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06/21/2011 - SP PENDING CAA APPROVAL CITY OF GRAND TERRACE COMMUNITY REDEVELOPMENT AGENCY MINUTES SPECIAL MEETING -JUNE 21,2011 A special meeting of the Community Redevelopment Agency, City of Grand Terrace, was held in the Council Chambers,Grand Terrace Civic Center,22795 Barton Road,Grand Terrace,California, on June 21, 2011 at 6:00 p.m. PRESENT: Walt Stanckiewitz, Chairman Lee Ann Garcia, Vice-Chairman Darcy McNaboe, Agency Member Bernardo Sandoval, Agency Member Gene Hays, Agency Member Betsy M. Adams, City Manager Brenda Mesa, City Clerk Bernie Simon, Finance Director Joyce Powers, Community& Economic Development Director Richard Shields, Building& Safety Director John Harper, City Attorney Ed Finneran, San Bernardino County Sheriff's Department ABSENT: Rick McClintock, San Bernardino County Fire Department CONVENE THE JOINT CRAXITY COUNCIL SPECIAL MEETING at 6:00 P.M. 1. Review of Fiscal Year 2011-12 Preliminary Budget Finance Director Bernard Simon, reported that the Preliminary Budget was presented to the City Council on June 14, 2011. The updated preliminary budget presented tonight reflects budget reductions #1-6 that the City Manager recommended on June 14' as well as cost allocation adjustments and anticipated revenue from the sale of the cell tower lease that was authorized by the City Council. City Manager Betsy Adams, gave an update on the State Budget activity indicating that the legislature has not yet presented a budget to the Governor and it is still unknown how it will impact our budget. She indicated that there were two recommended budget reductions for which additional information is to be provided for consideration. For Budget Reduction #7, defend Management Analyst position in Public Works, staff was to obtain cost information on the possibility of cost sharing Loma Linda's Emergency Services Coordinator position. Staff has received a verbal estimate from Loma Linda of$24,724 which exceeds the General Fund budget savings for this position. Instead of implementing this budget recommendation, staff proposes using extra savings to be received from restating the City's PERS reports to continue funding this position. She recommended that Budget Reduction#8,reduce patrol deputy position by one half,be implemented CRA AGENDA ITEM NO. Community Redevelopment Agency Minutes June 21,2011 Page 2 in the FY2011-12 budget with the understanding that Council can consider restoring the position once the State budget is adopted and if a majority of SEBA's members approve contract reductions. Sylvia Robles, Orangewood Ct., recognized challenges that exist with budgeting at the state and local level and encouraged the Council to practice conservative budgeting. Council directed staff to include the following Budget Reduction recommendations in the FY 2011- 12 Budget to be considered for final adoption on June 28, 2011: 1. Remove Traffic Deputy Position from Sheriff's Contract 2. Merge Rental Inspection Program into Code Enforcement 3. Defund Management Analyst Position in Community Development 4. Defund Community Events Program 5. Defund Deputy City Clerk Position 6. Reduce Parks and City Hall Maintenance 7. Removed 8. Reduce Patrol Deputy Position by one half 2. CLOSED SESSION - CONFERENCE WITH LEGAL COUNSEL - POTENTIAL LITIGATION GC54956.9 (b) - ONE CASE Mayor Stanckiewitz announced that the Agency met in Closed Session to hold a conference with Legal Counsel to discuss Potential Litigation per GC54956.9 (b) - One Case. There was no reportable action taken. Chairman Stanckiewitz adjourned the Community Redevelopment Agency Meeting at 7:47 p.m., until the next CRA/City Council Meeting that is scheduled to be held on Tuesday,June 28,2011 at 6:00 p.m. SECRETARY of the Community Redevelopment Agency of the City of Grand Terrace CHAIRMAN of the Community Redevelopment Agency of the City of Grand Terrace CITY OF GRAND TERRACE NOTICE AND CALL OF SPECIAL MEETING OF THE CITY COUNCIL AND COMMUNITY REDEVELOPMENT AGENCY TO THE MEMBERS OF THE CITY COUNCIL AND COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF GRAND TERRACE AND TO THE CITY CLERK: NOTICE IS HEREBY GIVEN that a Special Meeting of the City Council and the Community Redevelopment Agency of the City of Grand Terrace is hereby called to be held on Tuesday, June 21, 2011at 6:00 p.m. in the Council Chambers, located in the Grand Terrace Civic Center, 22795 Barton Road, Grand Terrace, California. Said Special Meeting shall be for: 1. Review Fiscal Year 2011-12 Preliminary Budget 2. Closed Session — Conference with Legal Counsel - Potential Litigation per GC54956.9(b) — One Case Dated: June 16, 2011 WALT STANCKIEWITZ, MAYOR it CALIFORNIA AGENDA REPORT MEETING DATE: June 21, 2011 Council Item ( X ) CRA Item (X) TITLE: FY 2011-12 Preliminary Budget PRESENTED BY: Bernie Simon, Finance Director RECOMMENDATION: For discussion BACKGROUND: The City Council conducted a budget workshop review of the proposed City budget for Fiscal Year 2011-2012 in a special meeting on June 14. Council was also presented with eight budget reduction recommendations by the City Manager. As a result of the City Manager's presentation, Council directed Staff to present revised budget numbers with City Manager budget reduction recommendations #1 through #6 in a special meeting on June 21, 2011. DISCUSSION: Changes to the FY 2011-12 Preliminary Budget include the effects of City Manager reduction recommendations one through six. Recommendation six was reduced by $6,400 in order increase the level of service of proposed park restroom cleaning services. On June 14, 2011, the City Council also directed the sale of the cell tower leases to Unison. General Fund revenue was increased by $344,897 for anticipated net revenue for sale of cell tower leases less the loss of monthly rentals of approximately seven months. The sale is expected to occur in October 2011. The reduction recommendations also resulted in recalculation of the cost allocation which was a net increase to the General Fund in the amount of$34,710. The City budget includes the General Fund, Special Revenue Funds and Capital Projects Fund. For FY 2011-12, the City budget consists of proposed expenditures of $8,394,333 supported by estimated revenues of $8,154,199. The proposed City budget has a combined deficit of$(240,134) comprised of shortfalls in the Special Revenue and Enterprise Funds. The ending combined City fund balance reserves is projected to be $2,922,941, excluding reserve designations. The revised Preliminary FY 2011-12 General Fund budget consists of proposed expenditures of$4,717,612, including transfers out, supported by estimated revenues of $4,889,971. Budget reduction recommendations one through six reduced the General Fund deficit $421,688. The net sale of the cell tower leases and the decrease in the cost allocation to the General Fund would increase the net budget by an additional $310,187. Therefore, the original General Fund budget deficit would go from ($553,116) to a budget surplus of $178,759 and changed the projected ending General Fund Balance Reserve from negative ($389,743) to a positive $342,132. The revised Preliminary FY 2011-12 Special Revenue Fund and Enterprise Fund budget includes proposed expenditures of $2,760,301, including transfers out, supported by estimated revenues of $2,341,408. The proposed Special Revenue Fund budget has combined expenditures over revenue of $418,893 with a projected ending fund balance reserve of $2,922,941. Expenditures over revenue in Special Revenue Funds that are capital improvement funds or developer impact fee funds do not have an operational issue and are more dependent on the timing of capital projects. The Special Revenue and Enterprise Fund reserve includes $1,384,633 of available funds and a Waste Water Disposal designated reserve of $682,760 for interagency capital funds. The Traffic Safety Fund is projected to have a negative balance due to the "catch-up" of contract amounts owed to Redflex for the red-light camera fines that was temporarily borrowed from the Facilities Fund. The FY 2011-12 Capital Projects Fund budget consists of proposed expenditures of $922,820, including transfers out, supported by estimated revenues of$922,820. The FY 2011-12 CRA Fund budget consists of proposed expenditures of $10,032,174 including transfers out, supported by estimated revenues of $9,170,418. CRA reserve includes $389,917 of available funds and $5,299,181 of designated funds. Also, last weeks' closing of the 2011 Redevelopment Tax Allocation Bonds delivered $18,528,672 proceeds that were deposited