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HomeMy WebLinkAbout02.A- City Manager RESOLUTION 2012-139 DOC ID: 2121 A CITY OF SAN BERNARDINO—REQUEST FOR COUNCIL ACTION Budget From: Andrea Travis-Miller M/CC Meeting Date: 11/26/2012 Prepared by: Heidi Aten, (909) 384-5122 Dept: City Manager Ward(s): All Subject: Resolution of the Mayor and Common Council of the City of San Bernardino Related to the City's Financial Plan for Fiscal Years 2012-13 and 2013-14. Financial Impact: This Report proposes to take a number of actions related to the City's budget that combined represent the City's financial plan for Fiscal Years 2012-13 and 2013-14. Synopsis of Previous Council Action: August 29, 2012 - Staff began presentation of Pre-Pendency plan to MCC. September 5, 2012 - MCC approved a motion to Amend the Pre-Pendency Plan to direct the City Manager to work with the City Attorney to go out with an RFP for leasing public/private partnership opportunities of the entire refuse operation and that the RFP include: bifurcating the City; managed competition; include purchasing all solid waste equipment; employment offers to all employees; a state-of-the-art waste processing facility; that one or more haulers be considered; direct the City Manager to work with the City Attorney together with a professional consultant to advise us during this process, which should be part of how we begin this detailed opportunity for the City; that the City Manager come back to the Council with an RFP no later than October 1, 2012; and come back with a status update as to the activity up to that point at the next Council meeting. The MCC approved the Pre-Pendency Plan, with the following motion: Amend and approve the Pre-Pendency Plan, as previously amended, minus the Fire Department's proposal, include the nine-point plan as presented by Council Member McCammack, adding Villasenor Library to Item No. 3; and come back in two weeks with an updated plan for the Fire Department Budget. October 1, 2012 - The MCC passed the motion to: Approve the Fire Department's Pre-Pendency Plan related to the City's proposed FY 2012/2013 Budget. Backeround: Filing of the Chapter 9 petition placed the City of San Bernardino within the jurisdiction of the Federal Bankruptcy Court. As part of the bankruptcy process, the City is required to adopt a balanced budget referred to as the Pendency Plan. The Pendency Plan serves as the roadmap until the Bankruptcy Court confirms the Plan of Adjustment, which is intended to comprehensively restructure the City's debts and obligations and set the City on the path to solvency. At the recent status conference, the Bankruptcy Court ordered that the City file the Pendency Plan no later than November 30, 2012. 1 OExhibit A is the Pendency Plan, which is proposed for Mayor and Common Council approval. Updated: 11/15/2012 by Georgeann"Gigi"Hanna A 2121 The Pendency Plan presents a balanced budget for Fiscal Years 2012-13 and 2013-14 through cost reductions to labor, benefits, debt and other obligations. The details of the Pendency Plan and supporting financial schedules are included in the Exhibit. During the pendency of bankruptcy proceedings, the City is required to report quarterly on the status of the City's 2012-13 General Fund as required by the declaration of the state of fiscal emergency declared by Resolution 2012-205 of the Mayor and Common Council adopted on July 16, 2012. Regular reports are being presented at open session meetings of the Mayor and Common Council and are posted to the City's website. The Plan of Adjustment, that will comprehensively restructure the City's obligations and debts and set the City on the path to solvency, will be developed following mediation with creditors and labor groups. It is anticipated this will be a 12 to 18 month process. During this process, the City Council, City employees, and community will assist in prioritizing programs and services. As the Plan of Adjustment is developed, it will be reviewed at open session meetings of the Mayor and Common Council, will be posted to the City's website, and will be available at City Hall to encourage community involvement in the process. Ultimately, the Plan of Adjustment will be confirmed by the Bankruptcy Court. City Attorney Review: Sutwortine Documents: Budget Analysis and Recommendations for Budget Stabilization (PDF) Pre-Pendency Plan (PDF) 9-Point Adjustment Plan (PDF) Revised Fire Department Pre-Pendency Plan Adjustments (PDF) Pendency Plan Resolution (DOC) Pendency Plan(PDF) Updated: 11/15/2012 by Georgeann"Gigi"Hanna A Entered Into Rec. at MCC/CDC Mtg: // by: /n Agenda Item No: CITY OF SAN BERNARDINOb If;Q,{jIih PENDENCY PL FY2012-13 BASE Y �feSan BernardlnOary General Fund Cash Projection FY 2013 Base Year Receipts $ 120,424 Disbursements (166,237) Deficiency Before Transfers (45,812) Transfers 4,830 IWF Transfer(FY12-13 and FY13-14) 2,200 Total Operating Deficiency (38,783) Initial Cash Deficit (18,946) Integrated Waste Fund Transfer Reversal (FY2010-11) (3,722) Total Beginning Cash Deficit (22,668) Total Deficiency (61,451) Pre-Pendency Plan 9,318 Notwithstanding any references or changes to the Pre-Pendency Plan subsequently approved by the Mayor and Common Council not specifically mentioned in this Plan being submitted to the Court. 9-Point Plan Adjustment (296) Net Pre-Pendency Impact 9,022 Total Deficiency with Pre-Pendency (52,429) Projected Average Deficiency Over 5 Years (43,271) Required Percentage Impact to Total Annual Expenditures 26.0% OR Required Percentage Impact to Salary, Wages & Benefits 35.0% 11/26/2012 REVISED 3:14 PM Entered Into be.df MCCICDC Mfg: ' by:e Tip PENDENCY PLAN ��Bem NO' _ City of San Bernardinoby: � - CHy ClerIcICDC Secretary Prepared by: CSy of San Bernardino Andrea Travis-Miller, Acting City Manager Jason Simpson, Director of Finance Michael Busch, President, Urban Futures, Inc. November 4-926 2012 SUMMARY This report proposes to take a number of actions related to the City's budget that combined represent the City's financial plan for Fiscal Years 2012-13 and 2013-14 and, if approved by the Common Council, will serve as the City's Pendency Plan. The City's Pre-Pendency Plan submitted to the Mayor and Common Council by the City Manager on August 29, 2012, September 5,2012_ and October 1, 2012 included a plan for all of the City's funds for Fiscal 2012-13. It was noted that the General Fund remained out of balance while the City worked through labor negotiations and discussions with its creditors in an attempt to restructure financial obligations that would balance the fund. While the negotiations process continues, the City must present a balanced financial plan, or Pendency Plan, for the General Fund that allows the City to continue to provide effective service. This Pendency Plan would serve as the City's budget while it is under Chapter 9 protection and is presented for Council consideration as part of this staff report. The Pendency Plan provides a balanced General Fund through cost reductions to labor, benefits, debt and other obligations, the details of which are provided below and in the supporting financial schedules. It should be noted that solvent funds may experience some beneficial impact of the Pendency Plan changes due to organization wide changes to labor agreements. After the Pendency Plan is approved, staff will return to the Mayor and Common Council and present the balance of the non-General Fund operating and capital budgets for approval. DISCUSSION The City of San Bernardino has reached a cross roads. Years of financial struggles and challenges from declining revenues and increasing fixed costs have placed in the City in the position of making difficult service delivery decisions and financial restructuring a necessity. Continued financial imbalance between revenues and expenses have now exhausted the City's general financial reserves and burdened it with obligations it cannot pay, obligations that exceed its current year General Fund resources by $45.8 million in Fiscal Year 2012-2013 and that, unless addressed structurally to be sustainable, will continue to grow in future years. Like most cities in the State, the City of San Bernardino enjoyed the building boom in the past decade and the aggressive asset valuation and increasing sales tax growth that followed. Unfortunately, when the boom ended, San Bernardino found itself terribly exposed to the combined impacts of the Great Recession, the collapse of the housing market and the credit/b anking crisis of 2008-2009. Revenues plummeted combined with generous pay and benefit packages, became unsupportable. This situation is further exacerbated by a high foreclosure rate and one of the highest unemployment rates in the country. This Council has had to deal with plummeting revenues and steadily increasing fixed costs that increased the City's vulnerability to the economic storm. Despite efforts to reduce expenditures and put the City's financial house in order, the City is insolvent. During the past two years it became clear the C it y's financial position was weakening and its employment contracts, post-employment benefits and unfunded liabilities incurred over the last 15 years cannot be supported if the City is to continue delivering services crucial to protecting the health, safety and welfare of the community. The overall poverty level in the City has steadily increased over the past 15 years and the City has few resources to support its most vulnerable citizens. At the same time, drug and gang activity have left the City growing concern for increasing levels of violent crime. As described in extensive reports to the Mayor and Common Council in recent months, the City is insolvent. Now, only the difficult process of restructuring its long-term financial obligations and fixed costs will enable the Mayor and Common Council to protect the community and make sure that the City emerges from this financial crisis as a viable, sustainable institution. The Mayor and Common Council began that work on June 26, 2012, when it authorized the City Manager to develop a financial and organizational restructuring plan necessary to balance revenues against expenses. The City is working with its employee unions and associations, and its creditors, to reach agreements that would restructure the City's unsustainable financial obligations. Negotiations continue as this report is being drafted. At this time, however, the City cannot assume that agreements reached will enable the Mayor and Common Council to completely close the budget gap. The City must be prepared to balance its budget through a Pendency Plan implemented in the Chapter 9 case.. The alternative to a Pendency Plan that imposes selective reductions in the City's financial obligations are deep service reductions that are simply unacceptable because they are dangerous to our citizens or they threaten the future economic viability of the City. Should any tentative agreements be reached by the parties, they will be honored and will contribute to the City's ability to use bankruptcy as efficiently and expeditiously as possible. If agreements are reached and ratified with some or all of creditors after adoption of this agenda item and its contents, those new Memoranda of Understanding or agreements would modify the actions in the Pendency Plan. Without the changes incorporated into the budget as part of its Pendency Plan for the General Fund, the City cannot adopt the balanced budget required by its Charter and the State Constitution. This would affect its ability to pay its employees and suppliers and further interrupting critical service delivery during the fiscal year. In fact, by approving this Pendency Plan, the Mayor and Common Council will be protecting critical services and the San Bernardino citizenry. The City's Capital Improvement Program (CIP) is a five year plan that addresses facility and infrastructure needs for the City and is currently being updated and finalized for review once the Pendency Plan measures are known. The bulk of the funding for Capital Improvements come from restricted sources such as Measure I, a half-cent voter approved sales tax for street improvements, State Gas Tax or from the City's utility funds restricted for improvements to the utility systems. 2 Although the CIP will not receive funding from the General Fund in Fiscal 2012-13 nor under the Pendency Plan. This level is far below the amount needed to address existing deficiencies or ongoing needs for maintenance of capital assets essential to functions funded through the General Fund. An amendment to the California Constitution intended to limit growth in local government spending requires establishment of a maximum limit for expenditures from general taxes. The limit is indexed to specified growth factors approved by the Legislature. The City's annual appropriation limit will be calculated once the Pendency Plan measures are known for 2012-13 pursuant to the requirements of the California Government Code. This limit pertains to appropriations from general taxes and is far above the general taxes the City has available to appropriate. The City of San Bernardino uses the "change in California per capita personal income" for the "change in cost of living" component of the calculation of the appropriation limit. The growth of the index and recent declines in tax revenues leave the appropriation limit much higher than the general taxes available for expenditure. PENDENCY PLAN The Preliminary FY 2012-13 Operating Budget included a General Fund deficit of $45.8 million and indicated that a contingency, or balancing, plan to close the gap would be forthcoming. That plan is known as the Pendency Plan. The Pre-Pendency Plan presented on August 29, 2012, and the amendments to the Pre-Pendency Plan ref eenced in this Report, together, represent the City's Fiscal Years 2012-13 and 2013-14 Budget. 13a1� The Pendency Plan represents the spending levels the City needs to implement to become and remain solvent. Those spending levels are lower than the levels that would be required to deliver adequate services and meet all the requirements of the City's contractual obligations. Spending levels adequate to pay contractual obligations would exceed revenues and there are no reserves to make up the difference. The California State Constitution and the City Charter prohibit the City from adopting a budget that is out of balance, preventing the City approving expenditures unless the budget is balanced. Without restructuring its finances or maintaining the protection of Chapter 9, the City could not pay its employees, retirees, bondholders or vendors. This would result in uncontrolled default and, presumably, a collapse of public services. Bankruptcy protection assures that this will not happen in San Bernardino, though we cannot say how much creditors will, or will not, receive. The term "Pendency Plan" was developed in the City of Vallejo Chapter 9 case to describe the plan the City would operate under pending the completion of the bankruptcy process. Amendments to the plan or extension of the plan into future fiscal years could occur. Because the Great Recession struck Vallejo after it filed for bankruptcy protection it had to make many changes in its plan to adjust to worsening economic conditions. During the period the City operates under the Pendency Plan in bankruptcy, the differences between payments required by contracts and the amount actually paid become claims in bankruptcy and are resolved through negotiations and, ultimately, the Plan of Adjustment submitted to the creditors for approval and to the bankruptcy court for confirmation. In Vallejo, after three years, all classes of creditors voted to accept the Plan of Adjustment; however, under the Bankruptcy Code, 3 the court can confirm a Plan of Adjustment even if some classes of creditors disapprove; a process known as "cram down". The Vallejo Chapter 9 case took many months because suits determining General Fund access to restricted fund resources and issues regarding bankruptcy court jurisdiction and California labor laws had to be decided. We hope decisions in this case will provide the appropriate guidance in our case and reduce the litigations costs while in bankruptcy. Amendments to the Pre-Pendency Plan This Report describes further changes to the Pre-Pendency Plan required for solvency in Fiscal Years 2012-13 and 2013-14 under the protection of Chapter 9. The changes are based on adjustments intended to implement important principles that have guided the preparation of the Proposed Budget, especially in the General Fund. In addition minor technical corrections in estimates and calculations have been included based on actuals for the first quarter of the fiscal year. The changes described below will be important to the City's creditors. A description is included below of these principles and how they play out in the budget balancing plan. Promote Health. Safetv and Wel are — Protecting the health, safety and welfare of the community continues to be the top priority for the financial restructuring process. Service levels are inadequate throughout the City, though public safety has received special attention as the City balances competing demands for resources. Given the extremely high crime rates in San Bernardino, the foundation of the City's future must be safety, and the City's actions to assure that grant funded public safety positions continue to receive funding as grant funds expire reflect the commitment to that. Due to turnover, the base budget also includes funding to assure that the Police Department has resources to recruit and train new officers to fill vacancies, to take advantage of new staffing grants, and to assure that services are available for the community. This principle shaped the decision to recommend no additional significant service reductions. Minimize Impact on Future Services - The future also depends on stewardship of public assets in the form of maintenance, repair and replacement. Unfortunately, funding limitations do not allow even the modest expansion of these investments in the Pendency Plan despite ongoing deterioration of assets. In fact, some minor reductions in Public Works contract work and transfer of right of way median maintenance to Gas Tax funding is included. Other services that will assure the City can rebuild its reputation as a great place to live and invest continue with only very minor cost reductions planned for recreation, parks and libraries. The City's sewer and integrated waste utilities and other solvent funds are structured to operate with only indirect impacts from the insolvency of the General Fund and the Pendency Plan. Solvent funds, like utility enterprises will actually benefit from some of the organization wide reductions made as part of the Pendency Plan. Maintain Competitive Compensation Packages — It is essential the City maintain competitive pay and benefit programs to retain and attract qualified, motivated employees. In the past, the City's pay and benefit packages were among the most generous in its market area, sometimes significantly above the regional market. The City has, through negotiation or through