TITLE
Recommendation to adopt the Budget Oversight Committee's proposed funding recommendations, as amended, to the FY 19 Proposed Budget. (A-12)
DISCUSSION
On July 31, 2018, the City Manager’s Proposed Budget for Fiscal Year 2019 (FY 19) was delivered by Mayor Garcia to the City Council and community for consideration. Budget meetings were held on December 19, 2017, February 6, August 7, August 14, August 21, and September 4, 2018, along with Budget Oversight Committee (BOC) meetings, and community meetings throughout August and September at which the FY 19 Proposed Budget was discussed. As a result of these meetings, there were more than 18 scheduled opportunities for public feedback, deliberation, and input. Additionally, input was solicited through the Long Beach Budget Priority Survey to obtain feedback on what the City’s priorities should be. The survey was promoted on the City’s website, along with OpenLB, which shows the budget visually, through Twitter and Facebook, and at the community meetings.
At the conclusion of the hearing, the City Council will amend the proposed budget as it deems appropriate, and adopt the proposed budget as amended. Since the publication of the FY 19 Proposed Budget, updated estimates of FY 19 revenues and expenses, which primarily address technical corrections, are listed by fund and department in Attachments B, C and D to this letter. The reasons for the adjustments are discussed at the end of this letter.
There are three Ordinances in Attachment A. The first approves Resolution No. WD-1392 (A-3), which establishes the rates and charges for the water and sewer service. The second is the Appropriations Ordinance (A-17), which officially adopts the FY 19 budget and authorizes expenditures in conformance with the adopted budget. For these two Ordinances to become effective on October 1, 2018, the City Council must first declare an emergency to exist before adopting each Ordinance (A-2 and A-16). The third Ordinance amends the Departmental Organization of the City (A-13).
There are also five Resolutions that provide for approval of the budget for the Harbor Department (A-1), the budget for the Water Department (A-4), the Master Fees and Charges Schedule (A-5), establish the Gann Appropriations Limit (A-9), and amend the Salary Resolution (A-14). There are also motions that request approvals for the following: the FY 19 One-Year Capital Improvement Program (A-6); the FY 19 Budget for the Long Beach Community Investment Company (A-7); the Harbor Revenue Fund Transfer (A-8); the revised Financial Policies as recommended by the BOC (A-10); the Mayor’s Recommendations (A-11); the BOC Recommendations (A-12); and, a motion amending the Proposed FY 19 Budget (A-15).
This matter was reviewed by Deputy City Attorney Amy R. Webber on August 16, 2018 and by Interim Budget Bureau Manager Grace H. Yoon on August 20, 2018.
TIMING CONSIDERATIONS
In accordance with the City Charter, the FY 19 budget must be adopted by September 15, 2018. Should the City Council fail to adopt the budget by that date, the City Manager’s FY 19 Proposed Budget will be deemed the budget for the 2019 Fiscal Year. The Mayor has five calendar days from City Council adoption of the budget to use his veto authority. The City Council would then have until September 30, 2018, to override veto action by the Mayor with a two-thirds supermajority vote (six Councilmembers).
FISCAL IMPACT
The City Charter requires that the Appropriations Ordinance shall govern and control the expenditure and commitment amounts stated therein relating to the City’s departments, offices, and agencies during each fiscal year. The total Proposed FY 19 budget for all departments and funds is $3,485,079,611, which comprises of $3,046,742,656 in new appropriation and $438,336,955 in estimated carry-over from FY 18 for multi-year grants and projects. Attachments B, C and D provide the financial overview by Fund, by Department, and Citywide revenue by Fund.
The Appropriations Ordinance, included as Attachment A-17, totals $2,354,522,499 for all funds except Harbor, Sewer, and Water, and $2,358,672,358 for all departments except Harbor and Water. The $4,149,859 difference between funds and departments is due to general City indirect costs budgeted in the Financial Management Department, but charged to the Harbor, Water and Sewer Funds, which are not included in the Appropriations Ordinance by fund.
The proposed Harbor, Water and Sewer Funds budgets are in separate City Council Resolutions included as Attachment A-1 and A-4, respectively, and total $1,130,557,112. The Board of Harbor Commissioners adopted the budget for the Harbor Department by Resolution on June 11, 2018. The Board of Water Commissioners adopted the budget for the Water Department by Resolution on June 21, 2018.