into the designated CRA Capital Projects Fund. Net changes to the budget are shown in Table 1. REVISED CITY REVENUE AND EXPENDITURES - Net Changes—TABLE 1 Fund Revenue Expenditures Surplus Net Revised 06-14-11 06-14-11 (Deficit) Changes Surplus 06-14-11 06-21-11 Deficit General Fund 4,545,074 5,098,190) (553,11§1 731,875 178,759 Special 2,341,408 (2,767,801) (426,393) 7,500 (418,893) Rev/Entr Capital Project 922,820 922,820 0 0 0 Total CITY $7,809,302 8,788,811 $979,509 739,375 240,134 Total CRA 9,170,418 10,410,217 1,239,799 136,543 1,103,256 Total 16,979,720 19,199,028 2,219,308 875,918 1,343,390 Changes to budget revenues and expenditures are summarized as follows on Table 2 and Table 3: FY 2011-12 Budget Revenue Recap - TABLE 2 FY 2010-11 Prelim FY Budget Other Prelim FY Revised 2011-12 Reduc- Changes 2011-12 Budget -tions REVISED #1 to # 6 General Fund 4,697,558 4,545,074 0 344,897 4,889,971 Total Spec/Ent 2,887,924 2,767,801 0 0 2,767,801 Funds Total Capital Proj 1,602,319 922,820 0 0 922,820 Funds Total CRA Funds 10,182,474 91170,418 0 0 9,170,418 Total Revenue 19,370.275 17.406,113 0 344,897 17,751,010 General Fund Expenditures by Department- TABLE 3 Ex enditure Reca FY 2010- Prelim FY Budget Other Prelim FY 11 2011-12 Reduc- Changes 2011-12 Revised -tions REVISED Budget #1 to # 6 City Council 48,100 53,880 0 0 53,880 City Manager 262,391 272,035 0 0 272,035 City Clerk 187,890 176,595 58,533 0 118,062 Finance 267,338 275,011 0 0 275,011 City Attorney 60,000 60,000 0 0 60,000 Building & Safety 131,543 137,010 0 0 137,010 Public Works 232,669 228,440 9,187 0 219,253 Comm.Events/CD 55,201 52,880 52,880 0 0 Rental Inspection 65,043 68,900 68,900 0 0 Enforcmnt. Pro . 134,039 134,569 0 0 134,569 Non-Departmental 314,315 309,230 0 0 309,230 Facilities Maint. 157,849 172,849 10,000 0 182,849 Comm Econ Dev 211,103 211,565 10,939 0 222,504 Info.S stems 74,041 79,175 0 0 79,175 continued General Fund Expenditures by De artment- TABLE 3- Continued FY 2010- Prelim FY Budget Other Prelim FY 11 2011-12 Reduc- Changes 2011-12 Revised -tions REVISED Budget #1 to # 6 Law Enforcement 2,025,596 2,239,115 228,714 0 2,010,401 Child Care 867,380 863,630 0 0 863,630 Park Maintenance 174,171 171,930 18,013 0 153,917 NPDES 91,891 83,668 0 0 83,668 Storm Drain Maint 16,000 16,000 0 0 16,000 Planning Comm 2,500 2,395 0 0 2,395 Historical Cultural 1,200 1,200 0 0 1,200 Sen. Citizens Prg 29,588 27,000 0 0 27,000 EOC/CERT 10,320 10,320 0 0 10,320 Cost Allocation 549,207 549,207 0 34,710 514,497 Total General 4,870,961 5,098,190 (415,288) 34,710 4,717,612 Fund Special Revenue/Enterprise Funds - TABLE 4 Ex enditure Reca FY 2010- Prelim FY Budget Other Prelim FY 11 2011-12 Reduc- Changes 2011-12 Revised -tions REVISED Budget #1 to # 6 Street Fund 91,500 187,100 0 15,511 202,611 Storm Drain 0 0 0 0 0 Park Fund 16,629 16,629 0 1,087 17,716 AB 3229 COPS 0 0 0 0 0 Air Quality Fund 32,700 700 0 700 0 Gas Tax Fund 353,459 434,738 30,624 768 403,346 Traffic Safety 85,650 58,735 9,140 2,718 52,313 Facilities 0 0 0 0 0 Development Measure 1 462,007 271,974 0 14,730 286,704 Wastewater Disp 1,677,535 1,673,760 9,187 91705 1,674,278 CDBG 154,379 110,100 0 0 110,100 LLMD 14,065 14,065 0 832 13,233 Total Spec/Ent 2,887,924 2,767,801 (48,951) 41,451 2,760,301 Funds Capital Project Funds —TABLE 5 Expenditure Reca FY 2010-11 Prelim FY Budget Other Prelim FY Revised 2011-12 Reduc- Changes 2011-12 Budget -tions REVISED #1 to # 6 Capitallmprov.- 652,205 828,732 0 0 828,732 Streets Barton Bride 950,114 94,088 0 0 94,088 Total Capital Proj 1,602,319 922,820 0 0 922,820 Funds Community Redevelopment Agency Funds - TABLE 6 Expenditure Reca FY 2010-11 Prelim FY Budget Other Prelim FY Revised 2011-12 Reduc- Changes 2011-12 Budget -tions REVISED #1 to # 6 Capital Pro' Fund 3,757,290 1,818,070 49,635 62,891 1,705,544 Debt Service Fund 6,408,555 7,082,960 0 113,285 7,196,245 CRA Low Mod 16,629 16,629 (7,804) (129,498) 17,716 Fund CRA Trust. Fund 01 241,500 0 0 241,500 Total CRA Funds 1 10,18 4741 9,159,159 57,439 79,104 9,161.005 FY projected Fund Balance Reserves are shown on Tables 7 through 9 below; Revised Projected FY 2011-12 Available Fund Balance Reserves - TABLE 7 Beginning Revenue Expenditure Ending Available FY 2011-12 FY 2011-12 Available General Fund 163,373 4,889,971 (4,711,212) 342,132 Total General Fund 163,373 4,889,971 4,711,212 342,132 Special Revenue /Ent r Street Fund 752,411 7,000 202,611 556,800 Storm Drain 64,919 3501 01 65,269 Continued Projected FY 2011-12 Available Fund Balance Reserves - TABLE 7 -continued Beginning Revenue Expenditure Ending Available FY 2011-12 FY 2011-12 Available Park Fund 218,791 7,100 17,716 208,175 AB 3229 COPS 0 0 0 0 Air Quality Fund 55,6661 14,250 0 69,216 Gas Tax Fund 92,147 405,860 403,346 94,661 Traffic Safety 40,624 70,000 52,313 22,937 Facilities Development 206,343 200 0 206,543 Measure 1 84,251 216,913 286,704 14,460 Wastewater 1,563,611 1,495,300 1,674,278 1,384,633 CDBG 0 110,100 110,100 0 LLMD 2,187 14,335 13,233 3,289 Total Spec Rev/Ent r 2,999,702 2,341,408 2,760,301 2,580,809 Other Funds Capital Im rov.-Streets 0 828,732 828,732 0 Barton/Colton Bride 0 94,088 94,088 0 Total Other Funds 0 922,820 922,820 0 TOTAL AVAILABLE- CITY 3,163,075 8,154-199 8,394,333 2,922,941 Projected FY 2011-12 Available Fund Balance Reserves CRA - TABLE 8 Beginning Revenue Expenditure Ending Available FY 2011-12 FY 2011-12 Available CRA Funds Capital Projects Fund 0 1,837,000 1,705,544 18,930 Debt Service Fund 1,251,673 6,052,858 7,196,245 221,571 CRA Low Mod Fund 0 1,280,560 1,130,385 12,873 Total CRA Funds 1,251,673 9,170,418 10,032,174 389,917 Projected FY 2011-12 Available Fund Balance Reserves CRA - TABLE 8 Beginning Revenue Expenditure Ending Available FY 2011-12 FY 2011-12 Available ALL Available Funds 4,414,748 17,324,617 18,426,507 3,312,858 Designated fund balance reserves are summarized in Table 9. The designated reserves include the various CRA reserves and the recently received bond proceeds. Projected Ending FY 2011-12 Designated Fund Balance Reserves - TABLE 9 Purpose Beginning Increases Decreases Ending Designated FY 2011- FY 2011- Designated 12 12 Wastewater— Improve- $682,760 0 0 682,760 Capital ments CRA Funds Debt Service Bond debt & 2,168,335 0 0 2,168,335 Fund Other Debt Service Pass through 1,836,429 0 0 1,836,429 Debt Service SERAF Loan <448,636> 0 0 <448,636> Low Mod Pass through 459,107 0 0 459,107 Low Mod LM project 417,946 0 0 417,946 CRA Trust CRA Econ. 1,207,500 0 (241,500) 966,000 Fund Agreement Total CRA 5,540,681 0 (241,500) 5,299,181 Desig Funds CRA Bond CRA Projects 18,528,672 0 0 18,528,672 Proceeds- Total CRA— 24,069,353 0 (241,500) 23,827,853 include. Bond Proceeds TOTAL 24,752,113 0 (241,500) 24,510,613 DESIG.Funds FISCAL IMPACT: Fiscal impact is included in the FY 2011-12 Budget document, as noted in the report. Respectfully submitted, Bernie Simon, Finance Director Manager Approval: Betsy . Adam City Manager ATTACHMENTS: Changes to FY 2011-12 Preliminary Budget City of Grand Terrace Changes to FY 2011-12 Budget 6/14/2011 Recommendations 1 to 6 plus update of Cost Allocation Charges Fund Fund Fund Fund Fund Fund Fund Fund Fund Fund Fund Fund Recommendation 10 11 14 15 16 17 20 21 26 32 33 34 Total 1 228,714 0 0 0 0 9,135 0 0 0 0 0 0 $ 237,849 2 51,465 0 0 0 0 0 0 0 0 0 0 0 $ 51,465 3 6,496 0 0 0 0 0 0 0 0 37,928 0 0 $ 44,424 4 52,880 0 0 0 0 0 0 0 0 0 0 0 $ 52,880 5 58,533 0 0 0 0 0 0 0 0 11,707 0 7,804 $ 78,044 6 23,600 0 0 0 30,624 0 0 9,187 0 0 0 0 $ 63,411 6 Adj (6,400) 0 0 0 0 0 0 0 0 0 0 0 $ (6,400) Changes 1 to 6 415,288 0 0 0 30,624 9,135 0 9,187 0 49,635 0 7,804 521,673 Other 0 0 0 0 0 0 0 0 0 0 0 Unison A 365,897 0 0 0 0 0 0 0 0 0 0 0 $ 365,897 Less:CT lease loss (21,000) 0 0 0 0 0 0 0 0 0 0 0 $ (21,000) Chng-CostAlloc (34,710) (15,511) (1,087) 700 768 (2,713) (14,730) (9,705) 832 62,891 (113,285) 129,498 $ 2,948 Changes 725,475 (15,511) (1,087) 700 31,392 6,422 (14,730) (518) 832 112,526 (113,285) 137,302 $ 869,518 CALI'FORNIA AGENDA REPORT MEETING DATE: June 21, 2011 Council Item ( X ) CRA Item ( X ) TITLE: Updated Information Impacting the Proposed FY 2011-12 Budget and Recommended Budget Reductions Presented on June 14, 2011 PRESENTED BY: Betsy M. Adams, City Manager RECOMMENDATION: Receive updated information impacting the proposed FY 2011-12 Budget and consider updated recommendations to close General Fund budget gap. BACKGROUND: The Budget Workshop and Budget Hearing for the proposed Fiscal Year (FY) 2011-12 Budget were conducted on June 14, 2011. This budget information was not provided sooner because the City Council wanted to first receive the Fiscal