imposition of reductions covered by its fiscal emergency powers,reduced compensation and benefit packages for its employees. These include employee payment of their PERS contributions, capping contributions to employee health plans and reducing costs by changing carriers, limiting pay outs, seeking new, lower pension benefit levels for new hires and eliminating retiree health insurance for new hires. The additional, but 4 selective, changes here continue to address situations where compensation is above market and has created excessive liabilities that cannot be paid without unacceptable reductions in service. The primary reductions proposed herein relate to retirement costs and benefit structure. Balance Costs and Service Impacts of Reductions — Cost reductions in the Pendency Plan have been designed to minimize service impacts. As noted above, reductions in employment benefits will not affect service levels. In comparison, significantly reducing salaries could have immediate direct impacts on current employees and would make recruiting and retaining qualified staff nearly impossible. Build Fiscal Sustainability — The Mayor and Common Council's often-stated goal for the restructuring process has focused on sustainability, which means building adequate reserves, covering the full cost of operations, implementing proper stewardship of public assets and building competitive, affordable compensation packages over the long run. Inadequate financial resources result in compromises in the Pendency Plan. Elements of the Proposed Budget aimed at stabilization and sustainability like maintenance investments are deferred in the Pendency Plan. Other sustainability measures like restoration of adequate, pay-as-you-go funding of internal service costs and the basic commitment to competitive compensation remain. The Pendency Plan must appropriate funding for restructuring expenses because sustainability is central to the City's effort to return to fiscal health. General Fund Spending Chances Implemented in this Pendency Plan The principles built into the Pendency Plan come in different forms. They include suspension of debt payments and payments for legal claims, continued reductions on pay and benefits imposed under emergency powers, reductions to over market compensation components, transfers of eligible costs to other funds, necessary legal and financial consulting services to pursue the City's interests via bankruptcy and, possibly, via labor negotiations and limited revenue increases. These changes eliminate the $45 million F Y 2 01 2- 1 3 General Fund gap identified in the preliminary budget and begin to address the City's General Fund cash deficit of$18 million. The City's current deficiency and efforts taken to date are addressed in greater detail on page 8 of this Report. The further reductions proposed in the Pendency Plan are detailed on pages 9 and 10 of this Report. Impacts are ongoing in nature unless otherwise noted and are reflected in the attached schedules. Summary of Pendency Plan Reductions and Deferrals Salary, Wages, and Benefits Balancing Measures ($26,064,125) 25-1 g90177LK-1' 1. Complete implementation of the Pre-Pendency Plan approved by the Mayor and Common Council. 2. MaintainEliininate vacant sworn positions in the Police Department above 260 as unfunded. 3. Achieve employee concessions that reflect full implementation of the State's pension reform. 4. Reduce Fire overtime by 35 percent by employing a minimum staffing model of a 3-person engine/track company made up of a Captain, Engineer, and Paramedic/Firefighter at all fire stations. 5. Phase out the Other Post Employment Benefit(OPEB) implied subsidy for retiree health. 5 6. Reduce the OPEB direct payment for health care for police retirees to the amount afforded to other employees. 7. Eliminate the 9% Employer Paid Member Contribution (EPMC) for police and fire. Deferral of General Fund Obligations ($34,959,311) 5 1. Defer reimbursement of the Restricted and Non-Restricted Funds. Reimbursement would be addressed in future years. 2. Defer the Ca1PERS payments less the Employee Withholding and negotiate repayment over time. 3. Suspend payment of accruals to employees terminating employment with the City until an alternative program is approved This does not apply to employees that continue employment with the City. 4. Defer debt service on 2005 Pension Obligation Bonds. 5. Discuss the reamortization of the CalPERS liability with Ca1PERS actuarials. Revenue Related Balancing Measures While new revenues are not projected in FY 2012-13 due to the timing of implementation, it is recommended the Council consider and provide direction related to new revenue measures to be explored further. The Pendency Plan identifies four measures for Council consideration or the Council may identify other measures. Indirect Impacts on Other Funds The Pendency Plan focuses on the insolvent General Fund but has implications for other funds. All reductions apply to employees equally regardless of their fund assignment or allocation, and all funds will have cost reductions associated with personnel cost changes. Potential changes in required subsidy levels from the General Fund resulting from those savings have not been programmed at this time. The primary impact of these Pendency Plan changes on other funds is a reduction in salary, wages, and benefit costs. These changes will be offset by allocations of costs related to the Chapter 9 process and continuing efforts to work with investors, rating agencies and insurers of bonds to emphasize and clearly disclose the strength of the revenue and cash balances that support repayment of these bonds. STATE OF FISCAL EMERGENCY The Mayor and Common Council, by Resolution 2012-205, declared a state of fiscal emergency based on fiscal circumstances on July 16, 2012. It is recommended the Council authorize the continuation of the Fiscal Emergency through June 30, 2014. With respect to MOUs that have expired and to the extent that the meet and confer process under the Meyers Milias Brown Act is not yet complete, the Council hereby finds that the need to immediately implement the Pendency P Ian constitutes an emergency within the meaning of Government Code section 3504.5, authorizing the immediate implementation of such plans while the City completes any remaining aspects of the meet and confer process. This emergency is based upon the findings in this Report, and in the staff report and accompanying Resolution adopted by the Mayor and Common Council. CONCLUSION 6 Despite the drastic reductions in staffing and service levels, the City of San Bernardino is insolvent from both a financial and service delivery perspective. Further reductions to service levels would jeopardize the health, safety and welfare of residents, and would severely limit the City's chances for economic development. The City has a responsibility to provide the services the citizens deserve and require, and the limited resources available to the City need to be focused on preserving basic services and providing for public health and safety given the high crime rates, poverty levels and other socio-economic challenges facing the community. It is with hope for a financially stable and fiscally responsible future, that the proposed Pendency Plan is submitted. We are committed to continuing to participate in good faith negotiations with our creditors going forward in the bankruptcy process and remain committed to getting San Bernardino to a position of fiscal solvency such that it can remain able to deliver essential services. 7 CITY OF SAN BERNARDINO, CALIFORNIA PENDENCY PLAN FY 2012-13 and FY 2013-14 CURRENT FINANCIAL SITUATION CHART TO BE REPLACED— General Fund Cash Projection FY2013 Base Year Receipts $ 120,424 Disbursements (166,237) Deficiency Before Transfers (45,812) Transfers 4,830 Total Operating Deficiency (40,983) Initial Cash Deficit (18,946) Integrated Waste Fund Transfer Reversal (3,722) Total Beginning Cask Deficit (22,668) Total Deficiency (63,651) Pre-Pendency Plan 9,318 9-Point Plan Adjustment (296) Net Pre-Pendency Impact 9,022 Total Deficiency with Pre-Pendency (54,629) Projected Average Deficiency Over 5 Years (44,004) Required Percentage Impact to Total Annual Expenditures 26.5% OR Required Percentage Impact to Salary, Wages& Benefits 35.6% Notes: 1. The table above reflects the July 31, 2012 General Fund cash deficit, the FY 2012-13 General Fund preliminary budget ("Baseline") deficit, the impact of the Pre-Pendency Plan as adjusted by the 9-Point Plan, the Adjusted Fire Department Plan,and the projected 5 year average General Fund deficiency. 2 The proposed receipts of$120,424 million includes repayment by the Successor Agency of$2 million for costs related to the Regal Theater. 3. The Integrated Waste Fund Transfer Reversal is for FY 2010-11. 4. The reference to the Pre-Pendency Plan includes the Adjusted Fire Department Plan approved subsequently by the Mayor and Common Council. 8 it I i 1 i I I i 1 a 9 PENDENCY PLAN ELEMENTS—FY2012-13 and FY2013-14 Item FY 2013 Notes Impact Salary,Wages,aadBenefits, and Expense Balancing Measures l.workforce and Service $ 13,452,000 Reflects the additions:savings from Pre-Pendency Plan less Reductions SAFER grant. 2.Police Vacancies 3,280,000 Sworn positions included in the proposed FY 2012-13 budget (Voluntary Separations) totaled 299. The Pre-Pendency Plan addressed the 18 vacancies that existed at that time, reducing the number of sworn to 281. It is anticipated there will be 268 sworn positions filled as of 12/2012 and 258 filled as of 01/2013. As proposed 260 positions would be funded and the remainder would be unfunded. it iq FPenFAFnPRdPd the ^ mbeF be set at 2b0 The City is currently awaiting a proposal from the San Bernardino County Sheriff's Department as there may be significant savings or adjustments in the City's overall cost to effectively police the City. 3.Police 13.989%Benefit 3,252,000 Reflects 50%of the normal PERS costs;the recent change to Concession state law encourages cities to implement the full cost sharing by 2018. 4.Fire 13.989% Benefit 1,894,000 Reflects 50%of the normal PERS costs; the recent change to Concession state law encourages cities to implement the full cost sharing by 2018. S.Miscellaneous 9.304% 651,000 Reflects 50%of the normal PERS costs; the recent change to Benefit Concession state law encourages cities to implement the full cost sharing by 2018. 6.Fire Overtime ("OT") 921,375 Reduction eenseR,ative feFmula estimated that 35,0/o This number reflects a 35% reduction in Fire overtime by employing a minimum staffing model of a 3-person engine/truck company made up of a Captain, Engineer, and Paramedic/Firefighter at all fire stations. ax.4&lako 7.OPEB Implied Subsidy 0 Reflects the reduction of the implied subsidy to existing Phase Out retirees of roughly$800,000 to$1 Million annually beginning January 1, 2014. B.OPEB Direct Subsidy 213,750 Reflects the reduction of the direct payment to existing police Phase Out retirees to the $112 per month afforded to other retirees beginning January 1, 2013. Elimination of the subsidy would 10 i 4 i Item FY 2013 Notes Impact result in savings of$427,000 for FY 2012-13. 9.EPMC 2,400,000 The City currently provides through an MOU a 9%salary adjustment for Police and Fire employees to cover the cost of the Employer Paid Member Contribution (EPMC) benefit. The City could eliminate the 9%contribution and require the employees receiving this benefit to pay the contribution through salary deductions. The annual savings to the City is $2.4M. 10. Council Office $64,156 less Reflects expense reductions in the Council office. Expense Reductions 211 695 Subtotal Salary,Wages& $ Benefits $25,980,742 Deferral of General Fund Obligations 40,11. Defer $ 15,156,944 Reimbursement will be addressed in future years. Reimbursement to Restricted and Non- Restricted Funds 11-12._ CaIPERS 12,974,727 Reflects the deferral plus the balance of the payments due Payments less and payable and not paid. Assumes repayment at some Employee future date to be negotiated with creditor and assumes Withholding (ER) resumption of payments in FY 2013-14. 1-2-13_____Paid Time Off 3,453,175 Vacation, sick leave, holiday and concession leave time Payments accruals. 13,14_ Pension Bond 3,374,465 Reflects deferral of principal and interest. Payments 14.15_-__- _Reamortize Discussions with CalPERS actuarial staff are underway; would CaIPERS Liability over realize value of$1.3 million per year starting Fiscal Year 2014. 30 yrs(Fresh Start) Subtotal Deferrals $ 34,959,311 Revenue Related Balancing Measures 1. Real Property $ - Increase to $5 per$1,000 transferred; projected $3 million Transfer Tax annually in future years. Alternatively, consider a comptehensive tiered structure. 2. Transient - Increase from 10%to 12% projected $800,000 annually in Occupancy Tax future years. 11 Item FY 2013 Notes Impact 3. Utility User Tax - Increase from 7.75%to 9.5%; projected $5.25 million annually in future years. 4. 911 - Projected $6.7 million annually in future years. Communications Fee Subtotal Revenue $ - Projection model assumes about$5.1 million in new revenue in future years(33%of total revenues). Total Balancing Measures L11" A Additional Expenditure Reduction Measures Being Considered (Not an Exhaustive List): 1 Capping of vacation and sick leave and use policies are continuing to be evaluated. 2 The City is continuing to review options to reduce unfunded liabilities related to retiree health and evaluate the impacts of the Affordable Health Care Act Medicare eligibility, and implementation of health savings accounts. 12 ID O O 00 O O �nD r 0 m 00 N Ol u r 0 0 m 0 0 Vt �D O 0 z 00 VNt V O lnD O N W C � N a 'O C d W.. w h0 N Y A Y C C c V L O m O O v 11- . . p A � E E 0 > n n c c u p o v w r ^ E vii o _ O_ U p N Y y ~ O M W O N C C C C U w h N O N ate+ 0 0 C ` cc c p u Y M ° N o °- ^ = u v m t om v E a evc Y �+ Y 3: c d c III. III. w o m m m L LL v E ,> u z cc m° v v c a a E u = d �w i > c u v u °' c Z w v m O O m 3O w o o d y+ U h U p Z Z o c m m d r o u 3 v > > v M O N m m 0 H w N V1 p0 ywj w L d N O w w d O V U •' K Y 7 a m Y Y m m C C C � W 0 y v O a 0 u v m -*°0 M m v l7 o c m c c c > E z > > o E 0 V m to W c 0 0 w o M M C L G K 3 C O N Y Y Y v C C C v w °` °' w °' E E u_ u u u c c c m 2 Z Z E d H d d W m M to Vl to w U 'O �' 0}I Y w w w m m m w U m m m m U C C C w w C C C > E ~ S S v c o o my E >m m m °' wwo m :° mow L a c. 0 u � � v d d d n w w w Y Y Y Y v „ v y w K K K Y Y > m m m m m w 0 0 0 0 w C O' Q C n d aL.. > W W W w w w m m m m m m U U U U p u+ w w W 0 0 0 0 ¢ OC K d d d d A �n �^ �^ > > > > u u u r u u u r u u r o c c c v c c c w c c w IV w v 'o w w v w v c v v v a w c c c ) c v c v v v v , c , c c c c a W N w w w w o a a a v a a d y d d d w tr y d w d w d l7 v v v a H v w v a d+ w d` !� u !^ v v � d �- C d d d d d d d d y o o c c m m m y m m 'p m m •o v m m m a d w w w w w C C C C a c c C p C 'C C � c c 01 p d d d p w d C - - — 00 N O O N � ip M N N O Y O V! C N pl w O U C N O O O_ �o O w N 0 7 o O y n w C N n T w N O U ` c s w w E o M c c Q j O U C w X w > O -p t= U m r N p o = ac m 0 0 CO w m _ _ n U a O paj co* V F « i+ 00 O `w y O wJ VI C N VI Y ywj 0 Q C a± M d m d LL L Z Z r X 10 r U C N d X Y « u10 r 7 7 u y 0 0 0 � N N C C C _ (O A N N m N c c o 0 w Y « C C w C d N N CL w w w a d z z w w « c c c c c a Y > > d C C C C C 0 > > of a a a W aw ci z `I I CITY OF SAN BERNARDINO, CALIFORNIA PENDENCY PLAN -SELECTED DATA ANALYSIS PRE-PENDENCY PLAN $ 15,659,404 LESS: SAFER GRANT REVENUE (1,500,000) NET FROM PRE-PENDENCY 14,159,404 9 POINT PLAN WORKFORCE MODIFICATIONS (707,595) WORKFORCE AND SERVICE REDUCTIONS PER PENDENCY PLAN SCHEDULE $ 13,451,809 RECONCILIATION OF WORKFORCE AND SERVICE REDUCTIONS FROM PRE-PENDENCY PLAN PRELIMINARY OPERATING BUDGET $ 166,236,557 PROPOSED PRE-PENDENCY PLAN 143,613,581 NET REDUCTIONS 22,622,976 LESS: INITIAL PRE-PENDENCY PLAN Contractual Service Reductions 152,763 Outsourcing Services (651,000) Restructuring Costs (2,000,000) Phone Switch and Network Infrastructure Deferral 564,380 Fire Truck Replacement (3 Engines) Deferral 1,710,000 Equipment(Police and Public Works) Deferral 40,000 Miscellaneous 93,576 Maintenance and Operations-line item reductions 767,675 Deferral of Retiree Health Contributions 4,749,000 SAFER Grant Award 1,500,000 30% Budget Cut of Common Council 211,695 30% Budget Cut of City Attorney's Office 1,487,882 Net Transfers In/Out 692,058 9,318,029 FULL YEAR 10%SALARY CONCESSION 1,415,190 LESS: NET TRANSFERS 692,058 ADD: PARTIAL YEAR 10%SALARY CONCESSION (576,270) NET RECONCILIATION $ 13,451,809 2Aa c m City of San Bemardinc Budgetary Analysis and S a. an Bernar 'ino Recommendations for Budget Stabilization M N r O N U) W c O N O) 7 m 0 O w N C O C O1 E E O u m K v c R N N T O C Prepared by: a D � CO CO c d E City of San Bernardino, California Finance Department a 300 N D Street, 4l" Floor San Bernardino, California Packet Pg. 7 2A.a City of San Bernardino, California June 26, 2012 c m To Mayor and Common Council: a T V This report contains an analysis of the City's FY 2007-08 to FY 2012-13 budgets, d budget projections and recommendations for budget stabilization and resiliency in d California's cyclical economy. The purpose of the analysis was to identify cost a. containment and cost recovery strategies necessary to reduce costs and increase °D revenue so the City can align expenditures with annual revenues while addressing N immediate and long-term fiscal obligations. o N The City of San Bernardino has been affected by the serious economic recession as W have other cities and has taken steps over the last several years to reduce costs. Nevertheless, costs continue to outpace revenue due to increased operational `o expenses and significant rapid declines in property tax revenues as a result of a drop in N property values and decline in sales tax revenue. Deficits of major proportions are = projected in all five years of the forecast created as part of this project. To ensure basic operational service levels are maintained and anticipated cash flow requirements are in met, steps will be needed immediately to reduce costs. O m A deficit was projected in the City's FY 2011-12 Budget, and with the loss of o redevelopment, we assume the deficit issues will be more significant until the assets N held by the Successor Agency can be liquidated and placed back on the property tax c rolls. Measures are necessary to mitigate ongoing costs and/or enhance revenue generation during the current fiscal year and the upcoming 2012-13 fiscal year. It is the organization's top priority toaddress these issues with the adoption of the FY 2012-13 E operating budget, as the City's reserves and discretionary funds have been depleted, c and the City faces insolvency. Simply put, the City must now take substantial action to reduce its spending and increase revenues. The action plan attached identifies realistic short and long-term solutions to address the N financial challenges lying ahead for FY2012-13 and thereafter. The plan is broken down into two phases; Phase 1) Immediate Budget Balancing and Cash Flow a` Management Plan; and Phase 2) Budget Stabilization Plan. City Management staff look forward to assisting the Mayor and Common Council in implementing these necessary phases though a series of tough decisions to balance the City's financial resources with m' the cost of delivering essential City services. c d Attachment A to this report provides a look at the numbers involved and City staff will be holding a Budget Workshop for the Mayor and Common Council whereby the City Departments will be presenting their budgets. The budget details at the workshop will a include proposed deep cuts with the goal of presenting a balanced budget to the Mayor and Common Council for adoption in July 2012. O Packet Pg. 8 2Aa c m a If these measures do not achieve immediate and substantial cost savings, then the City T will have to explore other alternatives to deal with its fiscal crisis, including developing U plans for reducing costs further and providing lower service levels, suspending certain d debt payments from unrestricted sources, consideration of AB506 proceedings to a restructure debt obligations, including unfunded liabilities, and preparation for a potential Chapter 9 filing. N r Respectfully Submitted, ° th W o Andrea Miller ?son Simpson Interim City Manager Director of Finance a m in m m v CO CO 0 w N C O C d E E O U d r C A N N T W C a d a m c d E L U O a Packet Pg. 9 0 Table of Contents a T U CONTENT d v c d EXECUTIVE SUMMARY............... ..........................