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CITY OF SAN BERNARDINO—REQUEST FOR COUNCIL ACTION
From: Charles E. McNeely, City Manager Subject: Resolution of the Mayor
and Common Council of the City of
San Bernardino proclaiming the
Prepared By: Adam Raymond, Mgt existence of a fiscal emergency.
Analyst
Dept: City Manager's Office
Date: April 26, 2010
M/CC Meeting Date: May 3, 2010
Synopsis of Previous Council Action:
February 19, 2009 — Resolution of the Mayor and Common Council of the City of San
Bernardino proclaiming the existence of a local emergency.
Recommended Motion:
1) Adopt Resolution.
2) That the City Manager be directed to submit a Hardship Exemption request pursuant to
HUTA funds to the State of California, Department of Finance by Monday, M 17s'.
Signature
Contact person: Barbara Pachon, Director of Finance Phone: 5242
Supporting data attached: Staff Report, Resolution,
Attachments Ward: All
FUNDING REQUIREMENTS:
Expenditures:
, ii�� Finance:
Council Notes: •J'e�o c-20/0- d07
Agenda Item No. I O
S-3-r0
CITY OF SAN BERNARDINO—REQUEST FOR COUNCIL ACTION
Staff Report
Subiect•
Resolution of the Mayor and Common Council of the City of San Bernardino proclaiming the
existence of a fiscal emergency.
Backeround:
Over the last two and a half years, the historic downturn of the national economy has had a
significant negative impact on the City's financial condition. To address these circumstances,
the City has implemented numerous actions designed to constrain General Fund spending,
including eliminating over 170 full-time positions, imposing a freeze on most hiring, asking
vendors to take a voluntary 5%reduction in contract costs, placing restrictions on non-mandated
travel and training, and reducing supply and material purchases to the extent practical.
Additionally, significant reductions in budget allocations for facilities and public infrastructure
maintenance were imposed, new revenue sources were identified, and personnel costs were
reduced through employee granted wage concessions. Further, one-time revenue mechanisms,
such as transferring funds from the City's reserves to operating accounts, were implemented.
This is just a summary of the actions taken by the Mayor and Common Council to address a net
General Fund shortfall of more than $59 million during the summer of 2008 through the current
mid-year budget hearing. As a part of the efforts to address the deficit, and to protect the City's
revenues from diversion by the State, on February 19, 2009, the Mayor and Common Council
adopted Resolution 2009-36, proclaiming the local emergency related to the City's financial
situation.
Over the past 15 years, the State has responded to its fiscal crises by taking actions that
negatively impact the budgets of all the municipalities in California; actions such as retaining
municipal revenues, shifting city revenues to the counties and school districts, and delaying
payments of taxes to cities have resulted in a loss of approximately $36 million for the City of
San Bernardino. On January 8, 2010, the Governor declared a fiscal emergency, identifying the
nature of that emergency to be the projected budget imbalance for Fiscal Year 2009/10 and the
projected insufficient cash reserves and cash deficits in Fiscal Year 2010/11. This declaration
may result in further actions that impact the City's budget. For example, in March 2010, the
State Legislature passed a bill that will delay a variety of state payments to local agencies as a
method to address the anticipated state cash flow problem. This legislation contained provisions
to withhold a portion of the payments of Highway Users Tax funds for the first nine months of
FY 2010-11 to be paid no later than the end of April 2011. According to estimates from the
Michael Coleman, League of California Cities Financial Advisor, the estimated revenue for the
City for FY 2010-2011 is $3,227,475 of which$1,483,270 would be delayed. (Attachment A).
The implementing provisions of this bill include mechanisms to apply for exemptions to the
deferral of payments. In order to be considered for an exemption, cities must complete a
questionnaire and submit a request to the Department of Finance by Monday, May 17, 2010
(Attachment B). One of the grading criteria in granting an exemption is the declaration of a
fiscal hardship/emergency by the governing body. This may be just the first of a number of
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activities that require a declaration of fiscal emergency in order to receive an exemption or
prevent the diversion of city funds. Given these circumstances, it is recommended that the
Mayor and Common Council adopt a resolution proclaiming the existence of a fiscal emergency
for the remainder of FY 2009/10 and for FY 2010/11.
Financial Impact:
Although the direct financial impact is unknown, the action of adopting a resolution declaring a
fiscal emergency is designed to inform the public of the City's financial condition and to protect
the City's revenues from diversions by the State.