Sustainability Model (Model) for the General Fund which the Rosenow Spevacek Group, Inc. (RSG) presented on May 24, 2011. The Model developed was in response to the Governor's proposed elimination of redevelopment agencies and included a 20-year forecast of revenues and expenditures that identified a General Fund structural deficit which substantially increases over time unless significant mitigating actions are taken. At the Council Meeting on June 14, the Council decided to schedule a Special Meeting for June 21, 2011 in order to receive updated information on the State budget and on labor negotiations for Sheriff's Department safety and management employees represented by the San Bernardino County Safety Employees Benefit Association (SEBA). The Council further directed staff to present updated budget information including Recommended Budget Reductions #1 through #6, though Council did not take formal action to include these reductions, in the 2011-12 budget. The Council also directed that Recommended Budget Reduction #4 (Reduce Parks & City Hall Maintenance) be modified to include contracted cleaning of the parks seven days a week versus the three days proposed which reduces the savings from $23,600 to $17,200. The impact of #1 through #6 on the proposed FY 2011-12 Budget will be provided in a separate staff report by the Finance Director. Going into the June 21 Special Meeting, the Council provided direction, though formal action was not taken, to address 75 percent ($415,288) of General Fund revenue shortfall ($553,116) with reductions which would provide on-going budget savings. No Updated Information Impacting the Proposed FY 2011-12 Budget & Recommended Budget Reductions Presented on June 14 June 21, 2011 Page 2 use of fund balance or the General Fund cash balance was considered. The Council planned to consider Recommended Budget Reductions #7 and #8 after receiving updated information at the Special Meeting. The following table summarizes the direction provided by Council on June 14: Recommended FY 2011-12 Budget Reductions (Includes Council Direction on June 14) # Description $ 1 Remove Traffic Deputy Position from Sheriffs Contract 228,714 2 Merge Rental Inspection Program into Code Enforcement 51,465 I 3 Defund Management Analyst Position in Community Development 6,49611 $415,288 4 Defund Community Events Program 52,880 5 Defund Deputy City Clerk Position 58,533 6 Reduce Parks & City Hall Maintenance (previously$23,600) 17,200 7 Defund Management Analyst Position in Public Works 21,584 8 Share Patrol Deputy with City of Loma Linda 118,404 Total (previously$561,676) 555,276 DISCUSSION: There is a significant amount of information to be considered at the June 21 Special Meeting which will be presented in the following subsections: ■ State Budget Developments Impacting Redevelopment Agencies ■ State Budget Developments Impacting State Funding of Local Law Enforcement ■ Status of Recommended Budget Reductions #7 and #8 ■ Consideration of a Local Tax Measure ■ Policy Issues ■ Direction Needed for June 28 Budget Adoption State Budget Developments Impacting Redevelopment Agencies On June 15, the Legislature passed nine bills to balance the State's 2011-12 budget including two budget trailer bills (AB 1X 26 / SIB 14 X1) and AB 1X 27 / SIB 15 X1) which seriously impact redevelopment agencies. AB 1X 26 eliminates redevelopment agencies and AB 1X 27 establishes the Alternative Voluntary Redevelopment Program which requires cities and counties to pay $1.7 billion to schools, fire districts and transit Updated Information Impacting the Proposed FY 2011-12 Budget & Recommended Budget Reductions Presented on June 14 June 21, 2011 Page 3 districts in 2011-12 and $400 million ongoing. On June 16, the Governor vetoed the main budget bills (AB 98 and SIB 69). This veto had no impact on the budget trailer bills which the Governor has not yet received. At a press conference later that day, the Governor indicated that he does not plan to veto all the trailer bills. He stated "there's some that I think could be very helpful." He declined to talk about specific trailer bills, including the redevelopment bills. In response to these developments, the League of California Cities and the California Redevelopment Association intend to file a lawsuit, including a request for a stay to prevent the laws from going into effect while the lawsuit is decided, if the Governor signs the two redevelopment bills. If signed by the Governor, the redevelopment bills would take effect immediately. Redevelopment agencies would be replaced by successor agencies with limited authority that extends only to the extent needed "to expeditiously wind down the affairs of the dissolved redevelopment agency affairs." As Grand Terrace would intend to participate in the Alternative Voluntary Redevelopment Program provided for in AB 1X 27, there would be limited activity by the successor agency for a period of about three months, depending on when the Governor signs the bills. During this period, AB 1X 26 specifically prohibits the following as part of the process of reducing redevelopment agencies activity prior to their elimination: ■ Issuing new or expanded debt of any type (except emergency refunding of bonds, under certain conditions). ■ Making loans or advances or grants or entering into agreements to provide funds or financial assistance. ■ Executing new or additional contracts, obligations or commitments. ■ Amending existing agreements or commitments. ■ Selling or otherwise disposing of existing assets. ■ Acquiring real property for any purpose by any means. ■ Accepting financial assistance from any public or private source that is contingent on this issuance of debt. ■ Adopting or amending redevelopment plans or making new findings with respect to blight. ■ Entering into new partnerships, imposing new assessments, or increasing staff or compensation. ■ Other actions that would result in ongoing commitments or a depletion of assets. During this time the successor agencies (for Grand Terrace this would be the City) would need to identify its "enforceable obligations" as defined by the bill and would need to prepare a Recognized Obligation Payment Schedule (semi-annual requirement). Our redevelopment agency's backfill of the residual receipts agreement would end, as it would not be considered an enforceable obligation. If the Governor signed AB 1X 26 by June 30, this would be a loss of $300,000 in revenue to the General Fund beginning in Updated Information Impacting the Proposed FY 2011-12 Budget & Recommended Budget Reductions Presented on June 14 June 21, 2011 Page 4 FY 2011-12. If he signs the bill after that date then the General Fund revenue loss would be in subsequent years. AB 1X 27 has specific requirements to establish the Alternative Voluntary Redevelopment Program: ■ Adopt a non-binding resolution of intent to participate in the Alternative Voluntary Redevelopment Program and notify the Department of Finance, Controller and County Auditor-Controller prior to October 1, 2011. ■ Adopt an ordinance to participate in the Alternative Voluntary Redevelopment Program and notify the Department of Finance, Controller and County Auditor- Controller no later than November 1, 2011. ■ Make required remittances to school, fire districts, and transit districts as specified in the bill. Half of the annual payment needs to be remitted by January 15 with the other half due by May 15. The California Redevelopment Association is preparing estimates of the required remittances which should be available this week. In the meantime, RSG developed a conservative estimate of Grand Terrace's payment for FY 2011-12 ($2.85 million) which includes a matter presently in Closed Session. When this issue is resolved, the City would appeal this amount to the Department of Finance. If successful, the amount could be reduced to $2.3 million. The City has funds available to make the required "voluntary" payment, even at the higher estimate, though doing so would significantly limit the City's ability to do projects in FY 2011-12. State Budget Developments Impacting State Funding of Local Law Enforcement While one of the budget trailer bills (AB 1X 22 / SIB 10 1X) addressed vehicle license fees, funding for local law enforcement was not included. The Governor and the Legislature have acknowledged the need to address the $504 million in funding historically dedicated to local public safety programs due to end on June 30, 2011. This may happen if the Governor's tax continuation measures are placed on a future ballot. Status of Recommended Budget Reductions #7 and #8 