-......... ......................... .......1 a •• BACKGROUND.................. ................................. .........—............ .......... BUDGETPROJECTIONS .............................................................................................17 N FISCAL SUSTAINABILITY PLAN..................................................................................27 N BUDGET STABILIZATION OPTIONS ............................................................... ...........27 vi .............42 CONCLUSIONS ......................................................................................... m c 0 TABLES N a m Table 1 Major Revenue Trends From 2008-2012........................................................3 ui Table 2 Housing Starts, Sales and Investment ...........................................................4 a Table 3 Land Use by Net Taxable Value.....................................................................5 Table 4 Sale Tax Comparison ...................................................................................6 m Table 5 Unemployment Comparison ......................................................... ............. .6 .2 Table 6 5-Year Budget & Fund Balance Estimates...................................................33 0 Table 7 5-Year Expenditure Projections by Department ..........................................27 Table 8 FY 2011-12 Personnel Expenditures by Department...................................27 Table 9 Comparison of Paramedic Subscription Programs .....................................27 E Table 10 Historical Pension Expenses ............................................................36 c Table 11 Revenue Options Summary.........................................................................42 d o: c m N 0 T A C Q w d ATTACHMENTS m ATTACHMENT A: 5-YEAR FORECAST c W E cc r U z Q I Pa 2.A.a EXECUTIVE SUMMARY San Bernardino, like many California cities, has faced a reduction in one-time fees and T tax revenues that have significantly outpaced increases in expenditures outside of the c City's control. This report provides an update on the City's fiscal condition and m discusses changes that are necessary to avoid significant impacts to basic service delivery and the possibility of bankruptcy. Reserves in the General Fund were a exhausted years ago, reserves in the internal service funds were also depleted and the M City has encumbered itself with various debt obligations and labor agreements putting oadditional and unnecessary risk on the General Fund. The City has declared numerous fiscal emergencies based on fiscal circumstances and has negotiated and imposed N concessions of $10 million per year and has reduced the workforce by 20% over the past 4 years. Yet, the City is still facing the possibility of insolvency due to a variety of issues including accounting errors, deficit spending, lack of revenue growth, and c increases in pension and debt costs. The City has reached a breaking point and faces N the reality of deficient cash on hand to meet its contractual and debt obligations due in a m July 2012. rn Staff believes this report provides a comprehensive understanding of the City's current m fiscal condition. To assist the Council to begin making the difficult and courageous m decisions necessary to address the City's fiscal issues: staff has been reviewing and o analyzing conditions and mechanisms which affect the current and future financial N performance of the City. This report is not to serve as a detailed implementation plan to 0 address the issues in a specific manner. Rather, the report is drafted to validate the a immediate need to take action and to provide staff with policy direction necessary to develop a specific cost reduction strategy to bring revenues inline with expenses in an E attempt to avoid insolvency if at all possible. u d The options available to the City involve difficult choices and require the support of the organization, the Mayor and Common Council, and the community. Over the past several years, the City has utilized General Fund reserves, asset sales and one time H revenues to maintain City services. To address the projected deficits in previous fiscal Z, years, the City has reduced positions, negotiated compensation reductions, and a implemented new revenue measures. Unfortunately, the decline in taxable sales and property values over the last several years has resulted in revenue losses of $10 to $16 m million annually. Additionally, previously negotiated compensation reductions will m sunset at the conclusion of fiscal year 2011-12 creating an increase in salaries and benefits of $10 million effective July 1, 2012, and increased costs in future years as merit increases resume. Beginning in FY 2012-13, expenditures are projected to exceed revenues by $45 million and absent any changes to improve revenues and x reduce expenditures, the City will face increasing annual deficits. The City's financial a constraints are compounded with the depletion of all General Fund reserves, which were as high as $19 million in 2001, and failure to fund long-term liabilities 11 Pa Packet Pg. 11 0 N. Viable options to balance expenditures against revenues require new service delivery models involving reducing personnel levels and associated costs, revenue measures which require voter approval, revised fee structures which can be approved by the Common Council, and/or further compensation and benefit reductions. While such T increases are possible, the options are constrained by current economic conditions including high unemployment, low per-capita incomes and the expressed concerns of burdening current residents and businesses with further tax or revenue fee increases. a As outlined in this report, staff has developed a plan to stabilize the City's financial M situation including the following key areas: r 0 N Service delivery model changes w w Changes in compensation philosophy c 0 m Revenue increase options N a The next step for the City will be to create an implementation plan which will identify rn cost reductions that the City can make without the need for agreement from the labor d groups, tax measures that the City Council may wish to consider, and additional labor O1 a negotiations. Without question; the timely implementation of Phase 1: Immediate M Budget Balancing and Cash Flow Management Plan, is necessary given the current o fiscal crisis and the expected cash-flow constraints expected and rapidly approaching in fiscal year 2012-13 and beyond. 0 A s Since the City has a current deficit in its General Fund, the City does not have sufficient E unrestricted cash available to pay its ongoing obligations. As such, substantial and E immediate action is necessary to remedy this dire situation. 0 m v c a N W T F C Q d W 0 7 CO w C d E r 0 m V Q 2 1 P a Packet Pg 12 BACKGROUND a The City of San Bernardino is located in San Bernardino County in Southern California. a Pursuant to the State Department of Finance (May 2012), the City's population is 211,674 residents. Population has increased rapidly since the 1970's, but since the City is mainly a bedroom community, the growth has outpaced the revenues needed to a provide services. The largest employers are local government agencies, California State University San Bernardino, San Manuel Band of Mission Indians, and San Bernardino Community Hospital. The business base is geared to the support of these o N employers. W Since the City's peak of General Fund revenue in 2008 of $133 million, the City has experienced losses in key areas such as sales tax, property tax, franchise fees, utility `o users tax (UUT), permits and funds transferred from the Economic Development N Agency (EDA). The chart below details the reduction of roughly $11.69 million in a m Y General Fund revenues. w d Table 1 0 Ma'or Revenue Trends from 2008-2012 CO Revenue Source Peak Revenue 2011-12 Variance o 2007-2008 Revenue c 0 Y Prop. Tax Secured $11.6M $9.5M ($2.1M) c d Prop. Tax in Lieu of VLF $18.9M S1 5.7M ($3.2M) E 0 Sales Tax $22.3M $19.03M ($3.27M) v Franchise $3.32M $2.88M ($450K) `m Ul a UUT $24.41M $22.5M ($1.9M) m c Licenses and Permits $9.2M S8.6M ($600K) a m Totals $89.72M $78,21M ($11.69M) m c d E r The chart above is consistent with the findings in other California cities. According to a recent bldg by calculaterisk.com, which was shared by the City's property tax consultant HdL, who is predicting that nationwide we are near the housing bottom. There are actually two bottoms for housing. The first is new home sales, housing starts and residential investment. The second is for sales prices. Sometimes these can happen 31Pa Paeimt Pg.13 years apart. Calculaterisk.com reports that the first housing bottom was spread over a few years from 2009 until 2011. They believe the second bottom, prices, hit in March 2012. This doesn't mean prices will increase significantly any time soon. Usually a towards the end of a housing bust, normal prices mostly move sideways for a few more years, and real prices adjusted for inflation could even decline for another 2 or 3 years. r C d It is reasonable to assume the housing market will find its bottom at some point in the a very near future; if it hasn't already. The chart below provides an illustration of the Cn national housing market since 1968. While this may be the steepest decline in over 40 N years, we shouldn't assume an aggressive increase of investment or pricing. Rather, N we would be wise to assume no to slow growth over the next several years leading to w flat property tax revenues for residential properties in 2012-13 with slight growth over 0: the next fiscal years. Commercial properties continue to search for the bottom. Based o N on information from the City's property tax consultant, HdL, for FY 2012-13 the City faces $17,202,341 of non-residential property tax appeals exposure to its total assessed a value. The current appeals figure isn't significant, which may lead us to a bottom of N commercial prices as well. Overall, City revenues generated from property m assessments are expected to be flat. M Table 2 0 Historical Home Starts, Sale and Investment 0) Comparing peaks and Troughs for starts,New Home Sales,and Residential Investment G —Aans,sintb-Family _New HOme 5.1. ----Rmdentiallr .Ammsas Pertmtof GDP 'O 7,OT E 2,D00 E I 2,800 j b.0% ^1,600 � a 8 _ � s.o+s C 2,400 I N N L200 - - , 4.0% `o _T I � r C ZLOOD ' Q f IDS g N Boo C I V N 7 m 600 C C i 400 d 2.0% E L O j4--Q._gg.�q_ qq..--i.�- . . .. -. _ ... --. ._.y_A... .,..,-..�. L._.tf.. 0.D% MnP/pw,w.ulcNaud,iskblos.com/ O 4 Pa Packet Pg. 14 0 Because we do not anticipate much growth with housing new starts or employment in the near future, and with the loss of the EDA, we should assume construction related permit activity will also be flat or possibly continue with its decline. Permit activity within IL most California cities has been very volatile with trends pointing to decreasing activity. c The chart below reflects the City's property tax base according to land use. Typical of a c large, older community, the City is fairly balanced with 52% of taxable property a assessed value as residential, 19% commercial and 15% industrial. Despite the diversity in property tax generation, 80 % of the City's taxable parcels are residential. N Because of the high percentage of residential parcels, we should assume service N requirements will remain high and that a sustainable and resilient revenue base is vital w to support essential City services. c Table 3 Land Use by Net Taxable Value N /MTautle Value NuaMre7l�ula — alue — M Land Use by Net Ta7cableValue A INaWUftal $5,33),96S,963 44,917 Naysas i rn [anmerZW $L939,T9L007 7,795 az m WksVlal $1,557,715,45 7M MKWft N as Sek979,9ID 34 hew ,en G9vem M 59.797.90 17 00 k.dbw N $56,767.361 707 Yeupltl� Ory Him 61.34416 7 6ema6aNl $75,74,40/ 50 N lMpwz $43,090 c $35493 1 Rw4NMN j VaaM1 6,079 4.5M +VK sz 0 BNln9t s0 3,347 e4% a epic d I 'O N rhmis S7,WD 9 C SOENmuo ry $5,719,774 54 , 01 9emawlunwo se6t.D93p37 1967 °6 ,ti,aN E unknown 61 "` I E $10,304719,]M 96,576 311 NowwesT I 1) 9 C N N T R C Q d 9 7 M C 07 E z v m SIPa t Pg.15 0 Based on data provided by the City's sale tax consultant, HdL, the City's sales tax revenue diversity reflects the statewide average for all business types (see charts n, below). a T Table 4 c m Sales Tax Com arison City of San Bernardino Statewide Totals M ■ Restaura ■ Restaura A Business • Food and nts& Business • Food and nts& N Drugs Hotels and Drugs, Hotels, W and 6.03% 11.60% Industry, 6.60% 13.00% K Industry 12.71% 16.51% ■ General p ■ General Consume m Consume r Goods, H rGoods 27.06% a • Buildin 2 29 75% y and ■ Buildin m Construct and 0) ion Construct 10.17% ■ Autos • Fuel and ion • Autos ■ Fuel and m and Service 7.on, and Service Transport Stations Transport Stations, c ation 14.16% ation, 14.52% 4 15.57% 14.50% c The overall diversity of the sales tax base within the City presents an opportunity for E future revenue growth. The City's population, size, and economic development c V opportunities on former EDA properties provide for an optimistic outlook. Despite these 4) positive traits, the City will need to play a role in job creation in order to fully realize its true sales tax generation. As the table below indicates, the City unemployment rate as of April 2012 was 15.7%. When compared to the State of California and San T Bernardino County unemployment figures for April 2012 of 10.9% and 11.7% Cc respectively, we begin to understand this as a component of a decline in sales tax IM generating revenues well below the peak in 2007-08. m c Table 5 E Unemployment Comparison m State of California County of San Bernardino City of San Bernardino a 10.9% 11.7% 15.7% Unemployment rates as of April 2012 61 Pa Rai:fo�tPg.1S 0 N The City may want to establish a working relationship with the County's Workforce Investment Board on job placement and/or an economic farming program to grow local businesses which could lead to local job creation. a T STRENGTHS WEAKNESSES OPPORTUNITIES & THREATS (SWOT) ANALYSIS v To best understand the issues facing the City and to develop a go-forward plan, a a Strengths, Weaknesses, Opportunities, and Threats (S.W.O.T.) analysis was completed at a macro level with the following findings: N C O Strengths: N N < The City maintains several enterprise operations including Refuse, Water, and X Sewer. C 0 The former EDA, now the Successor Agency, owns real property assets needed N for economic development opportunities throughout the City, including the a Carousel Mall y Sales tax revenue diversity leading to decreases in sales tax leakage v • Strategic location within the region m • Diversified employment and tax base w N Measure Z approved by the voters for expanded services c v c Weaknesses: d E • Starting General Fund balance has been erroneously stated for the past 2 fiscal u d years July Staff Reported Fund Fiscal Year Audited Fund Balance Balance M FY 2009-10 $2,708,319 $2,557,900 m FY 2010-11 $410,293 $1,770,400 a Y FY 201 1-1 2 $(1,181,603) $2,044,1004' V `Mid-Year report p•esented April 3, 2012. m c d E Failure to complete the FY 2010-11 audit on time delayed necessary budget reductions further depleting cash z a Expenses are over budget in FY 2011-12. Use of reserves to balance past budgets No reserves to balance future budgets 71 Page Paden Pg 17 • Depletion of Internal Service Funds to balance the previous budgets • High capital lease balances for equipment which is traditionally funded through Internal Service Funds a • Insufficient economic development programs in place due to loss of redevelopment • High ratio of public safety costs to overall General Fund revenues a • Unemployment above State and County averages N r O Opportunities: "' y • Privatization of City services beyond base level and for one-time or fluctuating W programs c • Implementation of an Early Retirement Incentive Program (ERiP) N • Place a priority on economic development programs a Y • Reallocate general government costs to General and Restricted Funds w d • Revenue enhancement and optimization including the sale of surplus City assets: a marketing of the ambulance subscription program and balancing one-time fee m revenues with appropriate staffing levels w N • Delay capital projects and low priority one-time expenses to preserve capital `o 0 • Open negotiations with employee labor groups in an effort to seek sustainable A v c compensation and staffing levels E E 0 Q Threats: d The possibility of insolvency and the need to initiate a neutral evaluation process under AS 506 process .N Depletion of operating cash which will affect the City's ability to meet debt T obligations and to carry out all desired programs and projects a` • Sunset of employee compensation concessions on June 30, 2012, of $10 million annually m' • Anticipated increases in employee benefit costs due to PERS and health care c d rate increases E r Loss of the Economic Development Agency resources to support economic z development programs / projects a Insufficient resources for needed infrastructure improvements and repairs. a 81 Pa e Paid�tP� f8 State budget impacts and overall failure of the State Legislature to focus on their own financial issues c General Fund Reserves will remain depleted and the City's operating condition is a at risk without immediate implementation of cost cutting measures, enhancement of revenue collection measures, and implementation of new revenues d V Slow growing revenue base underperforming when compared to expenditure (L growth m N Based on the immediate need to improve cash flow and reduce expenses and the c findings of the SWOT analysis, the recommendations have been structured to N implement the two phases of proposed financial restructuring; Phase 1) Immediate z Budget Balancing and Cash Flow Management Plan; and Phase 2) Budget Stabilization Plan. To fully understand the impacts of the proposed financial restructuring, each o Phase of restructuring is presented in the following three areas; 1) Operations; 2) N Personnel; and 3) Revenue. a m N Operations: o, v m a Phase t w N 1. Freeze and/or eliminate all vacant non-essential positions. `0_ 2. Evaluate restructuring Fire personnel with the possibility of closing one or more inefficient Fire Stations to reduce overtime with minimal impact to response E times. c 0 3. Evaluate restructuring of Police personal with the possibility of reducing non- a' essential services and administrative duplication while maintaining a high level of r_ m service to the community. N N 4. Reorganize the Community Services and the Public Works Departments in an —' effort to implement full-cost recovery of operations, better utilization of restricted a funds and evaluate consolidation of duplicate services and administrative V, functions. m 5. Evaluate contracting out additional legal services under the management of the c City Attorney. E r 6. Defer one-time equipment and capital improvement purchases without dedicated z funding sources. a 7. Implement full cost recovery for fees such as building, planning, etc. 91 Pa Padret Pg 19 Phase 2 8. Continue to defer funding accrued liabilities for retiree health, workers' compensation and general liability until FY 13-14. a v 9. Evaluate joint services and public/private partnerships (P3). c 10.Implement a quarterly review of expenditures and freezing of expenditures if a necessary. r 11.Strengthen revenue collection measures involving existing revenue sources N including code enforcement, false alarm fees and paramedic subscriptions. N N 12.Implement best practices for revenue audits every 5 years of UUT, TOT and W Franchise Agreements starting in FY 2012-13. r_ 0 13.Implement cost containment strategies balancing activity levels with available N resources. a m to Personnel: 0, v m Phase 1 g w 1. Best practices and industry standards now recommend the City have employees c pay the employee portion of retirement costs. m v c 2. Consider implementation of an Early Retirement Incentive Program (ERIP) as an E option to lower personnel costs to sustainable levels. E 0 m 3. Consider negotiating with employees to fund a portion of the employer share of retirement costs. m w .y Phase 2 -- m c 4. Revise the "step' process to slowdown the average annual growth of salaries a thereby structuring the growth in salaries with anticipated revenue growth. 