth, public safety, homelessness and essential core services.
Economic Impacts: Not applicable.
Environmental Considerations:
California Environmental Quality Act (CEQA): This report concerns administrative activities that will not have a significant effect on the environment and that do not constitute a “project” as defined by the California Environmental Quality Act (“CEQA”) Guidelines Sections 15061(b)(3) and 15378(b)(2) and are not subject to the provisions of CEQA (CEQA Guidelines15060(c)(2)(3)). CEQA review for any project, which utilizes funds allocated under the FY2019/20 CIP budget, has been or will be performed in conjunction with planning, design, and approval of each specific project as appropriate.
Sustainability: None.
Commission/Committee Action:
Budget and Audit Committee: The Proposed Operating Budget was presented to the Budget and Audit Committee on April 30, 2019. The Committee directed City staff to present the General Fund and the Measure U Fund forecasts separately. This request has been incorporated into this report for City Council consideration.
Planning and Design Commission: Sacramento City Code Section 17.912.010 requires the Planning and Design Commission to review the City’s five-year CIP for consistency with the City’s General Plan and to report its findings to the City Council. The 2019-2024 CIP will be presented to the Planning and Design Commission on May 9, 2019.
Rationale for Recommendation: The strategies identified above provide the City Council with additional resources to invest in equitable economic development projects and programs, and at the same time ensures the flexibility necessary for the City to be responsive to changing economic conditions.
Financial Considerations: To encumber Measure U revenues, requiring $750 million in debt service over thirty years for one-time resources, would severely limit the City’s ability to respond to changing economic conditions. The costs associated with long-term debt are excessively restrictive when we have the opportunity to address this goal through one-time and ongoing investments.
With prudent management of expenditures and robust revenue growth in key revenue sources, the Budget as presented is balanced. The initiatives included in the Budget are focused on the strategic use of one-time resources reflecting the Council identified priorities outlined above.
Local Business Enterprise (LBE): Not applicable.