There were two recommended budget reductions for which additional information is to be provided for consideration at the June 21 Special Meeting. For #7, defund Management Analyst position in Public Works, staff was to obtain cost information on the possibility of cost sharing Loma Linda's Emergency Services Coordinator position. Staff has received a verbal estimate from Loma Linda of $24,724 which exceeds the General Fund budget savings for this position. Instead of implementing this budget recommendation, staff proposes using extra savings to be received from restating the City's PERS reports to continue funding this position. Doing this, plus avoiding the accrual payouts for the employee in the impacted position, would generate one-time budget savings slightly in excess of the saving anticipated by implementing the budget reduction. The status of this position would have to be evaluated again in FY 2012-13. Updated Information Impacting the Proposed FY 2011-12 Budget & Recommended Budget Reductions Presented on June 14 June 21, 2011 Page 5 Maintaining it next fiscal year will provide an adequate level of professional staff in the Public Works department. For #8, reduce patrol deputy position by one half, the City learned at the June 14 Council Meeting that the members of SEBA are scheduled to vote on June 30 on changes to their Memorandum of Understanding (MOU) with the County which could result in contract savings. The results of this vote will be counted on July 1. If approved, staff estimates the savings may be $30,000 to $40,000 in FY 2011-12. With regard to the State's funding of the COPS grant and booking fees through the motor vehicle license fee, the budget trailer bills did not make a provision for these. Perhaps this will be addressed if the Governor's tax extensions are place on a future ballot. The patrol deputy could be restored to a full position through the use of the General Fund's fund balance but doing so would reduce the balance to $45,000 until the revenue is received for selling the cell phone tower leases (due in about 90 days). Short term use of the General Fund's cash could be considered but is not recommended since it appears likely that redevelopment agencies will be eliminated. The Council may also choose to restore the deputy position from half to full if the COPS grant is restored during FY 2011-12. Consideration of a Local Tax Measure With the possibility that redevelopment agencies would be eliminated and replaced with the Alternative Voluntary Redevelopment Program, the City's fiscal circumstances have reached the point where consideration needs to be given to a local tax measure. At the June 14 Council Meeting, the Council was advised that if the FY 2011-12 budget was balanced without the use of one-time funds then the projected General Fund revenue shortfall for FY 2012-13 would be approximately $300,000. Since AB 1X 26 eliminates any agreements, contracts or arrangements between the City and its redevelopment agency, the residual receipts backfill by the agency would end. If the Governor signs the redevelopment bills by June 30, the General Fund would have an additional revenue shortfall of $300,000 in FY 2011-12 and the estimated shortfall for FY 2012-13 would increase to $600,000. If the Governor signs the redevelopment bills on July 1 or later, there would not be an additional GF revenue shortfall in FY 2011-12 but the $600,000 estimated shortfall for FY 2012-13 would remain and would need to be addressed by additional service level reductions such as reduced business hours, facility closures, and defunding of additional filled positions. The California Constitution, Article 13C Section 2(b) addresses the timing for a local tax measure: "The election required by this subdivision shall be consolidated with a regularly scheduled general election for members of the governing body of the local government, except in cases of emergency declared by a unanimous vote of the governing body." This means the soonest a non emergency local tax measure could be considered would be the November 6, 2012 election. Updated Information Impacting the Proposed FY 2011-12 Budget & Recommended Budget Reductions Presented on June 14 June 21, 2011 Page 6 Policy Issues At the June 14 Budget Hearing, three policy issues were raised: ■ Should the City proceed with the dog park or the westside park when parks maintenance staffing would be reduced? ■ Should the City consider using reserves to maintain the current level of patrol service since it is identified in the Model as a mandated service? ■ Should the City explore alternatives to the Sheriff's Department for law enforcement services? A decision on the second policy issue, use of reserves to maintain patrol service, needs to be made at the June 21 Special Meeting. Decisions on the future parks should be deferred until the Governor either signs the redevelopment bills or returns them to the Legislature unsigned. In addition, another policy issue has been raised in this staff report: • Should consideration of a local tax measure be scheduled for a future City Council Workshop? Direction Needed for Budget Adoption on June 28 While mentioned elsewhere in this staff report, decisions are needed on the following items so that the budget can be finalized for adoption at the June 28 Council Meeting: ■ Should Recommended Budget Reductions #1 through #6 be included in the FY 2011-12 Budget? Staff recommends including these reductions. If any are excluded, then the Council needs to provide direction on how to replace the anticipated General Fund budget savings (e.g. reductions elsewhere in the budget, use of fund balance, etc.) ■ Should Recommended Budget Reduction #7 be included in the FY 2011-12 Budget? Staff recommends not including this reduction. Anticipated savings would by replaced with the extra savings to be received from restating the City's PERS reports plus avoiding the accrual payouts for the employee in the impacted position. While these are one-time savings they exceed the savings of defunding the position. If the Council chooses to include this reduction then there will be additional General Fund budget savings. ■ Should Recommended Budget Reduction #8 be included in the FY 2011-12 Budget? Staff recommends including this reduction. If the State restores funding for the COPS grant, and if a majority of SEBA's members approve contract reductions, then funds would be available to restore the patrol deputy from half to full. The Council also has Updated Information Impacting the Proposed FY 2011-12 Budget & Recommended Budget Reductions Presented on June 14 June 21, 2011 Page 7 the option of restoring the patrol position from half to full through the use available fund balance in the General Fund. Providing direction on these budget items on June 21 does not preclude the Council from making changes at the June 28 Council Meeting. FISCAL IMPACT: If the Recommended Budget Reductions (implement #1 through #6, use of one-time savings to avoid implementing #7, and either implementing #8 or using fund balance to restore the service) are implemented the projected General Fund deficit in FY 2011-12 would be eliminated, assuming that the Governor does not sign the redevelopment bills by June 30. If he does, then staff will bring back recommendations in July to address the additional $300,000 revenue shortfall in the General Fund created by the loss of residual receipts backfill. Respectfully submitted: Betsy M dams City Manager ATTACHMENTS: None. CITY OF GRAND TERRACE NOTICE AND CALL OF SPECIAL MEETING OF THE CITY COUNCIL AND COMMUNITY REDEVELOPMENT AGENCY TO THE MEMBERS OF THE CITY COUNCIL AND COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF GRAND TERRACE AND TO THE CITY CLERK: NOTICE IS HEREBY GIVEN that a Special Meeting of the City Council and the Community Redevelopment Agency of the City of Grand Terrace is hereby called to be held on Tuesday, June 21, 2011at 6:00 p.m. in the Council Chambers, located in the Grand Terrace Civic Center, 22795 Barton Road, Grand Terrace, California. Said Special Meeting shall be for: 1. Review Fiscal Year 2011-12 Preliminary Budget 2. Closed Session — Conference with Legal Counsel - Potential Litigation per GC54956.9(b) — One Case Dated: June 16, 2011 WALT STANCKIEWITZ, MAYOR CALIFORNIA AGENDA REPORT MEETING DATE: June 21, 2011 Council Item ( X ) CRA Item (X) TITLE: FY 2011-12 Preliminary Budget PRESENTED BY: Bernie Simon, Finance Director RECOMMENDATION: For discussion BACKGROUND: The City Council conducted a budget workshop review of the proposed City budget for Fiscal Year 2011-2012 in a special