5. Evaluate the use of part-time/contract employees or rehire retirees on part-time m c basis. E r 6. Implement an overtime reduction and management plan to reduce unanticipated x overtime expenses. a 101 Pa ParJret Q'9.20 Revenue: c Phase 1 a T 1. Adopt and implement comprehensive financial policies to ensure current and future deficits are avoided. d a 2. Initiate the voter-approved process to increase property transfer tax to levels consistent with other agencies. N 3. Expand Utility Users' tax to include sewer and sanitation. N 4. Consider an increase in the current ambulance subscription fee from its current Lu $24 per year to the regional average of$48. c 5. Sale of all City/Successor Agency-owned parcels in order to generaie additional 0 property taxes as well as economic development once the transfer occurs. •n 6. Sale of cell tower lease revenue agreements for one-time lump sum payment in Y 7. Review Sanitation operations to identify and implement cost reduction v opportunities necessary to ensure the Sanitation enterprise can pay its $3.5 m million Franchise Fee to the City. `o w c c O Phase 2 c 8. Conduct an audit of property assessments and tax bills to possibly generate E additional revenue that was lost due to across-the-board reductions by the c County of San Bernardino during the downturn in the economy. d m 9. Consider implementation of a Community Financing District (CFD) on new development necessary to pay its fair share impacts on public safety services. y N 10.Analyze the opportunity to consolidate the City's 74 maintenance districts in an effort to reduce City administrative costs and any General Fund subsidies. a` Y d 11.Consider implementation of a street sweeping fee to recover costs for the services provided. m' 12.Parcel Tax for Public Safety could be raised with declaration of fiscal emergency d for lower voter threshold. A 13.Implement performance measures within the false alarm fee program necessary a to recover costs of police services. 14.Review fee structure for Building and Planning permit revenues along with incentives for large projects and expedited permit fees. 111Pa P�Ioet�31 2.A.a ■ BUDGET PROJECTIONS C a T U C d City staff has developed budget projections through 2016-2017 that project annual m General Fund operating deficits of $45 million with expenditures significantly exceeding a revenues in each year. Roughly half of the annual deficit is attributed to unfunded liabilities in City's Retiree Health, Workers' Compensation and General Liability N accounts. The remaining half is attributed to increasing operational costs and the end N of employee concessions. As early as FY 2009-10, expenditures exceeded revenues w and the City had begun to utilize prior year fund balances to avoid service cuts or delays in projects. Because expenditures continue to exceed revenues, fund balances have `o been depleted and have reached a critical point in 2012-13 where the City will begin the N year with an actual deficit and significant cash flow constraints. Put into perspective, this projected deficit in 2012-2013 represents almost 38% of the General Fund budget 2 for that year. The remaining fund balances cannot pay for ongoing operating costs and m large sustained reductions will be required. Reducing ongoing expenses must largely come from ongoing reductions in personnel costs since these costs represent about 00 75% of total General Fund expenditures. Of the personnel costs in the General Fund y r about 78% are for public safety. The State's budget included takeaways from cities including the elimination of redevelopment agencies and the remaining portion of vehicle license fee (VLF) E revenues. (VLF) revenue losses from the State budget are approximately $1 million 0 Additionally, the City is faced with increasing pension costs, as CaIPERS adjusted the X investment returns increasing retirement costs to all its members starting in FY 2013. Vi Cost recovery measures would strengthen the City's financial position and greatly T improve its bottom line. While some cost recovery measures can be implemented at the Council level, significant revenue sources require voter approval which is uncertain and a iu not within control of the City staff. M m TIMING OF COST REDUCTIONS & REVENUE ENHANCEMENTS c m Cost reductions will need to be identified as soon as possible in FY 2012-13 and must L be ongoing in nature. Reductions have been implemented through the end of FY 2011- z 12 but are insufficient to ensure that revenues exceed expenditures by June 30, 2012. a Cost reductions must take into account the recent State actions affecting redevelopment, pension cost increases, and the end of employee concessions and 121Pa PacketPg. 22 provide the organization time to implement a new policy direction affecting the City's budget. Given the deficit spending in recent years, the City does not have sufficient funds to fill a T the gap with one-time measures and is unable to grow itself out of the financial dilemma. The City needs to develop and implement a budget sustainability plan along c with the appropriate policies to restore reserves. Furthermore, the City must maintain a reserve levels in all of its internal service funds at adequate levels. M Table 6 below provides a current and forecasted illustration of the City's General Fund b performance from FY 2008-09 to FY 2016-17. Because expenditures have exceeded N available revenues and cash on hand over the past several years, the City's fund LU balance is now negative. Phase 1, as outlined in this report, is geared to balance r_ 0 revenues against expenses. Phase 2, is to replenish the City's fund balance to positive 0 levels and to restore needed reserves. N Table 6 m 5 Year Budget & Fund Balance Estimates (Amount in Millions) I V 3 Acluals 2008-0902010-11 Budget 2011-12(0 2016-17 m 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 W C 150.00 0 100.00 c 50.00 e�Expenditures m E E - Revenue u (50.00) K (100.00) —Fund Balance c m (150.00) - w N (200.00) m (250.00) a` IM M d W C d E r v m x 131 Pa Packet Pg.23 0 0 Table 7, below provides a graphic illustration of the City's General Fund cost centers. Ideally, the allocation of financial resources should reflect the Common Council's overall c priorities. a T Table 7 c 5 Year (2012-13 to 2016-17) Budget Projections by Department d -- ■Police rn M ■Fire N 2009-09 2009-30 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 General Government 180.00 a r%1 e Public Works W 160.00 f ■Community o Development « 140.00 ------- •Parks&Recreations w 120.00 •City Attorney m to 100.00 •Debt Service v 80.00 - • City Clerk m i ■Finance w 60.00 — .. — _ c ■City Manager 40.00 '— — m V Mayor 20.00 E ■Human Resources E s 0 Common Council v a Civil Service � m w ■City Treasurer 'T m — — c Q m CM v EXPENDITURES m' As noted above, 73% of the FY 2011-12 General Fund budget is dedicated to public d safety services (Police, Fire, Code Enforcement, Animal Control, and Emergency E Preparedness). Within the services provided, $6.1 is funded under Measure Z x approved by the voters for enhanced crime and gang prevention programs. Q The table below reflects the City's allocation of General Fund resources on personnel. While the numbers below are reflective of what is seen in most full-service cities in 141 Pa e PacleetE�g.24 0 M California, they unfortunately do not reflect the Council's other priorities outside of public safety. The desired expenditure profile should reflect a diversity of priorities and funding to support those priorities in other departments. A a v c d Table 8 a FY 2011-12 Full-Time Personnel Expenditure Comparison by Department m (In thousands) N W $50,000 c 0 I � `$40,000 N 3 m ($30,000 N if d $20,000 m 1 O `$10,000 -- y c $0 •—r"-r---r--r'—r— • A5 C `rP�Pa °oJP P�° O m LOS a W T R C a In recent years when expense reduction plans were put in place, programs outside of public safety sustained severe cost cutting measures. W= «: San Bernardino Public Safety expenditures consume the majority of the budget, with m 73% of the General Fund budget in FY 2011-12. Additionally, in FY 2011-12, an estimated $5 million, or 4%, of the General Fund budget was allocated to other departments to support public safety functions. Clearly, if San Bernardino wants to a maintain its efforts in the public safety arena, expenditure reductions in these service areas may not be something that the Council desires. Notwithstanding, all options for the provision of public safety should be explored and San Bernardino should look for 151 Pa Padrat Pg.2S opportunities to implement new programs and staffing plans to reduce costs while maintaining essential services. c m a U C COST ALLOCATIONS c Through researching annual expenses and staffing allocations, we have found that a" many departments do not appropriately allocate staffing costs to funds outside of the General Fund. Additionally, we found that General Government services (Mayor, N Common Council, City Attorney, Human Resources, Information Technology, Finance N and the City Clerk) are not charged as an overhead expenses to operating departments. w A typical practice for local government is to allocate General Government costs across W all funds. Instead, the General Fund is picking up a majority of the costs despite the r 0 fact that these services are provided to all funds. The City's Workers Compensation N costs are also not appropriately charged to the departments. These costs should to allocated based on actual expense and not on `across-the-board" methodology. The in City should update its current cost allocation plan and Workers Compensation charges to identify the appropriate rates to charge departments in and outside of the General Fund. m `o w Implementing a cost allocation plan would help offset current expenses away from the General Fund and into the appropriate areas without impacting existing service levels. a c m E E 0 U d C R U! Y T m C Q Ot m C d E z v Packet Pg.26 FISCAL SUSTAINAB [LITY PLAN. a W a T V It is critical that San Bernardino act swiftly to decrease its expenses and increase its revenue. However, to ensure that actions are meaningful and will make an ongoing a impact to the financial health of the City, the following should be integrated as underlying goals: N r 1. The City will proactively seek to protect and expand its tax base by encouraging N a healthy, underlying local economy. San Bernardino should encourage vi W shopping, dining, and visiting at San Bernardino stores, restaurants, and hotels. San Bernardino should explore ways to capitalize on its resources such as its 0 0 regional location and retail opportunities N a 2. The City will establish and maintain appropriate cash reserves. rn Y 3. City revenue performance will be reviewed no less than quarterly and appropriate budget adjustments will be made in advance of the end of a budget year if m revenue performance is not meeting projections. o w w 4. The City will consider competitive contracting of services and equipment when c appropriate and where clear, cost-effective alternatives exist. m V C m 5. The City will establish appropriate cost-recovery targets for its fee structure and E will annually adjust its fee structure to ensure that the fees continue to meet cost 0 d recovery targets. W c 6. The City will work in partnership with its employees to ensure fair compensation a and that costs related to pension and other benefits are appropriately allocated T between employer and employees. c 0 Q 7. The City will work to strengthen revenue collection practices and procedures. o, V M M BUDGET PHILOSOPHY c T d An important strategy for avoiding structural budget deficits is to adopt a budget philosophy that is relatively easy to understand and can serve as a meaningful a framework for maintaining financial discipline. Reporting the state of the municipality's finances to the governing body for public discussion is a way for the fiduciary responsibilities of the elected officials and executive managers to be understood by the public and organization. 171 Pa Padoet Pg.27 ■1 The following reflects best practice policies in public financial management. It is a typical practice for cities to have adopted budget policies of the type described below, R Structurally Balanced Budget. The annual budgets for all City funds should be T structurally balanced throughout the budget process. Ongoing revenue should be equal to or exceed operating expenditures in both the proposed and adopted budgets. If a structural imbalance occurs, a plan should be developed and a implemented to bring the budget back into structural balance. Multi-Year Financial Forecasting. To ensure that current budget decisions N consider future financial implications, a five-year financial forecast should be w utilized by the staff and Council. The annual General Fund proposed budget Lu balancing plan should be presented and discussed in context of the five-year forecast. Any revisions to the proposed budget should include an analysis of the 0 impact on the forecast out years. If a revision creates a negative impact on the N forecast, a funding plan should be developed and approved to offset the impact. The five-year forecast should be updated quarterly to reflect changes in revenues yr and unexpected changes in expenditures. The forecast should be presented to the City Council for discussion and to provide information to the public. m' 0 Use of One-Time Resources. One-time resources (e.g., revenue spikes, H budget savings, sale of property, and similar nonrecurring revenue) should not be `o used for current or new ongoing operating expenses. Examples of appropriate uses of one-time resources include rebuilding reserves, retiring debt early, E making capital expenditures (without significant operating and maintenance E 0 costs), and other nonrecurring expenditures. d Established Reserves. San Bernardino has multiple funds, based on different revenue sources and requirements. Because there are risks (both known and unknown), it is important that reserve levels in all funds be maintained as a , hedge against such risks. Without proper reserves, there can be major a disruptions in services when unforeseen financial demands emerge, requiring immediate attention. The City should maintain an adequate reserve level and/or ending fund balance for each fund, not just the General Fund, as determined 00 annually and as appropriate for each. For the General Fund, different types of d reserves should be maintained, including an economic uncertainty reserve to E t provide a cushion for unexpectedly low revenues in any given year, and a x contingency reserve for other emergency needs that arise. More about reserves a is explained below, including recommended levels. City Council and City Manager authorization should be required for the expenditure of established reserves, along with repayment requirements. 181Pa PacketPg. 28 Debt Issuance. A municipality should not issue long-term (over one year) debt to support ongoing operating costs (other than debt service) unless such debt issuance achieves net operating cost savings and such savings are verified by m CL appropriate independent analysis. All debt issuances shall identify the method of repayment (or have a dedicated revenue source)without an impact to operations. c Employee Compensation. Negotiations for employee compensation should I.L. continue to consider total compensation bargaining concepts and focus on all M personnel services cost changes (e.g., step increases and the cost of benefit N increases). Compensation costs should be included in the five-year financial N forecast to ascertain affordability to the municipality, within context of expected w W revenues. -- c Fees and Charges. Fee increases should be utilized, where possible, to assure ° that program operating costs are fully covered by tee revenue. Opportunities should be explored to establish new fees for services where appropriate. A in Capital Improvement Projects. Capital improvement projects with annual CM operating and maintenance costs exceeding $50,000 should not proceed without v m' City Council certification until funding is identified in the applicable year of `o w operation. 