Recommendations:
1) Adopt Resolution.
2) That the City Manager be directed to submit a Hardship Exemption request pursuant to
HUTA funds to the State of California, Department of Finance by Monday, May 17a'.
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Attachment B
CITIES AND COUNTIES HARDSHIP EXEMPTION REQUEST CHECKLIST
This form must be completed for any hardship exemption request pursuant to Government
Code Section 16325.5 from the deferral of a city or county's share of the Highway Users
Tax Account (HUTA). Budgetary difficulties, however severe, are not in themselves
justification for a hardship exemption. A municipality must demonstrate it is unable to
manage the payment delays with its cash management tools and that the payment delays
will result in unacceptable public safety hazards.
Name of City: County:
Please check the appropriate boxes and provide appropriate attachments.
Yes No
❑ ❑ 1. Was the request submitted to the California Department of Finance no later
than May 17, 2010? If the request is submitted after May 17, 2010, due to an
unexpected disaster or emergency and the Governor has declared such an
event, check "Yes".
❑ ❑ 2. Have all reasonable efforts been made to adjust the structures, amounts,
terms, and timing of the municipality's cash flow borrowing for 2010-11 to
accommodate the payment delays? Attach a complete but succinct
explanation as to why the payment delays cannot be managed through cash
flow tools available to the agency.
❑ ❑ 2a. Has the agency determined that the impact of the payment delays cannot be
accommodated through external cash borrowing?
❑ ❑ 2b. Has the agency determined that the impact of the payment delays cannot be
accommodated through internal cash borrowing (internal funds, county pool,
Prop 113, etc.)?
❑ ❑ 3. Is a schedule of the amounts and months requested for exemption from
payment delay attached?
(note: monthly amount of a payment delay cannot exceed the entity's share of
the $50 million per month payment delay)
If any of the above boxes are checked "No", stop; the municipality does not qualify for exemption.
❑ ❑ 4. If the agency is unable to accommodate the payment delays through cash
management, describe the programmatic impacts due to the payment delays
(not due to other budgetary difficulties). What risks or public safety hazards
will result from the payment delay? Provide specific examples and projects, if
possible.
❑ ❑ 5. Has the city/county filed for bankruptcy or declared insolvency as defined in the
U.S. Bankruptcy Code? If so, attach resolution of the governing board.
❑ ❑ 6. Has the city/county adopted a resolution declaring a hardship?
If so, please attach the resolution.
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Attachment B
Submit exemption requests to:
California Department of Finance
Attn: Greg Bruss
915 L Street, 9th Floor
Sacramento, CA 95814
Signature of Authorized Representative Title
Date
Contact Individual (Printed Name) Contact Phone Number and Email Address
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Attachment B
April 16, 2010
Details of the HUTA Hardship Deferral Process Now Available Deadline
May 17
Cities that plan to apply for a hardship exception from deferral of their Highway User Tax Account(HUTA)
funds must do so by May 17 using the this checklist.
Gov. Arnold Schwarzenegger on Thursday, March 4, signed ABX8 5(Budget Committee), Chapter 1,
Statutes of 2010, which establishes a cash management plan that defers various appropriations to state
universities, county social services programs and other programs including local HUTA funds during FY
2010-11.
HUTA revenues will be deferred not exceeding $50 million monthly from cities and counties combined for
ten months, July 2010 through March 2011, with repayment no later than May 2, 2011. Cities and counties
currently receive approximately$85 million per month in HUTA revenues. The$50 million cap means that
cities and counties will receive a portion of their scheduled allocations.
Rural counties with a population under 50,000, and the cities within those counties, are exempt from this
deferral.
The California Local Government Finance Almanac has a breakdown of city by city impacts of HUTA.
HUTA Deferral Hardship Exemption Process
Hardship consideration is being given to local agencies that meet specific criteria. The League and the
California State Association of Counties worked with state agencies to clarify the process and conditions
under which a local agency can seek relief from the HUTA deferral requirements. Cities must complete the
checklist which is designed to identify situations where a local agency will be severely impacted by the
HUTA deferral and does not have any other viable options.