meeting on June 14. Council was also presented with eight budget reduction recommendations by the City Manager. As a result of the City Manager's presentation, Council directed Staff to present revised budget numbers with City Manager budget reduction recommendations #1 through #6 in a special meeting on June 21, 2011. DISCUSSION: Changes to the FY 2011-12 Preliminary Budget include the effects of City Manager reduction recommendations one through six. Recommendation six was reduced by $6,400 in order increase the level of service of proposed park restroom cleaning services. On June 14, 2011, the City Council also directed the sale of the cell tower leases to Unison. General Fund revenue was increased by $344,897 for anticipated net revenue for sale of cell tower leases less the loss of monthly rentals of approximately seven months. The sale is expected to occur in October 2011. The ruction recommendations also resulted in recalculation of the cost allocation which was a net increase to the General Fund in the amount of$34,710. The City budget includes the General Fund, Special Revenue Funds and Capital Projects Fund. For FY 2011-12, the City budget consists of proposed expenditures of $8,394,333 supported by estimated revenues of$8,154,199. The proposed City budget has a combined deficit of$(240,134) comprised of shortfalls in the Special Revenue and Enterprise Funds. The ending combined City fund balance reserves is projected to be $2,922,941, excluding reserve designations. The revised Preliminary FY 2011-12 General Fund budget consists of proposed expenditures of$4,717,612, including transfers out, supported by estimated revenues of $4,889,971. Budget reduction recommendations one through six reduced the General Fund deficit $421,688. The net sale of the cell tower leases and the decrease in the cost allocation to the General Fund would increase the net budget by an additional $310,187. Therefore, the original General Fund budget deficit would go from ($553,116) to a budget surplus of $178,759 and changed the projected ending General Fund Balance Reserve from negative ($389,743) to a positive $342,132. The revised Preliminary FY 2011-12 Special Revenue Fund and Enterprise Fund budget includes proposed expenditures of $2,760,301, including transfers out, supported by estimated revenues of $2,341,408. The proposed Special Revenue Fund budget has combined expenditures over revenue of $418,893 with a projected ending fund balance reserve of $2,922,941. Expenditures over revenue in Special Revenue Funds that are capital improvement funds or developer impact fee funds do not have an operational issue and are more dependent on the timing of capital projects. The Special Revenue and Enterprise Fund reserve includes $1,384,633 of available funds and a Waste Water Disposal designated reserve of $682,760 for interagency capital funds. The Traffic Safety Fund is projected to have a negative balance due to the "catch-up" of contract amounts owed to Redflex for the red-light camera fines that was temporarily borrowed from the Facilities Fund. The FY 2011-12 Capital Projects Fund budget consists of proposed expenditures of $922,820, including transfers out, supported by estimated revenues of$922,820. The FY 2011-12 CRA Fund budget consists of proposed expenditures of $10,032,174 including transfers out, supported by estimated revenues of $9,170,418. CRA reserve includes $389,917 of available funds and $5,299,181 of designated funds. Also, last weeks' closing of the 2011 Redevelopment Tax Allocation Bonds delivered $18,528,672 proceeds that were deposited into the designated CRA Capital Projects Fund. Net changes to the budget are shown in Table 1. REVISED CITY REVENUE AND EXPENDITURES - Net Changes—TABLE 1 Fund Revenue Expenditures Surplus Net Revised 06-14-11 06-14-11 (Deficit) Changes Surplus 06-14-11 06-21-11 Deficit General Fund 4,545,074 5,098,190 553,116 731,875 178,759 Special 2,341,408 (2,767,801) (426,393) 7,500 (418,893) Rev/Entr Capital Project 922,820 922,820 0 0 0 Total CITY $7,809,302 8,788,811 $979,509 739,375 240,134 Total CRA 9,170,418 10,410,217 1,239,799 136,543 1,103,256 Total 1 16,979,720 19,199,028 2,219,308 875,918 1,343,390 a Changes to budget revenues and expenditures are summarized as follows on Table 2 and Table 3: FY 2011-12 Budget Revenue Recap - TABLE 2 FY 2010-11 Prelim FY Budget Other Prelim FY Revised 2011-12 Reduc- Changes 2011-12 Budget -tions REVISED #1 to # 6 General Fund 4,697,558 4,545,074 0 344,897 4,889,971 Total Spec/Ent 2,887,924 2,767,801 0 0 2,767,801 Funds Total Capital Proj 1,602,319 922,820 0 0 922,820 Funds Total CRA Funds 10,182,474 9,170,418 0 0 9,170,418 Total Revenue 19,370,275 17,406,113 0 344,897 17,751,010 General Fund Expenditures by Department- TABLE 3 Ex enditure Reca FY 2010- Prelim FY Budget Other Prelim FY 11 2011-12 Reduc- Changes 2011-12 Revised -tions REVISED Budget #1 to #6 City Council 48,100 53,880 0 0 53,880 City Manager 262,391 272,035 0 0 272,035 City Clerk 187,890 176,595 58,533 0 118,062 Finance 267,338 275,011 0 0 275,011 City Attorney 60,000 60,000 0 0 60,000 Building & Safety 131,543 137,010 0 0 137,010 Public Works 232,669 228,440 9,187 0 219,253 Comm.Events/CD 55,201 52,880 52,880 0 0 Rental Inspection 65,043 68,900 68,900 0 0 Enforcmnt. Pro . 134,039 134,569 0 0 134,569 Non-Departmental 314,315 309,230 0 0 309,230 Facilities Maint. 157,849 172,849 10,000 0 182,849 Comm Econ Dev 211,103 211,565 10,939 0 222,504 Info.S stems 74,041 79,175 0 0 79,175 continued General Fund Expenditures by Department- TABLE 3- Continued FY 2010- Prelim FY Budget Other Prelim FY 11 2011-12 Reduc- Changes 2011-12 Revised -tions REVISED Budget #1 to # 6 Law Enforcement 2,025,596 2,239,115 228,714 0 2,010,401 Child Care 867,380 863,630 0 0 863,630 Park Maintenance 174,171 171,930 18,013 0 153,917 NPDES 91,891 83,668 0 0 83,668 Storm Drain Maint 16,000 16,000 0 0 16,000 Planning Comm 2,500 2,395 0 0 2,395 Historical Cultural 1,200 1,200 0 0 1,200 Sen. Citizens Prg 29,588 27,000 0 0 27,000 EOC/CERT 10,320 10,320 0 0 10,320 Cost Allocation 549,207 549,207 0 34,710 514,497 Total General 4,870,961 5,098,190 (415,288) 34,710 4,717,612 Fund Special Revenue/Enterprise Funds - TABLE 4 Ex enditure Reca FY 2010- Prelim FY Budget Other Prelim FY 11 2011-12 Reduc- Changes 2011-12 Revised -tions REVISED Budget #1 to # 6 Street Fund 91,500 187,100 0 15,511 202,611 Storm Drain 0 0 0 0 0 Park Fund 16,629 16,629 0 1,087 17,716 AB 3229 COPS 0 0 0 0 0 Air Quality Fund 32,700 700 0 700 0 Gas Tax Fund 353,459 434,738 30,624 768 403,346 Traffic Safety 85,650 58,735 9,140 2,718 52,313 Facilities 0 0 0 0 0 Development Measure 1 462,007 271,974 0 14,730 286,704 Wastewater Disp 1,677,535 1,673,760 9,187 9,705 1,674,278 CDBG 154,379 110,100 0 0 110,100 LLMD 14,065 14,065 0 832 13,233 Total Spec/Ent 2,887,924 2,767,801 (48,951) 41,451 2,760,301 Funds Capital Project Funds —TABLE 5 Expenditure Reca FY 2010-11 Prelim FY Budget Other Prelim FY Revised 2011-12 Reduc- Changes 2011-12 Budget -tions REVISED #1 to # 6 Capitallmprov.- 652,205 828,732 0 0 828,732 Streets Barton Bride 950,114 94,088 0 0 94,088 Total Capital Proj 1,602,319 922,820 0 0 922,820 Funds Community Redevelopment Agency Funds - TABLE 6 Expenditure Reca FY 2010-11 Prelim FY Budget Other Prelim FY Revised 2011-12 Reduc- Changes 2011-12 Budget -tions REVISED #1 to #6 Capital Pro' Fund 3,757,290 1,818,070 49,635 62,891 1,705,544 Debt Service Fund 6,408,555 7,082,960 0 113,285 7,196,245 CRA Low Mod 16,629 16,629 (7,804) (129,498) 17,716 Fund CRA Trust. Fund 0 241,500 0 0 241,500 Total CRA Funds 10,182,474 9,159,159 57,439 79,104 9,161,005 FY projected Fund Balance Reserves are shown on Tables 7 through 9 below; Revised Projected FY 2011-12 Available Fund Balance Reserves - TABLE 7 Beginning Revenue Expenditure Ending Available FY 2011-12 FY 2011-12 Available General Fund 163,373 4,889,971 (4,711,212) 342,132 Total General Fund 163,373 4,889,971 4,711,212 342,132 Special Revenue /Ent r Street Fund 752,411 7,000 202,611 556,800 Storm Drain 64,9191 3501 0 65,269 Continued Projected FY 2011-12 Available Fund Balance Reserves - TABLE 7 -continued Beginning Revenue Expenditure Ending Available FY 2011-12 FY 2011-12 Available Park Fund 218,791 7,100 17,716 208,175 AB 3229 COPS 0 0 0 0 Air Quality Fund 55,666 14,250 0 69,216 Gas Tax Fund 92,147 405,860 403,346 94,661 Traffic Safe 40,624 70,000 52,313 22,937 Facilities Development 206,343 200 0 206,543 Measure 1 84,251 216,913 286,704 14,460 Wastewater 1,563,611 1,495,300 1,674,278 1,384,633 CDBG 0 110,100 110,100 0 LLMD 2,187 14,335 13,233 3,289 Total Spec Rev/Ent r 2,999,702 2,341,408 2,760,301 2,580,809 Other Funds Capital Im rov.