0 Grants. City staff should seek, apply for and effectively administer federal, state and other grants that address the City's priorities and policy objectives and provide benefits. Before any grant is pursued, staff should provide a detailed pro- E E forma that addresses the immediate and long-term costs and benefits to the City. u One-time operating grant revenues should not be used to begin or support the � V costs of ongoing programs. w Performance Measures. All requests for departmental funding should include T performance measurement data so that funding requests can be reviewed and 10 c approved in light of service level outcomes to the community and organization. a m w To resolve its structural budget deficit and prevent a recurrence in the future, the City m needs to adopt a budget philosophy similar to the measures above to help elected and appointed officials maintain the financial discipline crucial to a growing community like d E San Bernardino. Recommendation 1: Adopt a budget philosophy to provide a meaningful and easy to understand framework for maintaining financial discipline. Present a report to the City Council on the financial results of the policies at least once a year. Present an updated five-year forecast to the City Council at least two times a year. 191 Pa f�aritPq.2! EXISTING AND ANTICIPATED BUDGET ISSUES Without significant and immediate reductions in spending or significant increases in on- A going revenue, there will be a continuing significant gap between expenditures and a T revenues during the next five years. Deficits are projected in all five years of the v forecast. d a The significant points in this analysis are: The City does not have sufficient resources to fill the ongoing structural deficit and will not be able to maintain current levels of services or meet contractual or y debt obligations. W While the City has had unrestricted fund balance to fill a large portion of the gap o in the past few years, that fund balance has now been spent. The City does not N have sufficient one-time monies from other sources at its disposal to fill the gap. U) Because of the time necessary to implement new revenue sources, significant ' reductions in expenditures will be required to meet the limitations of available m revenue. U) A deficit of approximately S45 million is projected for FY 2012-13, representing 38% of `o the total General Fund. A significant part of the deficit is the result of deferred funding of the City's internal service funds including: Retiree Health, Workers' Compensation and General Liability. Currently, these funds are cash deficits in the millions of dollars. E The balance of the deficit, roughly $20 million, is a combination of flat revenues, end of employee concessions, increasing benefit costs and the elimination of the EDA In FY 2011-12, the EDA allocated funds for General Government functions (City Manager, Finance, Human Resources, Clerk, City Attorney, etc) that are now the responsibility of a T the General Fund. The loss of EDA funds to these activities requires a revised cost � allocation to all restricted funds. Despite the reallocation, the General Fund will likely < remain responsible for a significant share of these expenses in future budgets. m s 0 M FIVE YEAR FINANCIAL PERSPECTIVE c �. d The forecast shown as Attachment A is not a prediction of future policy decisions by the City Council, nor is it the City staff recommendation as to what spending and revenue levels should be. It simply reflects negotiated employee compensation commitments, a California Public Employee Retirement System (PERS) rates as currently known, and revenue projections based on an assumption of modest growth in the economy. As can be seen, expenses have increased steadily from FY 2008-09 while revenues remain flat 201 Pa t'adret Pg.36 over the same period, The rate of revenue growth has not been sufficient to meet the contractual and debt obligations of the City. Additionally, since the City has previously allocated General Fund reserves to meet budget obligations, there are no additional a sources with which to fill the gap. c In the past several years, the major reason for the deficit was the sudden drop in revenues combined with exhausting internal services funds without a plan to replenish a the cash, compensation/benefit increases, and need for increased public safety services. For the future, key contributors to the deficit are the need to replenish cash in N the Internal Service Funds, loss of redevelopment and increased PERS employer rates, N along with revenues that have decreased in recent years and are expected to be flat or w experience only slight growth during the period of the five-year forecast. PERS rates 0: are causing a greater portion of the City's available resources to be allocated to that c purpose, rather than to service delivery. Increases in PERS rates and pension % obligation bond payments will cost the City in excess of $1 million between FY 2011-12 and FY 2015-16. The percentage of General Fund budget spent on PERS benefits will rn go from 13% in FY 2011-12 to 15% in FY 2015-16, a 2% increase for an expenditure which is basically an overhead cost over which the City has little control in the short m term. c w PAST BUDGET BALANCING STRATEGIES c 0 Over the past few years, the City has balanced its budget through a comb'nation of cost reductions (including layoffs, unfilled vacancies and labor concessions), transfers from E other funds, and use of unallocated fund balance. San Bernardino has gone through o personnel reductions, which resulted in more than 250 issued layoff notices over the past three years. All City departments have made changes to reduce costs. For example, training budgets have been virtually eliminated. This has helped save costs, `m but is not sustainable in the long term because the City needs to have highly skilled and An trained employees, especially when there are fewer of them. Many employee positions have been eliminated. The positions held vacant may need to be filled if they are a essential to service delivery. This presents an opportunity to move staff from non- essential positions to essential positions which are currently vacant. m' A major aspect of the problem facing San Bernardino can be found in the fact that while E expenditures have been reduced and many positions have been eliminated, personnel costs per employee and overtime costs have continued to increase. Specifically the z General Fund budget indicates that the City budgeted approximately $102 million for a personnel expenses in FY 2011-12. Effective June 2012, the City's 3-year agreement with certain employee labor groups terminates and labor costs are forecasted to 211 Pa PacketPg. 31 increase by $10 million annually. Additionally, the City is facing increases in overtime costs and PERS rates which are offsetting reductions made from prior year layoffs. m Personnel costs currently constitute approximately 73% of all General Fund r expenditures. Therefore, personnel costs will need to be reduced in order to create a stabilized budget. Of the total allocated to salaries and benefits, public safety comprises 79% of the entire General Fund personnel expenditures. Therefore to effectively reduce a expenses, cost reductions from both police and fire are necessary. Recommendation 2: Initiate significant immediate changes to the expenditure and 0 revenue base, with major reductions in spending taking effect in FY 2012-13. W W K IN ERNAL SERVICE FUNDS c Internal Service Funds have been established for several uses, pursuant to accepted N governmental accounting practices. An Internal Service Fund is a fund for goods and m services provided for specific purposes- Rates for each Internal Service Fund are in established and charged to departments for the goods and services provided to them. v The City of San Bernardino has several internal service funds: m' w Fleet Services. For the provision of maintenance on, materials and supplies for, H and replacement of, City vehicles and other gasoline or diesel-powered o equipment, and maintenance of a warehouse inventory of materials and supplies v c for all City departments. E Liability and Property Insurance Fund. For the administration of the City's u self-insurance programs and the payment of liability claims. M v c Workers Compensation Fund. For the administration of the City's workers' a compensation and payment of liability claims. m Unemployment Insurance Fund. For the payment of unemployment insurance a claims from released workers, o, v 0 Telephone Support Fund. For the provision of maintenance on, materials and m V supplies for: and replacement of the City's telecommunications systems. c m E Utility Fund. For the administration and allocation of utility costs citywide. x Central Services Fund. For the provision of in-house reprographics and a duplication services. 221Pa 1Paoloet tP1�.32 Only two Internal Service Funds (workers' compensation and liability) have actuarial bases for determining funding level. Both of these funds appear to be presently c underfunded given the risks. There has not been an analysis to actually determine what a level of funding is needed to ensure that basic services paid for by those funds can be maintained. Each of the internal service funds should be carefully analyzed to r_ determine the proper level of funding to pay for the services or equipment that depends m on those funding sources. The City should initiate a study to establish the basis for a allocating costs for the City's internal service funds, beginning with fleet and building maintenance- 0 N Recommendation 3: Conduct an analysis of each internal service fund to w determine funding requirements for the services and equipment paid for out of W each of those funds and create a five-year forecast for each ISF. Set rates to c departments based on a cost allocation study and funding requirements for each m N ISF. a M U) COST DRIVERS v The major cost drivers for the City's General Fund are compensation and retirement m costs. Other costs are the City's debt payment on pension obligation bonds ($3.5 million w annually for now and expected to increase to $6 million/year in FY 2021-22), contracts, c commodities and fixed charges which represent about 15% of total General Fund costs. The compensation and retirement cost drivers are described in more detail below. E E 0 RETIREMENT COSTS d The City's costs for employee retirement have increased from $1 million in FY 2006/07 to nearly $1.9 million in FY 2011/12. By FY 2013/14 the annual cost will be over $2.2 a million. To put this into perspective, the City was spending about 9% of its General Fund i budget on retirement costs in FY 2006/07. In FY 2011/12 it will need to spend 13% of a the budget on those costs, and by FY 2015/16 it will require 15% of the budget for d m retirement obligations. m UNDERSTANDING EMPLOYEE RETIREMENT COSTS_ E E The City pays the PIERS costs for the majority of its employees. PERS divides the rates x into two parts! 1) employee rates and 2) employer rates. It has been a common practice for San Bernardino and many other agencies to pay both parts of the rates. However, recently the City was able to negotiate with the employee groups for all new hires after October 2011 to pay the full employee share. 23 ( P a f'+adistPg.34 2A.a ■; What is referred to as employee rates are set by PERS at 9% for safety employees and 8% for miscellaneous (non-safety) employees. Through negotiated agreements, San c Bernardino's public safety employees pay the full 9% (with an incentive pay offset) and (L portions of the City's non-safety employees based on their date of hire pay the 7 & 8% share (the difference in share is based on the PERS benefit afforded to the particular d employee). C N a The City could negotiate with current employees to pay all or a portion of the employee M share. Further, the City could negotiate any level of sharing with its employees and is N not limited to 7% or 8% for miscellaneous and 9% for safety as the employee share. o N Some cities are planning for a greater share of PERS costs than what has commonly J) been referred to as the "employee share' as shown below. For instance, the City of It Newport Beach has a new City Council policy that says, `The retirement benefits portion o of total compensation will be structured over time to achieve a 50/50 cost sharing between the City and the employees, including the implementation of defined 'a contribution programs in the event such programs are authorized for the City's use." m U) Z Effective organizations use a variety of strategies to manage the size of their workforce. One strategy, an early retirement incentive plan (ERIP), increases retirements above M natural attrition by enhancing employee retirement benefits. This tactic allows w employers to decrease payroll costs, reorganize staff, and trim down higher-paid middle o management without layoffs. The organization achieves fiscal savings only by keeping % the positions vacant or replacing retiring employees, who are typically at the top of the d salary schedule, with entry-level employees. California has several retirement incentives E available; however, the cost-effectiveness of these programs must be examined within g the context of an aging workforce. The program used by most public agencies is referred to as the "golden handshake' which was made available under the California c m Public Employees Retirement Law (Gov. Code, 20903). H .N For background on the Golden Handshake (as known as the CalPERS Two Years a Additional Service Credit benefit), it is an option that allows an agency to provide two 5 additional years of service credit to members who retire during a designated window period because of imminent demotions, mandatory transfers, or layoffs. And while it can m provide some short-term savings, it adds to a city's future retirement costs and limits flexibility when it comes to filling vacated positions since the CalPERS program requires r that they remain permanently unfilled. a To evaluate the value of this program for our City, we need to: 24 I P a Packet Pg. 34 C ■, • Determine all individuals who meet the minimum eligibility for retirement (at least age 50 and at least 5 years of service credit) who are employed in the designated classification, department or organizational unit A E Determine the annual pay rate for each person ; 2.A.a ■ The PARS early retirement program goes far beyond the limitations of the PERS option and it is far more flexible. The PARS program can be structured to provide years of c service credit or years of age credit, the terms of the payment of the benefit can be a defined and eligibility can be structured to meet City and employee needs. c m Unlike PERS, the PARS program allows the City to determine the number of positions by classification and department, thereby minimizing economic risk. Also, once the a" Council determines a need for a separation incentive program, the plan administrator o can implement the program and can offer early retirement incentives as necessary as N broadly or as narrowly as necessary. The City has used PARS in the past for early N retirement of public safety staff. W PARS offers the flexibility of providing structured payments to the employee including lump sum payments, monthly payments for life, or a monthly payment for 5, 10, or 15 ° years. The PARS early retirement option could be offered as a supplement to PERS and can be structured to complement PERS and social security eligibility. m The cost for the PARS retirement option program is calculated based upon the number rn of early retirements offered plus an administrative fee of 6% based upon cost of the retirements. It is considered a fee-for-service plan. Rather than paying for the cost 00 `o within the first two years, costs are paid as expended. Most importantly, if the City approves the PARS retirement option it can be utilized during these budget hearings. `0_ v c d E E 0 U 0 Of a c m Mn.N A C Q d OI 9 J m C d E Z U Q 261 Pa Packet Pg. 36 2.A.a BUDGET STABILIZATION OPTIONS c Eliminating the estimated deficit in FY 2012-13 and future years will require difficult decisions. a The City already has reduced costs and staffing levels in many areas, so reducing additional costs will be a matter of determining what is not important or essential and returning to basic services. It can be assumed that every service and program provided is important to a someone. Therefore, decisions will need to be made between numerous important services rn and interests. Given the size of the gap and the growing costs of operations, revenue increases alone should not be the only option considered to eliminate the deficit and put the N 0 City on stable financial footing. Therefore, as previously mentioned, the following three v strategy approach including these components is suggested. w W 1. Evaluate and Implement new revenue opportunities `o 2. Compensation strategies that measure full cost of compensation package a m 3. Implement Service delivery model changes for full cost recovery and costs containment in rn Each strategy is described in this section of the report, with specific suggestions for consideration. Any public organization has a need to balance services to the community with m employee compensation and benefits. Most of the budget balancing solutions will need to come through a combination of reducing personnel costs, changing service delivery models `o_ including out sourcing some city services, more efficient revenue collection procedures, and voter approved tax measures. The total number of personnel and the compensation costs are E no longer sustainable given the City's resource base. E 0 U The ideas presented in this report resulted from disaIssions with the City management staff, analysis of costs, and viability of alternative methods of providing services. The focus is on m delivering valued services to the public, so the following principles were identified. N T • San Bernardino desires to continue with the current operation of its public safety programs. a m m a • What is most important is that high quality, basic services be delivered, not necessarily m' that they all be delivered by City employees when services can be provided less c v expensively by the private sector or another agency. t U R • The fundamentals of the municipal corporation must be maintained to properly manage a the organization and reduce risk and liability. • Financial stability and sustainability is important to employees and to the City's ability to recruit and retain motivated, competent and capable individuals. 27 1 P a g e PacketPg. 