User fees and charges in the Master Fees and Charges Schedule, included as Attachment A-5, have been adjusted due to changes in service and other factors, including the City Cost Index adjustment. For details regarding these proposed new fees, deletions and adjustments, please see the List of Proposed Fees Adjustments for FY 19 that has been incorporated as Exhibits B and C to the Master Fees and Charges Resolution.
Other requested City Council actions include:
• Approving the FY 19 One-Year Capital Improvement Program (CIP) budget, included as Attachment A-6, which is contained in the Appropriations Ordinance. The Planning Commission, at its meeting of August 16, 2018, approved the CIP for FY 19 as conforming to the General Plan.
• Adopting a Resolution, included as Attachment A-9, establishing the Gann Appropriations Limit (Limit) for general purpose expenditures. In November 1979, the voters of the State of California (State) approved Proposition 4, also known as the Gann Initiative (Initiative). The Initiative places certain limits on the amount of tax revenue that can be appropriated each fiscal year. The Limit is based on actual appropriations during FY 79 and prevents overspending proceeds of taxes. Only those revenues that are considered as “proceeds of taxes” are subject to the Limit. The Limit is recalculated each fiscal year based on certain inflation and population factors provided by the State. The Proposed Budget includes tax revenue estimates that are at 39.84 percent of the 2018-2019 Appropriations Limit and, therefore, do not exceed the Limit. This calculation is reviewed by the City Auditor for conformance to the law.
• Adopting the Financial Policies for the City, included as Attachment A-10. These policies have been presented to the BOC for consideration and review and now come to the full City Council for deliberation. Changes are made to the Fiscal Impact Policy (Policy 12), which is expanded to include non-City Manager departments or elected officials, and normally a fiscal impact statement reviewed by the Financial Management Department. Additionally, the Grant Policy (Policy 17) has been amended to include a statement of expectations for continued funding after the grant period and any deviations from expectations. A redline version of the changes is also provided.
• Adopting the FY 19 Long Beach Community Investment Company (LBCIC) budget, included as Attachment A-7. The LBCIC budget is prepared annually for City Council approval and is a subset of the Housing Development Fund. The LBCIC oversees the delivery of housing and neighborhood revitalization services. The LBCIC approved its FY 19 budget on April 18, 2018.
• Amending the Departmental Organization Ordinance, included as Attachment A-13. This amendment incorporates changes to departments, bureaus, and divisions for FY 19. These organizational changes are necessary to implement changes reflected in the Proposed FY 19 budget. A redline version of the changes is also provided.
• Adopting the Salary Resolution, which creates and establishes positions of employment while fixing and prescribing the compensation for officers and employees, is included as Attachment A-14.
After the City Manager delivered the FY 19 Proposed Budget to the Mayor, technical adjustments were made to the budget. These changes are generally not substantive and are shown in Attachments B, C and D. Changes include the following:
1. An appropriation increase in the Gas Fund (EF 301) in the Energy Resources Department (ER) by $9,050,000 to reflect the FY 19 Capital Improvement Projects budget that was inadvertently omitted.
2. An appropriation and revenue budget decrease in the Insurance Fund (IS 390) in the Human Resources Department (HR) by $383,630 to reverse the transfer of the Public Works Department’s Safety Division to HR that was included in the FY 19 Proposed Budget. Staff had explored the possibility of housing the Public Works Department’s Safety staff under HR, but both departments have decided to postpone the transfer to allow more time to study the impact and implementation of such a change.
3. A revenue budget increase in the Development Services Fund (EF 337) in the Development Services Department (DV) by $3,467,798 to correctly reflect higher Building and Safety Bureau revenues that were inadvertently reduced.
4. A revenue budget increase in the Civic Center Fund (IS 380) in the Citywide Allocations Department (XI) by $2,973,603 to correctly reflect FY 19 Civic Center rent revenue collected across departments that was inadvertently omitted.
The remaining changes were minor, technical adjustments made to various funds and departments to align budget with grants and/or revenues.
SUGGESTED ACTION
Approve recommendation.
Respectfully Submitted,
JOHN GROSS
DIRECTOR OF FINANCIAL MANAGEMENT
APPROVED:
PATRICK H. WEST
CITY MANAGER