-Streets 0 828,732 828,732 0 Barton/Colton Bride 0 94,088 94,088 0 Total Other Funds 0 922,820 922,820 0 TOTAL AVAILABLE- CITY 3,163,0751 8,154,199 8,394,333 2,922,941 Projected FY 2011-12 Available Fund Balance Reserves CRA - TABLE 8 Beginning Revenue Expenditure Ending Available FY 2011-12 FY 2011-12 Available CRA Funds Capital Projects Fund 0 1,837,000 1,705,544 18,930 Debt Service Fund 1,251,673 6,052,858 7,196,245 221,571 CRA Low Mod Fund 0 1,280,560 1,130,385 12,873 Total CRA Funds 1,251,673 9,170,418 10,032,174 389,917 Projected FY 2011-12 Available Fund Balance Reserves CRA - TABLE 8 Beginning Revenue Expenditure Ending Available I FY 2011-12 FY 2011-12 Available ALL Available Funds 4,414,748 1 17,324,617 18,426,507 3,312,858 Designated fund balance reserves are summarized in Table 9. The designated reserves include the various CRA reserves and the recently received bond proceeds. Projected Ending FY 2011-12 Designated Fund Balance Reserves - TABLE 9 Purpose Beginning Increases Decreases Ending Designated FY 2011- FY 2011- Designated 12 12 Wastewater— Improve- $682,760 0 0 682,760 Capital ments CRA Funds Debt Service Bond debt & 2,168,335 0 0 2,168,335 Fund Other Debt Service Pass through 1,836,429 0 0 1,836,429 Debt Service SERAF Loan <448,636> 0 0 <448,636> Low Mod Pass through 459,107 0 0 459,107 Low Mod LM project 417,946 0 0 417,946 CRA Trust CRA Econ. 1,207,500 0 (241,500) 966,000 Fund Agreement Total CRA 5,540,681 0 (241,500) 5,299,181 Desig Funds CRA Bond CRA Projects 18,528,672 0 0 18,528,672 Proceeds- Total CRA— 24,069,353 0 (241,500) 23,827,853 include. Bond Proceeds TOTAL 24,752,113 0 (241,500) 24,510,613 DESIG.Funds FISCAL IMPACT: Fiscal impact is included in the FY 2011-12 Budget document, as noted in the report. Respectfully submitted, Bernie Simon, Finance Director Manager Approval: Betsy . Adam City Manager ATTACHMENTS: Changes to FY 2011-12 Preliminary Budget City of Grand Terrace Changes to FY 2011-12 Budget 6114/2011 Recommendations 1 to 6 plus update of Cost Allocation Charges Fund Fund Fund Fund Fund Fund Fund Fund Fund Fund Fund Fund Recommendation 10 11 14 15 16 17 20 21 26 32 33 34 Total 1 228,714 0 0 0 0 9,135 0 0 0 0 0 0 $ 237,849 2 51,465 0 0 0 0 0 0 0 0 0 0 0 $ 51,465 3 6,496 0 0 0 0 0 0 0 0 37,928 0 0 $ 44,424 4 52,880 0 0 0 0 0 0 0 0 0 0 0 $ 52,880 5 58,533 0 0 0 0 0 0 0 0 11,707 0 7,804 $ 78,044 6 23,600 0 0 0 30,624 0 0 9,187 0 0 0 0 $ 63,411 6 Adj (6,400) 0 0 0 0 0 0 0 0 0 0 0 $ (6,400) Changes 1 to 6 415,288 0 0 0 30,624 9,135 0 9,187 0 49,635 0 7,804 521,673 Other 0 0 0 0 0 0 0 0 0 0 0 Unison A 365,897 0 0 0 0 0 0 0 0 0 0 0 $ 365,897 Less:CT lease loss (21,000) 0 0 0 0 0 0 0 0 0 0 0 $ (21,000) Chng-Cost Alloc (34,710) (15,511) (1,087) 700 768 (2,713) (14,730) (9,705) 832 62,891 (113,285) 129,498 $ 2,948 Changes 725,475 (15,511) (1,087) 700 31,392 6,422 (14,730) (518) 832 112,526 (113,285) 137,302 $ 869,518 CALIFORNIA AGENDA REPORT MEETING DATE: June 21, 2011 Council Item ( X ) CRA Item ( X ) TITLE: Updated Information Impacting the Proposed FY 2011-12 Budget and Recommended Budget Reductions Presented on June 14, 2011 PRESENTED BY: Betsy M. Adams, City Manager RECOMMENDATION: Receive updated information impacting the proposed FY 2011-12 Budget and consider updated recommendations to close General Fund budget gap. BACKGROUND: The Budget Workshop and Budget Hearing for the proposed Fiscal Year (FY) 2011-12 Budget were conducted on June 14, 2011. This budget information was not provided sooner because the City Council wanted to first receive the Fiscal Sustainability Model (Model) for the General Fund which the Rosenow Spevacek Group, Inc. (RSG) presented on May 24, 2011. The Model developed was in response to the Governor's proposed elimination of redevelopment agencies and included a 20-year forecast of revenues and expenditures that identified a General Fund structural deficit which substantially increases over time unless significant mitigating actions are taken. At the Council Meeting on June 14, the Council decided to schedule a Special Meeting for June 21, 2011 in order to receive updated information on the State budget and on labor negotiations for Sheriffs Department safety and management employees represented by the San Bernardino County Safety Employees Benefit Association (SEBA). The Council further directed staff to present updated budget information including Recommended Budget Reductions #1 through #6, though Council did not take formal action to include these reductions, in the 2011-12 budget. The Council also directed that Recommended Budget Reduction #4 (Reduce Parks & City Hall Maintenance) be modified to include contracted cleaning of the parks seven days a week versus the three days proposed which reduces the savings from $23,600 to $17,200. The impact of #1 through #6 on the proposed FY 2011-12 Budget will be provided in a separate staff report by the Finance Director. Going into the June 21 Special Meeting, the Council provided direction, though formal action was not taken, to address 75 percent ($415,288) of General Fund revenue shortfall ($553,116) with reductions which would provide on-going budget savings. No Updated Information Impacting the Proposed FY 2011-12 Budget & Recommended Budget Reductions Presented on June 14 June 21, 2011 Page 2 use of fund balance or the General Fund cash balance was considered. The Council planned to consider Recommended Budget Reductions #7 and #8 after receiving updated information at the Special Meeting. The following table summarizes the direction provided by Council on June 14: Recommended FY 2011-12 Budget Reductions (Includes Council Direction on June 14) # Description $ 1 Remove Traffic Deputy Position from Sheriff's Contract 228,714 2 Merge Rental Inspection Program into Code Enforcement 51,465 I 3 Defund Management Analyst Position in Community Development 6,496 $415,288 4 Defund Community Events Program 52,880 5 Defund Deputy City Clerk Position 58,533 6 Reduce Parks & City Hall Maintenance (previously$23,600) 17,200 7 Defund Management Analyst Position in Public Works 21,584 8 Share Patrol Deputy with City of Loma Linda 118,404 Total (previously$561,676) 555,276 DISCUSSION: There is a significant amount of information to be considered at the June 21 Special Meeting which will be presented in the following subsections: ■ State Budget Developments Impacting Redevelopment Agencies ■ State Budget Developments Impacting State Funding of Local Law Enforcement ■ Status of Recommended Budget Reductions#7 and #8 ■ Consideration of a Local Tax Measure ■ Policy Issues ■ Direction Needed for June 28 Budget Adoption State Budget Developments Impacting Redevelopment Agencies On June 15, the Legislature passed nine bills to balance the State's 2011-12 budget including two budget trailer bills (AB 1X 26 / SB 14 X1) and AB 1X 27 / SB 15 X1) which seriously impact redevelopment agencies. AB 1X 26 eliminates redevelopment agencies and AB 1X 27 establishes the Alternative Voluntary Redevelopment Program which requires cities and counties to pay $1.7 billion to schools, fire districts and transit Updated Information Impacting the Proposed FY 2011-12 Budget & Recommended Budget Reductions Presented on June 14 June 21, 2011 Page 3 districts in 2011-12 and $400 million ongoing. On June 16, the Governor vetoed the main budget bills (AB 98 and SB 69). This veto had no impact on the budget trailer bills which the Governor has not yet received. At a press conference later that day, the Governor indicated that he does not plan to veto all the trailer bills. He stated "there's some that I think could be very helpful." He declined to talk about specific trailer bills, including the redevelopment bills. In response to these developments, the League of California Cities and the California Redevelopment Association intend to file a lawsuit, including a request for a stay to prevent the laws from going into effect while the lawsuit is decided, if the Governor signs the two redevelopment bills. If signed by the Governor, the redevelopment bills would take effect immediately. Redevelopment agencies would be replaced by successor agencies with limited authority that extends only to the extent needed "to expeditiously wind down the affairs of the dissolved redevelopment agency affairs." As Grand Terrace would intend to participate in the Alternative Voluntary Redevelopment Program provided for in AB 1X 27, there would be limited activity by the successor agency for a period of about three months, depending on when the Governor signs the bills. During this period, AB 1X 26 