37 0 REVENUE Opportunities exist to increase fees for some services to match the costs of the service being provided, consistent with the City's policy of full cost recovery where possible. In recent a months, the City commissioned the Matrix Group to complete a comprehensive fee study for planning and engineering. The fee study will assist the City in its implementation of full cost recovery for services provided in those areas. In order to measure cost recovery for other a areas of the organization, the City must establish, track and monitor performance measures. M Specific areas for improved cost recovery include recreation programs, false alarms, code N enforcement, and sanitation. This role will be handled by a management analyst or budget b N officer within the proposed Administrative Services Department. (n w W The City needs to grow its current revenue streams. In order to do so, the City will need to implement economic farming programs which assist current business through the growth a° cycle. Other sizeable revenue increases, however, would need to come from voter-approved N tax increases. in The items above are described in the sections below. a m POTENTIAL TAX INCREASES `o w N City staff has estimated the potential reverues associated with the following tax increases. All c would require voter approval. c d E REAL PROPERTY TRANSFER TAX o U In California, localities including San Bernardino have imposed a tax on the transfer of property W located within the city. The tax, known as the documentary transfer tax or real property transfer m tax, is largely based on the federal documentary stamp tax, which was repealed in 1976. In H California, counties and cities have been authorized to impose a tax on deeds of transfer of realty located within such county or city. The amount of the tax is based on the consideration a or value of the realty transferred. The current County rate is one dollar and ten cents ($1.10) d for each one thousand dollars ($1000) of value. Of that amount, the City receives $0.55 and the County receives the remaining $0.55. Charter cities, however, may impose transfer taxes m' at a rate higher than the county rate. The transfer tax must be paid by the person who makes signs or issues any document subject to the tax or for whose use or benefit the document is E made, signed or issued. Real Estate Transfer Taxes, authorized as documentary transfer taxes by the California Revenue and Taxation Code on the sale or transfer of real property are z currently levied by all counties and many cities. a Real Property Transfer Taxes may be applied only to residential sales or to other types of real estate transactions including commercial and industrial sales. Revenue raised from the Real Property Transfer Tax is added to the City's General Fund. 28 1 v Packet P 1 38 The City should implement a rate of $5 per $1000 of value to provide a base level of funding necessary to deliver essential services to the community. The proposed rate would generate _ roughly $3 million annually. ` a U UTILITY USER TAX d v c Many cities charge a tax on utilities, ranging up to 9.5% (Huntington Park). San Bernardino a currently charges 7.75%. Each 1% increase on utilities currently taxed (telephone, cable, ; electric, water and gas) would yield approximately $3 million annually. Each 1% on utilities not N currently taxed (sanitary sewer service, sanitation, refuse collection) would yield several c N hundred thousand dollars annually. w W Utility user taxes (UUT) are paid by San Bernardino residents and businesses and are C collected by the utility providers who serve them. The utility then remits the tax payments to 0 the City. Annual revenue in FY 2010/2011 from utility user taxes (electric, gas, water; cable, land line phone, and cell phone) was $22 million. The City has made annual revenue projections considering possible tax increases at 1% and 2%. Further, sanitary sewer service, in sanitation, and refuse collection are currently not part of the utility user tax. The City may want to consider modernizing and expanding the utility user tax to cover utilities not currently m' included. w N A utility user tax increase can only be voted on during a general election (a simple majority is o needed), unless the City Council declares a fiscal emergency and puts the potential tax increase to a vote during a special election. It should be noted that costs for special elections E are higher. For San Bernardino, a special election costs approximately $200,000. E 0 U 0 tY SALES TAX m San Bernardino presently has a sales tax rate of 8%. Of this, .5% flows to the General Fund Mn budget of San Bernardino, amounting to $25.2 million. The City's voter-approved Measure Z took effect in April 2007, increasing sales tax by .25 percentage point. For FY 2012-13, a` Measure Z is expected to generate $6 million of the City's anticipated $25.2 million in sales tax revenue. Measure Z will remain in force for 15 years from the date of implementation, or until m 2022. C d Because the City recently approved Measure Z, we are not recommending the City seek E additional increases to the existing sales tax rate. a TRANSIENT OCCUPANCY TAX The Transient Occupancy Tax (TOT) is a tax charged on hotel stays. San Bernardino presently has a TOT rate of 10%, which is the County average. In the San Bernardino / Riverside County area, some cities charge as much as 12.7% (Palm Springs). For our City, TOT 29 Packet Pg.39 0 generates just under $2,500,000 per year in revenues, meaning that each 1% of the tax generates about S250,000. c A Increasing the rate by 1% would put the rate at the highest level in the County and would a generate only $250,000 in revenues. There might also be some negative impact of the higher tax rate on occupancy rates at the local hotels and spas. For these reasons, we are not recommending an increase of the existing TOT. a rn 911 COMMUNICATIONS FEE N 0 While often called a "fee," this potential revenue source is actually a tax requiring voter N N approval. A 911 communications fee would yield approximately $6.7 million a year. The tax z would be charged on most personal and business telephone lines and cell phones in the City. _ Some exemptions typically exist. mainly relating to customers on lifeline service and service to °- non-profit organizations and government offices. a m The City of San Jose has this fee and estimates that approximately 90% of the phone rn accounts in their community are taxed. The justification for charging a fee to telephone subscribers is that only people who have telephones can call 911 for emergency services. As m stated in the San Jose ordinance, "Subscribers to telephone service derive significant benefits `o from ongoing operation of the modernized integrated system installed at the San Jose Emergency Communications Center" in the form of more efficient dispatch of services to a 911 4 emergency request. d Recommendation 4: Determine- the Mayor and Common Council's interest in asking the E E voters to approve new or increased taxes. If supported by Mayor and Common Council, u d develop an action plan and schedule to seek voter approval of new revenues. v c A PROPERTY ASSESSMENT AUDITS w r A General Fund revenues in the form of Property Tax revenues have been impacted in recent a years by the downturn in the housing market and little growth in housing new starts. While this V would indicate that it is unlikely that Property Tax revenues will recover in the short term evidenced by a no-growth revenue assumption in FY 2012-13 despite given recent minor 00 increase in assessed values, it would be helpful to conduct an audit of assessed values d assigned to each property within the City. Indeed, in prior years, with across the board reductions in assessments without review and analysis, conducting an audit of property assessments to ensure accuracy may generate additional revenue and avoid costly appeals. a Recommendation 5: Engage a private firm to perform an audit of the property tax assessments to ensure data is current and accurate. 30 1 P =itp.M FRANCHISE AGREEMENTS AND LONG:-TERM CONTRACTS Like most cities, San Bernardino has long-term contracts and franchise agreements with a variety of vendors. Similar to most cities in Southern California, the City should evaluate the a benefit, if any: in providing services such as street sweeping, tree trimming, graffiti abatement, CD street light maintenance, and refuse service and other ancillary services through franchise agreements. a rn To ensure the services are being provided as cost effectively as possible, and at competitive rates, staff should review in-house operations as well as external contacts with terms exceeding two-years to identify opportunities to renegotiate the terms or to outsource the N services to outside contractors. Additionally, potential revenue generating contracts, such as W refuse services, may be restructured to provide revenues up-front to improve the City's short- r_ term cash position and to afford the City time to work through its options for budget 4 stabilization. 'a Recommendation 6: Evaluate all franchise agreements and contracts for cost cutting y and/or revenue generating opportunities. V m FEEINCREASES c w N A fee is a charge imposed on an individual for a service that the person chooses to receive. A `o fee may not exceed the estimated reasonable cost of providing the particular service or facility % for which the fee is charged, plus overhead. Examples of City fees include building permits, recreation classes, false alarms and development impact fees. E 0 v The City should make every effort to make annual adjustments to fees and to institute full cost recovery for development fees (with anrual cost adjustments). Areas that may generate increased revenues for the City, which we believe are under performing, are related to utility w franchises, paramedic subscription fees and false alarm fees. a, m e Q UTILITY FRANCHISE FEE_ V A potential revenue source to be considered, although it requires state legislative action, is to m' revise the utility franchise fee paid to municipalities in areas served by Southern California Edison (SCE). Inequity exists in what older communities such as San Bernardino receive from E franchise agreements when compared with newer cities which have negotiated with SCE. a The Franchise Act of 1937 sets one-half of one percent as a minimum franchise fee charged. Because of the methods used by the California Public Utilities Commission to set and account for investor-owned utility rates, SCE blends the cost of all franchise fees across its entire rate base, regardless of the return to each respective city. As a result, every SCE customer is subject to a 0.84% franchise fee charge, regardless of whether the customer resides in a city 311P tR 4f that is being paid a 1% fee or a 0.5% fee. San Bernardino receives only 0.5%, while some other, newer communities receive 1% franchise fee because of rates they negotiated with SCE. The result is that some cities are subsidizing others. Analysis should be conducted of the potential new revenue to the City if a legislative change was enacted. This proposal has T been presented to other fiscally challenged cities including Santa Ana and Stockton. The potential of legislative change should be monitored, with San Bernardino alone, or with other d cities throughout the State, advocating for change. a a� Recommendation 7: Analyze the amount of additional revenue that would be received by the City if a change in the utility franchise fee allocation were implemented. Advocate c for a change in legislation to correct the inequity of payments to cities of utility N U) franchise fees. � C 0 RECOVERING PARAMEDIC COSTS i Paramedic subscription programs function as a form of insurance in that subscribers are not m responsible for paying out-of-pocket costs for emergency medical services (EMS) above what rn is covered through insurance, Medicare or Medi-Cal. CO California cities that have paramedic subscription programs charge from $24 to $60 annually CO per household. The most common rate is $48 per year, which is double what the City is H currently charging. Some cities have varying rates for local businesses, convalescent homes, o and low-income residents (e.g., residents who qualify for low-income discounts on their city c water bill). Revenues vary by city and can be evaluated in terms of market penetration; the E ratio of subscribing households to the total number of households. c 0 The Table below compares several cities' paramedic subscription programs (data from 2009 W v and 2011). r_ 0 T A C Q d C) 9 7 m C d E r 0 m Q 32 I P a g e PW*d P9 42 Table 9 Comparison of Paramedic Subscription Programs in the Southern California c CITY m •P • • • a HOUSING OF PENETRATION FEE v UNITS REVENUE MEMBERS m Arcadia* 56,546*** 20,304 $160,000 11,000 54% $40 Buena Park* 81,460*** 24,280 $400,000 13,000 54% $45 a. Corona* 154,520*** 45,485 $1,050,516 23,244 51% $48 Fullerton* 137,481*** 47,044 $815,000 16,981 36% $42 Orange* 138:010*** 44,319 $650,000 10,896 25% $48 $ Westminster 90,677'*' 27.419 $235,000 5,419 20% $42 w Newport a Beach* 85,990*'' 42,711 $297,600 6,200 15% $48 r 0 Alhambra* 83,661*4* 30,216 $100,000 3,744 12% $48 A N Monterey B Park* 61,153*** 20,734 $115,000 2,538 12% $50 m Santa Ana** 327,731*** 73,174 $154,362 7,344 10% $48 w Burbank* m 104 427*'* 44:055 $180,000 4,064 9% $48 � Montclair* 37,163*** 9,677 $24,250 674 7% $36 m' San w Bernardino 211,674*** 45,000 59,600 400 .89% $24 w *May 2009 Data ** 2010/11 Data (Data Source: City of Santa Ana) ***May 2012 Data (Data o Source: CA Dept. of Finance, Demographic Research Unit) d The City should consider increasing the current rate and implementing a marketing plan in an E E effort to increase Subscription revenues. Currently, the program generates $9,600 plus an 0 additional $360,000 annually in collections for non-subscribers.. Based on the City's total a: number of housing units (45,000), which is equal to the number in the City of Corona, the City m should actively market the program in an effort to raise revenues equal to its peers. �+ 'w T Recommendation 8: Consider increasing the paramedic subscription rate Ito recover a costs associated with Fire/Paramedic Service. rn Market penetration rates are related to community demographics, population density, whether m transport services are provided, and the amount of EMS fees. According to Firemed officials (a c• private firm that operates an EMS membership program throughout Oregon), communities with d E a high percent of residents over 60 years of age and those in rural areas have higher market penetration (i.e., number of members). Given the large number of residential parcels in the a City, we believe there is an opportunity for this program to improve its performance in the recovery of costs for fire/paramedic services. Recommendation 9: Develop a marketing program for paramedic subscriptions with a goal of market penetration to at least 50% of households. Develop marketing efforts to target those most likely to subscribe and plan a campaign that will be ongoing. 33 I Padw Pg 13 FALSE ALARM FEES Responding to false alarms is unproductive use of Police Department resources. While we are unaware of the actual minutes spent per alarm response, we believe possibly 25-50% of total r alarm calls are false alarms. Based on the fees currently charged and the costs of officers c responding, it appears that the City may be losing thousands of dollars each year that is not paid for by fees. All City costs (police response and administrative overhead) incurred by false a alarms should be paid for by the alarm owner. Cq; Recommendation 10: Determine the fee level required to recover all City costs c associated with false alarm response and increase fees accordingly. `7 U) w a ASSET MANAGEMENT C 0 Cities own many buildings and physical facilities such as parks, office buildings, and corporate N yards. Asset management, the process of monitoring the inventory and leasing of these investments, can and should be considered as a cost reduction strategy. m V d The City of San Bernardino has an asset inventory now. It should develop a comprehensive v asset management program, identify market rental rates and subsidies. and sell unneeded and 00 under-performing properties. Over the long term, an asset management program should Ul integrate with maintenance and replacement schedules for the development of long-range `o 0 capital improvement program funding needs. % c d The identification of surplus, under-performing properties that can be sold will result in one- E time revenues and a reduction in ongoing maintenance costs. Market rate rents should be 0 calculated and updated periodically for all City and Successor Agency properties that are rented or leased. Market rental rates as well as the level of subsidy should also be identified for properties rented or provided to community and non-profit organizations and for economic a development purposes. The subsidies should then be supported by the appropriate program and funding source. This will identify the true costs of such programs, allow them to be a properly charged, and provide relief to the General Fund. w v Every parcel owned by the City or Successor Agency represents property taxes that the City m' does not receive. Currently the City and Successor Agency own 294 parcels with total book value of $300 million and a likely sale estimate of less than $100 million dollars. Given the E City's 18% of the property assessment, the sale of these parcels would generate roughly $18 million dollars. The City and Successor Agency may also wish to explore selling or leasing some of the parcels at below-market rates in order to incentivize developers and other business interests to spur additional economic development and development-related revenues. 34 I Nrr�litl�.ii FINE III The City and Successor Agency may also wish to explore selling or leasing some of the parcels at below-market rates in order to incentivize developers and other business interests to spur additional economic development and development-related revenues. a Recommendation 11: Develop a comprehensive asset management program, identify u market rental rates and subsidies, and sell unneeded and under-performing properties. Conduct an analysis of all property assets as part of the asset management program. a COMPENSATION AND BENEFITS N r With personnel costs accounting for about 85% of the General Fund, reducing them is $ essential to bring spending in line with resources. Changes to compensation or benefits are LU subject to negotiation with bargaining units. High cost drivers are noted in this section for possible negotiations. s is N PENSION COSTS Pension reform is being much discussed at the state and local levels because costs are Oincreasing at rapid rates significantly beyond increases in revenue and are no longer affordable to most public agencies. In San Bernardino, City-paid pension costs have grown o from $1 million in FY 2006-07 to $2.2 million in the upcoming FY 2012-13 Budget. Costs are w projected to grow to 2% in FY 2013-14. A Pension costs are a combination of an "employer' and employee" share. PERS sets the. employer share for each agency depending on actuarial assumptions. For San Bernardino, the E employer share is 30% of compensation for public safety employees and 17% for non-safety 0 employees. Those levels will grow to 31% for safety and 18% for non-safety in FY 2014115. W The employee share is set by PERS at 9% for public safety and 8% for non-safety and 7^/,, for c R non-safety new hires, although agencies and their employees can negotiate a higher cost A distribution between the agency and employees than the "employee" shares set by PERS. T m c The City has already been able to negotiate a two-tiered retirement benefit program wherein a d newly hired employees will receive a retirement benefit of 2% at 55 for non-safety employees and 3% at 55 for safety employees. Savings under this program will build with workforce m' turnover, as employees under the current system retire and are replaced by employees at the m new rate. Therefore, initial cost reductions are minimal but savings to the City in the long term r will be significant. This agreement has allowed the City to improve its pension obligation in the long term while it continues to work toward short term solutions. a 35 P a g P Packet Pg.45 realized from the issuance of POBs. In future years the City will need to be mindful of the growth in POB liabilities, as they will increase over time. m Table 10 r Historical Pension Expenses m v 25000000 m IL m 20GOOODO •2005 Series A-2 Capital N Appreciation Bonds c N ■Employee Portion W 15000000 K r police e 0 10000000 — A *Fire N a m 5000000 ■Misc ) v CO CO 0 w 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 c 0 m 9 SALARY-STEP ADJUSTMENTS E Traditional public agency salary schedules with an average of five or six steps in the range cEE were developed before the onset of widespread collective bargaining and were intended to provide an opportunity to reward employees annually for their performance and for the growth of their experience and productivity as they become more effective on the job. The increases w are often known as merit increases, and many are implemented automatically. 