Cities must apply for a hardship exemption by Monday, May 17. Complete the mandatory checklist and
mail to:
California Department of Finance
Attn: Greg Bruss
915 L Street, 9th Floor
Sacramento, CA 95814
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1 RESOLUTION NO. COPY
v,. 2 RESOLUTION OF THE MAYOR AND COMMON COUNCIL OF THE
CITY OF SAN BERNARDINO PROCLAIMING THE EXISTENCE OF A
3 FISCAL EMERGENCY.
4
5 WHEREAS last year, the nation and California confronted the most severe
economic downturn since the Great Depression; and
6
7 WHEREAS in response to this dire fiscal situation, the Mayor and Common
Council have addressed a$32 million projected deficit for FY 2009/10; and
8 WHEREAS as the recession deepened throughout the spring, the revenues
9 eroded,and the budget reserves for Fiscal Year 2009/10 are only $1.8 million; and
10 WHEREAS, Sacramento politicians have already taken tens of million of dollars
Il from the City of San Bernardino, are threatening to take more, and these cuts present a
significant fiscal challenge; and
12
WHEREAS, On January 8, 2010, the Governor of the State of California
13 declared a fiscal emergency and identified the nature of the fiscal emergency to be the
projected budget imbalance for Fiscal Year 2009/10 and the projected insufficient cash
.- 14 reserves and budgetary and cash deficits in Fiscal Year 2010/11; and
15
WHEREAS, City employees have also offered to make personal sacrifices by
16 agreeing to pay and benefit concessions, including unpaid furloughs and contract term
extensions; and
17
WHEREAS the City's economy remains weak, unemployment rates remain near
18 historic highs,revenues are decreasing, and an estimated budget shortfall of$24.3 million
19 for Fiscal Year 2010/11; and
20 WHEREAS, in beginning to plan for the next fiscal year budget, the Mayor and
Common Council want to ensure that the public is aware of this fiscal emergency and
21 that City staff begins to looks for the necessary cuts to services that the City will be
22 forced to make; and
23 WHEREAS, Pursuant to Section 2.46.020 of the San Bernardino Municipal Code
"emergency" means the actual of threatened existence of conditions of disaster or of
24 extreme peril to the safety of person and property within the City caused
by...conditions....which...are or are likely to be beyond the control of the services,
25 personnel, equipment and facilities of this City, are acquiring the combined forces of
26 other political subdivisions to combat; and
27 WHEREAS, this proclamation of emergency and the actions contemplated
hereunder are based on adequate factual foundation, are designed to protect a basic social
28 interest and not benefit a particular individual; are appropriate for the emergency and
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1 obligation; and are intended to be temporary and limited to the immediate exigency that
cause the action; and
2
WHEREAS, pursuant to his authority set forth above, the Mayor does here by
3 request the Common Council to proclaim the existence or threatened existence of a local
4 emergency.
5 NOW, THEREFORE, THE COMMON COUNCIL OF THE CITY OF SAN
BERNARDINO DOES HERE BY PROCLAIM, the existence of a local emergency
6 that such emergency did arise on or about March 11,2010
7 IT IS FURTHER PROCLAIMED AND ORDERED, that the Mayor and
8 Common Council finds and declares the existence of a fiscal emergency with the City for
fiscal years 2009/10 and 2010/11.
9 IT IS FURTHER PROCLAIMED AND ORDERED, that until finther action
10 of the Common Council, the powers, functions, and duties of the Mayor and the
emergency organization of the City as set forth in Chapter 2.46 of the San Bernardino
's1 ' Municipal Code, are not hereby activated except as herein above set forth.
12 IT IS FURTHER PROCLAIMED AND ORDERED, that the Mayor and
13 Common Council shall take any and all actions as deemed appropriate by them and as
authorized by the City Chapter and general law to address the emergency.
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1
RESOLUTION OF THE MAYOR AND COMMON COUNCIL OF THE
2 CITY OF SAN BERNARDINO PROCLAIMING THE EXISTENCE OF A
3 FISCAL EMERGENCY.
4 1 HEREBY CERTIFY that the foregoing Resolution was duly adopted by the Mayor
5
and Common Council of the City of San Bernardino at a meeting
6
7 thereof,held on the day of 2010, by the following vote,to wit:
8 Council Members AYES NAYS ABSTAIN ABSENT
9 MARQUEZ
10 DESJARDINS
i 1 BRINKER
12 SHORETT
13
KELLEY
14
15 JOHNSON
16 MC CAMMACK
17
18
19 City Clerk
20 The foregoing resolution is hereby approved this day of 12010.
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22
23 Patrick J. Morris, Mayor
City of San Bernardino
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Approved as to form:
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26 James F. Penman,
City Attorney
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v By:
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