specifically prohibits the following as part of the process of reducing redevelopment agencies activity prior to their elimination: ■ Issuing new or expanded debt of any type (except emergency refunding of bonds, under certain conditions). ■ Making loans or advances or grants or entering into agreements to provide funds or financial assistance. ■ Executing new or additional contracts, obligations or commitments. ■ Amending existing agreements or commitments. ■ Selling or otherwise disposing of existing assets. ■ Acquiring real property for any purpose by any means. ■ Accepting financial assistance from any public or private source that is contingent on this issuance of debt. ■ Adopting or amending redevelopment plans or making new findings with respect to blight. ■ Entering into new partnerships, imposing new assessments, or increasing staff or compensation. ■ Other actions that would result in ongoing commitments or a depletion of assets. During this time the successor agencies (for Grand Terrace this would be the City) would need to identify its "enforceable obligations" as defined by the bill and would need to prepare a Recognized Obligation Payment Schedule (semi-annual requirement). Our redevelopment agency's backfill of the residual receipts agreement would end, as it would not be considered an enforceable obligation. If the Governor signed AB 1X 26 by June 30, this would be a loss of $300,000 in revenue to the General Fund beginning in Updated Information Impacting the Proposed FY 2011-12 Budget & Recommended Budget Reductions Presented on June 14 June 21, 2011 Page 4 FY 2011-12. If he signs the bill after that date then the General Fund revenue loss would be in subsequent years. AB 1X 27 has specific requirements to establish the Alternative Voluntary Redevelopment Program: ■ Adopt a non-binding resolution of intent to participate in the Alternative Voluntary Redevelopment Program and notify the Department of Finance, Controller and County Auditor-Controller prior to October 1, 2011. ■ Adopt an ordinance to participate in the Alternative Voluntary Redevelopment Program and notify the Department of Finance, Controller and County Auditor- Controller no later than November 1, 2011. ■ Make required remittances to school, fire districts, and transit districts as specified in the bill. Half of the annual payment needs to be remitted by January 15 with the other half due by May 15. The California Redevelopment Association is preparing estimates of the required remittances which should be available this week. In the meantime, RSG developed a conservative estimate of Grand Terrace's payment for FY 2011-12 ($2.85 million) which includes a matter presently in Closed Session. When this issue is resolved, the City would appeal this amount to the Department of Finance. If successful, the amount could be reduced to $2.3 million. The City has funds available to make the required "voluntary" payment, even at the higher estimate, though doing so would significantly limit the City's ability to do projects in FY 2011-12. State Budget Developments Impacting State Funding of Local Law Enforcement While one of the budget trailer bills (AB 1X 22 / SB 10 1X) addressed vehicle license fees, funding for local law enforcement was not included. The Governor and the Legislature have acknowledged the need to address the $504 million in funding historically dedicated to local public safety programs due to end on June 30, 2011. This may happen if the Governor's tax continuation measures are placed on a future ballot. Status of Recommended Budget Reductions #7 and #8 There were two recommended budget reductions for which additional information is to be provided for consideration at the June 21 Special Meeting. For #7, defund Management Analyst position in Public Works, staff was to obtain cost information on the possibility of cost sharing Loma Linda's Emergency Services Coordinator position. Staff has received a verbal estimate from Loma Linda of $24,724 which exceeds the General Fund budget savings for this position. Instead of implementing this budget recommendation, staff proposes using extra savings to be received from restating the City's PERS reports to continue funding this position. Doing this, plus avoiding the accrual payouts for the employee in the impacted position, would generate one-time budget savings slightly in excess of the saving anticipated by implementing the budget reduction. The status of this position would have to be evaluated again in FY 2012-13. Updated Information Impacting the Proposed FY 2011-12 Budget & Recommended Budget Reductions Presented on June 14 June 21, 2011 Page 5 Maintaining it next fiscal year will provide an adequate level of professional staff in the Public Works department. For #8, reduce patrol deputy position by one half, the City learned at the June 14 Council Meeting that the members of SEBA are scheduled to vote on June 30 on changes to their Memorandum of Understanding (MOU) with the County which could result in contract savings. The results of this vote will be counted on July 1. If approved, staff estimates the savings may be $30,000 to $40,000 in FY 2011-12. With regard to the State's funding of the COPS grant and booking fees through the motor vehicle license fee, the budget trailer bills did not make a provision for these. Perhaps this will be addressed if the Governor's tax extensions are place on a future ballot. The patrol deputy could be restored to a full position through the use of the General Fund's fund balance but doing so would reduce the balance to $45,000 until the revenue is received for selling the cell phone tower leases (due in about 90 days). Short term use of the General Fund's cash could be considered but is not recommended since it appears likely that redevelopment agencies will be eliminated. The Council may also choose to restore the deputy position from half to full if the COPS grant is restored during FY 2011-12. Consideration of a Local Tax Measure With the possibility that redevelopment agencies would be eliminated and replaced with the Alternative Voluntary Redevelopment Program, the City's fiscal circumstances have reached the point where consideration needs to be given to a local tax measure. At the June 14 Council Meeting, the Council was advised that if the FY 2011-12 budget was balanced without the use of one-time funds then the projected General Fund revenue shortfall for FY 2012-13 would be approximately $300,000. Since AB 1X 26 eliminates any agreements, contracts or arrangements between the City and its redevelopment agency, the residual receipts backfill by the agency would end. If the Governor signs the redevelopment bills by June 30, the General Fund would have an additional revenue shortfall of $300,000 in FY 2011-12 and the estimated shortfall for FY 2012-13 would increase to $600,000. If the Governor signs the redevelopment bills on July 1 or later, there would not be an additional GF revenue shortfall in FY 2011-12 but the $600,000 estimated shortfall for FY 2012-13 would remain and would need to be addressed by additional service level reductions such as reduced business hours, facility closures, and defunding of additional filled positions. The California Constitution, Article 13C Section 2(b) addresses the timing for a local tax measure: "The election required by this subdivision shall be consolidated with a regularly scheduled general election for members of the governing body of the local government, except in cases of emergency declared by a unanimous vote of the governing body." This means the soonest a non emergency local tax measure could be considered would be the November 6, 2012 election. Updated Information Impacting the Proposed FY 2011-12 Budget & Recommended Budget Reductions Presented on June 14 June 21, 2011 Page 6 Policy Issues At the June 14 Budget Hearing, three policy issues were raised: ■ Should the City proceed with the dog park or the westside park when parks maintenance staffing would be reduced? ■ Should the City consider using reserves to maintain the current level of patrol service since it is identified in the Model as a mandated service? ■ Should the City explore alternatives to the Sheriffs Department for law enforcement services? A decision on the second policy issue, use of reserves to maintain patrol service, needs to be made at the June 21 Special Meeting. Decisions on the future parks should be deferred until the Governor either signs the redevelopment bills or returns them to the Legislature unsigned. In addition, another policy issue has been raised in this staff report: • Should consideration