0 c Some labor groups in San Bernardino have maintained a salary schedule with only five or six a steps. Consequently, it only takes three and a half to four years for the employee to get to the I top step. During this period the employee is typically awarded a step increase, and if m' available, cost of living adjustments negotiated by their bargaining group. Because of this practice, new employees have sometimes received raises of between eight and nine percent E annually in the first few years of their employment with the City. Most employees at the City are presently at the top of their salary range. a A 10 to 15 step range for management and non-management employees would reduce the City's costs and could spread the opportunity for performance increases over six to nine years rather than the current three and a half to four years. Such a change in the salary schedule would need to be negotiated with each of the City's bargaining units and would be considered by both sides as part of the total compensation package during negotiations. 36 I Peelrst�� Recommendation 12: Implement a 10 to 15 step range to spread out merit (performance) increases over six to nine years rather than the current three and a half to four years a REGIONALIZATION AND SERVICE SHARING OF FIRE SERVICES d Fire departments across the country are moving towards a regionalized approach to providing fire protection and emergency medical services to reduce costs to individual cities and to a improve fire service delivery. The Orange County Fire Authority (OCFA) is an example of a regional fire service covering 22 cities plus unincorporated county areas and is established as N a Fire District and contract service provider. Regionalization can be accomplished through N contracts for service (e.g., contracting with a county fire department) or by a joint powers UJ authority. c 0 Regionalization can range from complete consolidation of fire departments to service sharing of one or more functions. Under a service sharing model, typically one agency provides the a services to others on a contractual basis. in Examples of service sharing opportunities between fire departments include fire dispatch, training, specialized response units (such as urban search and rescue and hazmat), and m' equipment use. Through regionalization, fire stations that may be near stations in other w communities can be eliminated, along with their associated staffing and facility costs. Other benefits of regionalization and service sharing include: °- r Responses are coordinated across city lines including back-up for those responses. E Support functions such as dispatch and communications are coordinated. This o eliminates duplication, increases efficiency, and saves money. • Joint purchasing leads to savings. Firefighters use the same protective clothing for larger purchase orders and quantity discounts m N • hi equipment are shared No Specialized fire fighting and rescue teams, vehicles, and equip . T single community can afford to keep enough firefighters on hand to respond to every a specialized emergency. Urban search and rescue (USAR) and Hazmat vehicles and equipment can be shared rather than each city having its own. • Non-emergency resources such as training facilities, health centers, and other support m systems can be shared to reduce expense and standardize programs. m • Stations and equipment can be consolidated. Stations can be located more strategically instead of being redundant, e.g. stations within a mile of each other in adjacent cities x can be relocated or browned-out. a • Training and other specialized facilities and equipment can be centralized and shared. • Web-based video conference training can be shared. For example, the Rancho Santa Fe Fire Protection District based in San Diego County operates a multi-jurisdictional interactive video training system developed by the Tandberg Company that connects 61 different locations. This also enables staff to remain in their stations for the training. 37 I PacketPg.47 Mutual aid and automatic aid agreements throughout the County of San Bernardino now provide a solid foundation for a regional approach to fire service delivery. The existing relationships between the cities can be expanded to achieve significant economies of scale in a management, administration, training, and all aspects of operations. The City's Fire Department could be the vehicle to accomplish expanded regionalization as the lead agency, or there could be sub-regional fire agencies created by consolidating several existing a departments. The creation of regional fire service requires extensive study, input and acceptance from N surrounding communities and the support from the Fire Department to take on a lead agency N role. Despite these obstacles, there are potential long-term benefits of regionalization worthy w of discussion. c Recommendation 13: Initiate discussions with City Fire, Cal Fire and other cities in the 0 area about a regionalized approach through the establishment of a Fire District with San N Bernardino as the lead agency. If successful, this could create economies of scale by eliminating redundant programs and costs. N d POLICE DEPARTMENT COST SAVINGS OPPORTUNITIES m 0 w To substantially reduce costs in public safety services, the City will need to reduce staffing, or seek out contract opportunities for the City's Police Department to provide services to adjacent -° m communities. E In recent years, several municipal police departments have provided services to others under E contacts for service. In fact, its common place for public safety departments to share dispatch services. Similar policing contracts have existed in the following cities- V V c m Brea contracted services to Yorba Linda U) Whittier contracted services to Santa Fe Springs 21 Maywood contracted services to Cudahy a` d Other options are to outsource animal services, regionalize specialized police services, and pursue full cost recovery of fees for services to outside agencies. m' e Similar to Recommendation 13 above, extensive studies a•e required and the willingness of m E other jurisdictions to participate. z a ANIMAL CONTROL San Bernardino County provides animal control services to several cities as well as unincorporated County areas. The City should consider an alternative with County as an alternate service delivery method. 381 PackdPt.4111111 Recommendation 14: Consider contracting with the County of San Bernardino for all animal control services. Develop a detailed implementation plan. m a CIVILIANIZATION OF POLICE TRAINING c d Training is an important function within the Police Department. It is currently carried out by sworn personnel. Significant savings could occur by using retired police officers on a part-time a basis to conduct training programs and reallocating full time sworn positions from this function. 01 The City could increase free patrol time through this change if the full time positions were N 0 reallocated. C' rn Recommendation 15: Utilise retired police officers as trainers and reallocate full-time z sworn personnel from this operation. C 0 m N DEPARTMENTAL CONSOLIDATION The City has yet to fully experience economies of scale in management and administration d through the merger of departments and functions. Economies of scale could be achieved by merging functions between Information Technology, Finance, Human Resources, as one M Administrative Services Department. Such a merger would save a minimum of $200,000 0 annually by reducing one executive management position and consolidating administrative c functions. There are a number of specific programs and activities within all departments that m should be carefully evaluated as to how merger should occur. It is possible that some programs or services could be merged with other departments. Detailed evaluation of E alternatives will be needed to determine the precise configuration of merged departments. u m Additional opportunities may exist by contracting services to an outside agency. These services may include information technology, design engineering, public works and building m W inspection, refuse, economic development, community services and legal services. T A Recommendation 16: Consider merging Information Technology, Human Resources, a Risk Management with the Finance Department to create an Administrative Service Department and merging Library Services with Parks & Recreation to create a m Community Services Department. c m E L V R Q 391 D Pm*et Pg.49 IMPLEMENTATION AND CHANGE MANAGEMENT The recommendations presented in this report are difficult and there are no easy choices. Most of the options identified represent fundamental changes in service delivery and the number a and compensation of employees. The nature of the City's financial challenge is such that small changes will not create financial stability. During the past few years, the City has been creative, employee associations have been forthcoming with various levels of compensation a reductions and deferrals, fund balance has been used, and unfortunately reserves have been M completely depleted. A 0 Unfortunately, the economy will not grow the City out of its budget problem. Time is of the N essence due to the growing costs and the inadequacy of unallocated funds and other one-time LU methods to balance the budget. Those have been depleted. At this point, structural changes and changes to service delivery models are absolutely necessary to bring the City to financial 0 N health. = a Reducing costs does not happen without work. Therefore, given the urgency of the need to y make structural changes, staff, and/or consultants, will need to be assigned to this task, setting m aside other work. To enable staff to focus on this task, other new initiatives should be deferred. m Additional analysis will be required to confirm transition costs and policies, practices or Q procedures that will need to be modified as a result of implementation. Implementing the c recommendations in this report will require hard work as well as time. Taking any of the concepts to reality will not be instantaneous. d E E 0 IMPLEMENTATION SCHEDULE d The following schedule is suggested as a starting point for the City's discussions. The City has a projected deficit of $45 million for FY2012/13 consisting of $25 million in operations and an a addition $20 million in deferred liabilities and internal service funding. To realistically i implement a budget stabilization plan, a goal of $25 million in reductions in on-going costs to a be implemented as part of the FY 2012-13 Budget is needed. The remaining $20 million in m deferred liabilities must be dealt with concurrently in order to replenish internal service funds to appropriate levels. In order to avoid financial challenges associated with lack of reserves for 00 required cash flow, time is of the essence for making reductions through the implementation of both Phases of this report. 0 a COMMUNICATIONS AND TRANSPARENCY City management has taken steps to communicate openly and candidly and engage managers, employees and unions/associations about the City's financial position and the options available to create financial stability and resiliency. These communications will continue. Employees and managers may well have other ideas to offer that should be 40 I ftcb fwa M' analyzed and considered. The best thinking of everyone in the organization will be needed to make the necessary fundamental changes. The City has competent and capable employees who are committed to providing valued services to the community and who are proud of the a professions they represent. Engaging City staff in the next phases of the budget stabilization c process is important to the long-term health of the organization. c Communicating early, transparently and frequently about proposed changes, as well as why a the changes are important, is an essential part of effective change management. Openness, engagement and a spirit of teamwork will be critical for the City to emerge from what will be a N very difficult phase of fundamental changes to the organization. Because so many of the N recommendations have the potential to directly impact staff, executive management should w create an internal communication and engagement plan, as well as a plan for communicating whether proposed changes will impact the public and if so, how. In addition to creating the plan `o the executive management should determine how to staff and support it, and make sure it is N effectively implemented. a A (A « Recommendation 17: Create an internal and external communications and engagement % plan. Temporarily reassign positions within the City to provide analytical support for m' implementing a budget stabilization plan and a communications plan. LO C 0 m s c m E E 0 U d 9 C N 41 0 T N C Q « d O7 7 m w C d E M 0 0 Q 411 0 COKICLUSEONS R There are many who feel that taxes are high enough already and that expenditure cuts must a T come first. This is a sentiment that has resonated with City leaders as reflected in the Q approach taken to address the structural deficit which up to now has not relied on an increase d to any of the General Fund taxes. Nonetheless, the pursuit of new revenue sources and/or a increasing existing revenues is a strategy that can no longer be ignored. However, seeking to increase revenues that are subject to large fluctuations, such as the documentary transfer tax N or sales tax, should not be treated as a cure-all. As was the case with revenue received during N the real estate boom, some increased revenue is short-lived. Therefore, in conjunction with a w new revenue strategy, it is recommended that a portion of any new revenue received be a: directed into the City's Budget Stabilization Fund. Funding the Budget Stabilization Fund will o ensure that reserves are available for those economic times when economically sensitive revenues will fall. In addition to dealing with the economic cycles, funding the Budget Stabilization Fund will allow the City to better deal with uncertain legal liabilities. It is important 2 to note that the new revenue options described above would have little to no budgetary impact on the Fiscal Year 2012-13 budget as the collection of these enhanced revenues would not occur until very late in the fiscal year at the earliest. However, these solutions would have a m positive impact on reducing the structural deficit beginning in 2013-14. ° N C The financial situation in 2012 is a systemic problem held over for years going back into the R 1990's. Revenues are simply not sufficient to cover the cost of the services being provided. c City management and City residents have both made public safety the top priority in the City, E having approved ballot measures to allocate additional resources to the Police Department. u Other services have been cut to support the emphasis on public safety. Clearly, reductions to � the expenditure side of the budget are not going to produce the level of savings that will be c A needed to balance the budget. N The City has been working diligently to manage its operations through an unprecedented a. decrease in revenues while experiencing cost increases. As a comparison might note, the City a entered this challenge with a distinct disadvantage in that it has lower levels of discretionary revenue and the resultant lower levels of operational expenditures than other similar cities. m' Nevertheless, the City has taken steps to reduce costs over the last several years because it has been forced to do so by declining revenues, however, the expenditures have still outpaced E revenues. In this effort, employee associations have been forthcoming with some compensation concessions, yet costs continue to be much higher than can be afforded by the a City. The revenue forecast shows that significantly lower costs will be required for the foreseeable future. During this period of time, it has been noted that Council, residents and businesses in the City expect and deserve a well-maintained street network, manicured parks, cultural opportunities, neighborhoods, in addition to fundamental public safety services. The challenge to the City will 42 1 Packet Pg. 52 z.a.a �j be to identify what it can afford and how that relates to the type of community services it wants to provide. Staff has approached this analysis with the understanding that all current City services are important and that service reductions should be pursued as a last resort, only a after efforts to reduce costs, optimize service delivery and improve revenue performance have , been taken. While it is difficult for policymakers and executives to consider such topics as reductions in employee compensation, changes in the way services have been traditionally delivered (which also impacts employees) and revenue increases, there are strong a justifications for each area to be on the table for discussion. The fact remains that, in spite of M the actions taken to date, San Bernardino's financial situation requires immediate action. N Change in past service delivery models and significant revenue increases are required. N U) While the service delivery changes suggested in this report are likely to be resisted because of LU the impacts on personnel, the suggestions are not radical and are being used successfully in r- other similar jurisdictions. Additionally, because other local government agencies are also 0 looking for ways to reduce costs in response to financial challenges: there is greater _"- opportunity to discuss and implement regionalized or shared services than before. Finally, the analysis indicates the City receives a lower level of revenue than other similar cities, so revenue augmentation should also be on the table. However, options to increase m revenues significant enough to provide ongoing budget stabilization are limited, cannot be c implemented without voter approval, and will take time to be realized even if approved. 