of a local tax measure be scheduled for a future City Council Workshop? Direction Needed for Budget Adoption on June 28 While mentioned elsewhere in this staff report, decisions are needed on the following items so that the budget can be finalized for adoption at the June 28 Council Meeting: ■ Should Recommended Budget Reductions #1 through #6 be included in the FY 2011-12 Budget? Staff recommends including these reductions. If any are excluded, then the Council needs to provide direction on how to replace the anticipated General Fund budget savings (e.g. reductions elsewhere in the budget, use of fund balance, etc.) ■ Should Recommended Budget Reduction #7 be included in the FY 2011-12 Budget? Staff recommends not including this reduction. Anticipated savings would by replaced with the extra savings to be received from restating the City's PERS reports plus avoiding the accrual payouts for the employee in the impacted position. While these are one-time savings they exceed the savings of defunding the position. If the Council chooses to include this reduction then there will be additional General Fund budget savings. ■ Should Recommended Budget Reduction #8 be included in the FY 2011-12 Budget? Staff recommends including this reduction. If the State restores funding for the COPS grant, and if a majority of SEBA's members approve contract reductions, then funds would be available to restore the patrol deputy from half to full. The Council also has Updated Information Impacting the Proposed FY 2011-12 Budget & Recommended Budget Reductions Presented on June 14 June 21, 2011 Page 7 the option of restoring the patrol position from half to full through the use available fund balance in the General Fund. Providing direction on these budget items on June 21 does not preclude the Council from making changes at the June 28 Council Meeting. FISCAL IMPACT: If the Recommended Budget Reductions (implement #1 through #6, use of one-time savings to avoid implementing #7, and either implementing #8 or using fund balance to restore the service) are implemented the projected General Fund deficit in FY 2011-12 would be eliminated, assuming that the Governor does not sign the redevelopment bills by June 30. If he does, then staff will bring back recommendations in July to address the additional $300,000 revenue shortfall in the General Fund created by the loss of residual receipts backfill. Respectfully submitted: Betsy M dams City Manager ATTACHMENTS: None. CRA and City of Grand Terrace FY 2011 - 12 Preliminary Budget • June 14, 2011 — Budget Presentation • Revise preliminary budget with City Manager reduction recommendations # 1 to #6 • Other changes — Cost Allocation adjustments — Cell tower lease sale FY 2011 - 12 General Fund Budget $ (Undesig) Beg Est. Prop. Surplus End Fund Rev. Expend . (Def icit) Fund Balance Balance Reserve Reserve 163,373 41545,074 (510989190) (553, 116) (3899743) Changes Reduct.l - 6 - 415,288 415,288 f Cost AI loc. - (34,710) 0 Ilikk Iiil �i I} uf i ii 11l�ii I�I I Chg. CTL Sale 344,897 - 344,897 :Y (net) 163,373 41889,971 (417179612) 1723359 335,732 FY 2011 - 12 Spec Rev/Ent Budget $ (Undesig) Beg Est. Prop. Surplus End Fund Rev. Expend . (Def icit) Fund Balance Balance Reserve Reserve 2,9991702 21 341 ,408 (21767,801 ) (426,393) 21573,309 Changes Reduct. l - 6 - 48,946 48,946 Cost Alloc. - (419446) (419446) ` • A J i 21999,702 21 341 ,408 (217609301 ) (4189893) 2,5801809 FY 2011 - 12 CRA Bud et $ (Undesig) g Beg Est. Prop. Surplus End Fund Rev. Expend . (Def icit) Fund Balance Balance Reserve Reserve 1 ,2519673 991709418 (1091689717) (9989299) 2539374 Changes Reduct. 1 - 6 - 579439 57,439 � Cost AIIoc. - 799104 799104 14 192519673 991709418 (1090329174) (8619756) 3899917 FY 2011 -12 Budget $ (Undesig in 1 ,000's) Y �:�\,��� ::.xis:.: .:\.��.. �,�. /'�,,•° ,! . \., WIN' ��\.\\\... a Y o r 1' �i Beg Fund 163 21999 1 ,251 4,413 Balance Est. Rev 47889 27341 99170 169400 Proposed (41717) (21760) ( 10,032) ( 17,509) Expend . Surplus 172 (418) (861 ) ( 11109) (Deficit) End. Fund 335 21580 389 31304 Balance Projected Ending FY 2011 -12 Designated Fund Balance Reserves Beginning Increases Decreases Ending Purpose Designated FY 2011 - FY 2011 - Designated 12 12 Wastewater — Improve- $6829760 0 0 6829760 Capital ments CRA Debt Sv. Bond 251689335 0 0 2,1689335 paymt. CRA Debt Sv. Pass-thru 1 ,836,429 0 0 198369429 CRA Debt Sv SERAF <4489636> 0 0 <448,636> Loan CRA Low Mod Pass-thru 459,107 0 0 4599107 CRA Low Mod LM project 4179946 0 0 4179946 CRA Trust CRA Econ. 192075500 0 (2419500) 966,000 Fund Agreement CRA Bond CRA 1895289672 0 0 1895289672 Proceeds- Projects Total CRA — including. Bond 2491699353 0 (2419500) 2399279853 Proceeds TOTAL Designated Funds 2498529113 0 (2419500) 2456109613 CITY OF GRAND TERRACE PENW CITY 000WX APPROVAL CITY COUNCIL MINUTES SPECIAL MEETING -JUNE 21,2011 A special meeting of the City Council of the City of Grand Terrace was called to order in the Council Chambers,Grand Terrace Civic Center,22795 Barton Road,Grand Terrace,California,on June 21, 2011 at 6:00 p.m. PRESENT: Walt Stanckiewitz, Mayor Lee Ann Garcia, Mayor Pro Tem Darcy McNaboe, Councilmember Bernardo Sandoval, Councilmember Gene Hays, Councilmember Betsy M. Adams, City Manager Brenda Mesa, City Clerk Bernard Simon, Finance Director Joyce Powers, Community& Economic Development Director Richard Shields, Building& Safety Director John Harper, City Attorney Ed Finneran, San Bernardino County Sheriff's Department ABSENT: Rick McClintock, San Bernardino County Fire Department CONVENE THE JOINT CRAXITY COUNCIL SPECIAL MEETING AT 6:00 P.M. The City Council meeting was opened at 6:00 p.m. with an Invocation by Mayor Pro Tem Lee Ann Garcia, followed by the Pledge of Allegiance led by Council Member Gene Hays. 1. Review of Fiscal Year 2011-12 Preliminary Budget Finance Director Bernard Simon, reported that the Preliminary Budget was presented to the City Council on June 14, 2011. The updated preliminary budget presented tonight reflects budget reductions #1-6 that the City Manager recommended on June 14th as well as cost allocation adjustments and anticipated revenue from the sale of the cell tower lease that was authorized by the City Council. Ci , Manager Betsy Adams, gave an update on the State Budget activity indicating that the legislature has not yet presented a budget to the Governor and it is still unknown how it will impact our budget. She indicated that there were two recommended budget reductions for which additional information is to be provided for consideration. For Budget Reduction #7, defend Management Analyst position in Public Works, staff was to obtain cost information on the possibility of cost sharing Loma Linda's Emergency Services Coordinator position. Staff has received a verbal estimate from Loma Linda of$24,724 which exceeds the General Fund budget savings for this COUNCIL AGENDA ITEM NO.�j C, Council Minutes 06/21/2011 Page 2 position. Instead of implementing this budget recommendation, staff proposes using extra savings to be received from restating the City's PERS reports to continue funding this position. She recommended that Budget Reduction#8,reduce patrol deputy position by one half,be implemented in the FY2011-12 budget with the understanding that Council can consider restoring the position once the State budget is adopted and if a majority of SEBA's members approve contract reductions. Sylvia Robles, Orangewood Ct., recognized challenges that exist with budgeting at the state and local level and encouraged the Council to practice conservative budgeting. Council directed staff to include the following Budget Reduction recommendations in the FY 2011- 12 Budget to be considered for final adoption on June 28, 2011: 1. Remove Traffic Deputy Position from Sheriff's Contract 2. Merge Rental Inspection Program into Code Enforcement 3. Defund Management Analyst Position in Community Development 4. Def ind Community Events Program 5. Def ind Deputy City Clerk Position 6. Reduce Parks and City Hall Maintenance 7. Removed 8. Reduce Patrol Deputy Position by one half 2. CLOSED SESSION - CONFERENCE WITH LEGAL COUNSEL - POTENTIAL LITIGATION GC54956.9 (b) - ONE CASE Mayor Stanckiewitz announced that the Agency met in Closed Session to hold a conference with Legal Counsel to discuss Potential Litigation per GC54956.9 (b) - One Case. There was no reportable action taken. Mayor Stanckiewitz adjourned the meeting at 7:47 p.m.,until the next City Council Meeting which is scheduled to be held on Tuesday, June 28, 2011 at 6:00 p.m. CITY CLERK of the City of Grand Terrace MAYOR of the City of Grand Terrace