0 Listed below is the summary of options and the estimated revenue or costs savings derived from each recommendation contained within this report. Several of the recommendations can d be implemented at the staff level with Council approval. However, should the desire not be E E there to restructure the organization to staffing and service levels matching available revenue 0 resources, a voter-approved tax measure is needed. This report contains several options for the City and Council to consider prior to placing a measure on the ballot. We recommend file City consider all other options first prior to making a decision to place a measure on the N a ballot. a d m M d E r U R a 431Pa g e Packet Pg. 53 Table 11 Revenue O tions Summary c a - a Utility User Tax 1% Increase $3,000,000 d Utility User Tax 2% Increase $6,000,000 r N a 911 Communication Fee $6,700,000 Increase Real Property Transfer Tax $3,000,000 0 N Transient occupancy Tax $250:000 w W Develop 8 Implement Wiarketing Plan for the $690,000 `o Paramedic Subscription Program N Implement False Alarm Fees $100,000 A Sale of Surplus Land and Land Held For Resale $18,000,000' U CO Proceed from property held by the Successor Agency would CO 0 need to be allocated among taxing jurisdictions N In order to achieve financial sustainability and to maintain healthy reserves, the City will need R to take bold, decisive action to implement changes. The recommendations in this report will r assist the City in realigning annual revenues with annual expenditures and setting the path E toward financial sustainability and economic resiliency. Achieving financial health beyond u stability will require a partnership of the City Council, staff and community. v C A N N T A C Q iU m 'O rtl C d E L v m x a 44 PacketPg. 54 2.A.a C A IL T U C d C N CL rn M N r O N N W 0 O ATTACHMENT A N FORECAST m 0 w N C O C d E E 0 U d a c m N .N T N C Q d ca m C d E r U m a as IFPacketPg. 55 C_ E s c m a T U C d C d a m c� � � .a nd of `� MQ oiNd tl d d o0 tic0 tltlN � N LU > N_ J L La i v� n N �? ��' n A" l? .i d' N .t 4 N' v' [Q l z v gig gumag 0 � O z q 6q Z w y 6 ? U 6 Z o b � � F fHN u o o u u & JaCp� [yryp jg9 QLp{ Packet Pg. 56 . z a } J . J � CL ( | � § ■ w § . ) NB § ! 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August 29, 2012 Packet Pg. 60 OTABLE OF CONTENTS INTRODUCTION.........................................................................................................................................1 1. FISCAL EMERGENCY..................................................................................................................9 A. What is the Purpose of a City?............................................................................................9 B. A Service Level Emergency Creates a Fiscal Emergency..................................................9 C. Fiscal Emergency Legal Authority ...................................................................................10 D. Evidence of San Bernardino's Fiscal Emergency.............................................................11 1I. DECLINING REVENUES AS A FACTOR CONTRIBUTING TO THE STRUCTURAL DEFICIT........................................................................................................................................15 A. The Recession has Taken a Toll on the San Bernardino Economy...................................15 m B. San Bernardino Revenues Have Decreased, With Only Moderate Growth Forecast o. GoingForward..................................................................................................................16 U W C. General Fund Expenditures...............................................................................................21 v III. PERSONNEL & RETIREMENT COSTS AS A FACTOR CONTRIBUTING TO THE a STRUCTURAL DEFICIT.............................................................................................................24 M A. Overview of Pension Benef its...........................................................................................24 A 0 B. Overview of Other Post-Employment Benefits ................................................................26 v� W © C. The City's Retirement Contributions are Steadily Increasing...........................................27 X D. The Primary Cause of the Dramatic Increase in Retirement Costs is a Significant m Increase in Unfunded Liabilities.......................................................................................28 a E. The Impact of Enhanced Benefits.....................................................................................29 F. Failure to Meet Earnings Expectations.............................................................................30 m a. G. Increase in the Number of Retirees...................................................................................31 6 H. Conclusion........................................................................................................................31 a 1 1 c IV. EFFORTS TO ADDRESS THE FISCAL CRISIS AND CONSIDERATION OF E ALTERNATIVES TO CHAPTER 9 BANKRUPTCY.................................................................33 A. Past Budget Workshops and the City's Budgetary Analysis and Recommendation for Budget Sustainability...................................................................................................33 B. Best Cases Revenue Scenario Does Not Solve the Problem.............................................37 C. CONCLUSI ON.................................................................................................................38 V. BUDGET&OPERATIONAL RESTRUCTING PLAN...............................................................39 A. Preliminary Fiscal Year 2012-13 General Fund Budget...................................................39 B. Fiscal Year 2012-13 General Fund Reduction Methodology...........................................40 C. Preserving Essential Safety Services.................................................................................41 D. Maintaining the City's Investment in Infrastructure Through Service Delivery Changes in Community Development, Public Works, and Parks, Recreations & CommunityServices.........................................................................................................54 i Packet Pg.61 E. Implementing Service Efficiencies and Consolidation of Administrative Services Functions...........................................................................................................................61 F. Summary of Proposed Staffing Reductions......................................................................68 LIST OF TABLES Table 1 -5 Year Budget and Fund Balance Estimates (Amount in Millions)......................................... 1 Table 2-Major Revenue Trends from 2008-2012............................................................................. 2 Table 3 -Historical Home Starts, Sale and Investment...................................................................... 3 Table 4-Land Use by Net Taxable Value ....................................................................................... 4 Table 5 -Sales Tax Comparison..................................................................................................... 4 Table 6-Historical Pension Expenses............................................................................................. 5 a Table 7- 5 Year(2012-13 to 2016-17)Budget Projections by Department.......................................... 6 c Table 8-Land Use by Net Taxable Value ......................................................................................17 c Table 9—Property Tax Revenue 2002-2003 to 2011-2012................................................................18 a Table 10—Sales Tax Revenue 2002-2003 to 2011-2012...................................................................19 Table 11 —Utility Tax Revenue 2002-2003 to 2011-2012.................................................................20 A T Table 12—Revenues vs. Expenditures(10 Year).............................................................................22 y © Table 13—Enhanced Pension Formulas for the City's Retirement Plans.............................................25 Table 14—Other Post-Employment Benefits Annual Pay—Go Estimates...........................................26 c Table 15—CaIPERS Actuarial Valuation Rate—Miscellaneous Plan.................................................27 0 U Table 16—CaIPERS Actuarial Valuation Rate—Safety Plan.............................................................28 a Table 17—City Contribution Retirement Rates(as a Percent of Payroll) ............................................28 a Table 18—Proposed Fire Department Staffing Reductions ...............................................................48 m a Table 19—Proposed Sworn Staffing Reductions .............................................................................50 c Table 20—Proposed Non-Sworn Staffing Reductions......................................................................52 E L Table 21 —Total Estimated Savings...............................................................................................54 Table 22—Proposed Public Works Staffing Reductions ................. .............................••.......••...59 a Table 23—Proposed City Clerk Staffing Reductions........................................................................62 Table 24—Proposed Information Technology Staffing Reductions....................................................63 Table 25—Proposed Human Resources Staffing Reductions.............................................................65 APPENDICES Appendix A Summary of Revenues, Expenditures and Changes in Fund Balance(General Fund) Appendix B Fiscal Year 2012-2013 Pre-Pendency Plan ii INTRODUCTION San Bernardino is facing a crisis. To address budget shortfalls in thirteen of the past sixteen years, the City has already cut staffing levels, added new revenue sources, expended reserves, and is now faced with eliminating services and programs. Nonetheless, to correct for the City's further projected shortfalls in the current year and over the years just ahead, the level of required cuts must be done in such a manner to allow the City to provide acceptable services. For example, the City is faced with the undesirable prospect of closing fire stations, libraries and community centers, while still not having enough money to fund acceptable levels of police and fire protection. This statement of crisis is not made lightly, but reflects the Administration's profound concern that San Bernardino faces a service- level crisis that can only be classified as a fiscal emergency. The primary focus of this report is on the City's General Fund, which supports a large majority of 'c municipal services. However, the impact the negative cash of roughly $18 million and escalating a operational costs affects all City funds and services. As the General Fund balance continues further into It the negative and operational costs escalate, it drives up the cost for sewer services, integrated waste fund, Internal Service Funds, the Development Fee Program, and other special funded services paid by m every resident through monthly fees and other direct assessments. a co eo While a number of factors have contributed to this crisis, by far the most significant and difficult to A control has been increasing operating costs occurring at a time when the City's revenues continue to N decline. As the chart below depicts, as of June 30, 2011 the City's fund balance has declined to a w (^ negative $1.2 million. Without substantial and immediate restructuring of the organization, both a �✓ operationally and financially,the City will not be able to provide basic services. m IL Table 1 - 5 Year Budget and Fund Balance Estimates (Amount in Millions) t m Actuals–2008-09 to 201411 Projected Budget 2011-12 to 2016-17 m IL 2008-09 2009-10 2010-112011-12 2012-13 2013-14 2014-15 2015-16 2016-17 i N 150.00 d G Y - � 100.00 c CI 50.00 Expenditures r V _ m (50.00) Revenue (100.00) —Fund Balance (150.00) (200.00) (250.00) O Packet Pg.63 ODeclining Revenues Since the City's peak General Fund revenue of$133 million in 2008, the City has experienced severe losses in key areas such as sales tax, property tax, franchise fees, utility users tax (UUT), permits, and funds transferred from the Economic Development Agency (EDA). The chart below details the reduction of roughly$11.69 million in General Fund revenues. Table 2 - Major Revenue Trends from 2008-2012 Revenue Source Peak Revenue 2011-12 Revenue Variance 2007-2008 Property Tax Secured $11.6M $9.5M ($2.1M) Property Tax in Lieu of $18.9M $153M ($3.2M) _m Vehicle License Fees a. v c Sales Tax $223M $19.03M ($3.27M) c a Franchise Fees $3.32M $2.88M ( $450K) a� M Utility User Tax $24.4M $22.5M ($1.9M) A e Licenses and Permits $9.2M $8.6M ( $600K) w w Totals $89.72M $78.21M ($11.69M) c a The chart above is consistent with the findings in other California cities. However, many cities in m California have begun to recover from declines in revenues. With the exception of sales tax, most c significant General Fund revenues remain flat or are increasing extremely slow to the point that prior a peak levels are not expected to be reached within the next five years. Overall, General Fund revenues a remain roughly$11.7 million below peak levels. a E Of specific concern are revenues derived from property taxes which continue to be impacted by a significant drop in housing prices in 2008 and on-going foreclosures throughout the City. According to recent housing data, the City may have reached the bottom of the decline in housing values. This doesn't mean prices will increase significantly any time soon. Usually towards the end of a housing bust, normal prices move sideways for a few more years, and real prices adjusted for inflation could even decline for another two or three years. ! It is reasonable to assume housing values will stabilize and begin to grow at some point in the very near future; if it hasn't begun already. The chart below provides an illustration of the national housing market since 1968. While this may be the steepest decline in over 40 years, we shouldn't assume an aggressive recovery of investment or pricing. Rather, the Administration is assuming flat property tax revenues for residential properties in 2012-2013 with slight growth over the next fiscal years. O Commercial properties continue to search for the bottom, as evidenced by the $17.2 million of non- residential property tax appeal exposure for fiscal year 2012-2013. I '- Packet Pg.64 Table 3 -Historical Home Starts, Sale and Investment Comparing Peaks and Troughs for Starts,New Home Sales,and Residential Investment --Stnrt65h*IsrF nfly Plow HaeaSdr —Reddenthl kwambn n es Percent of GDP I 2,000 -. _— 7.D% X800 6.0% 6.0% n 1,600 A Apk 5.0% L400 lip W`may 1400 IL AL O 6 O 1200 4.0% I t =1000 Y 30% °S yLI C _m 400 1 2.0% d U x 400 _. C d L0% D C a -- r-_. . ._:.� 0.0% y s r n m u u r e n T 9 T T T 9 9 4 9 9 9 9 9 9 sii � g � £ � � c � sgssusi � � � http://wwvucalculatedriskblog.com/ N r O N Because we do not anticipate much growth with housing new starts or employment in the near future, LU and with the loss of the EDA, the Administration assumes construction-related permit activity will also c be flat or possibly continue to decline. Permit activity in most California cities has been very volatile to IL with trends pointing to decreasing activity. c m The chart below reflects the City's property tax base according to land use. Typical of a large, older community,the City is fairly balanced with 52%of taxable property as residential, 19%commercial and a 15% industrial. Despite the diversity in property Y tax generation, 80% of the City's taxable parcels are a residential. Because of the high percentage of residential parcels, service requirements will remain high c and a sustainable and resilient revenue base is vital to supporting essential City services. E r v m x Q Packet Pg.65 Table 4-Land Use by Net Taxable Value category Net Teaable Value NumberollProela Residential $5,337,905,953 44,%7 Land Use by Net Taxable Value commercial $1,988,781,002 2,295 Miscellaneous Industrial $1,557,715,525 721 Miscellaneous $86,9]9,310 346 Gouernmem Gmemment $5,39],890 12 0% Institutional $56,282,161 207 /Z Dry Famn $1,382,185 7 Institutional Remeationel $25,292,404 58 -.,Farm 1% 0% Irrigated $43,094 1 ,4,nOUnkn Renerti°nal Vacant $356,918,079 4,524 0 In 0% Ecempt $0 3,34] Vacant Irripted Outer Parcels $7,500 9 4% 0% SBE Nonunitary $5,219,]]4 S4 n Personal lUnsec) $852,093,032 3,%7 0% Unknown $24,201,315 61 outer Parrels 0% $10,308,219,224 56,526 SaF NOnunNirY 0% C Nnntt:i M1-31RcpnryTmaepvtr A a. T Based on data provided by HdL,the City's sales tax revenue diversity reflects the statewide average for c m all business types(see charts below). c m a Table 5 - Sales Tax Comparison a M r City of San Bernardino Statewide Totals o N U) ■ Restaura ■ Restaura W III and nts& Food and nts& ■ Business ■ Business � and Drugs Hotels and Drugs, Hotels, 6.03% 11.60% 6.60°% 13.00% d Industry Industry, �. 12.71% 16.51% 1 c ■ General a ■ General Consume d� Consume rGoods, a ■ Buildin r Goods 27.06% n. and 29.75% • Buildin Construct and £ ion Construct v 10.17% ■ Autos ■ fuel and ■ Autos ■ Fuel and x and Service ion,7.80% and Service Q Transport Stations Transport Stations, ation 14.16% ation, 14.52% 15.57% 14.50% The overall diversity of the sales tax base within the City presents an opportunity for future revenue growth. The City's population, size, and opportunities for economic development of former EDA properties provide for an optimistic outlook. Despite these positive traits, the City will need to play a role in job creation in order to fully realize its true sales tax potential. As of June 2012, the unemployment in San Bernardino was 19.9%. When compared to the State of California and San Bernardino County unemployment figures for April 2012 of 10.9%and 11.7% respectively, we begin to understand this as a component of a decline in sales tax-generating revenues well below the peak in 2008. 4 Packet Pg. 66 I In order to restore revenues to prerecession levels,multiple voter approved measures would be required. With local voter reluctance to increase taxes, the City's revenue generation options are significantly limited by required majority voter approval(50%+1)for general taxes and two-thirds voter approval for service-specific taxes. Increasing General Fund Operating Costs Over the past ten years, the City's population has grown by roughly 13% resulting in increasing demands for services to the community. In order to meet growing service demands, the City has maintained a workforce exceeding 1,140 employees. Maintaining a large workforce has exposed the City to rising operational costs outside of the City's control. Despite recent reductions of 250 employees, retirement costs have increased from $6 million in 2000-2001 to $22 million in 2009-2010 (see the chart below). C a Table 6 -Historical Pension Expenses a C 25000000 m ■2005 Series A-2 Capital Appreciation Bonds a 20000000 .. ■Employee Portion 15000000 N 10000000 ■Police r CO) III 5000000 ■Fire K C 0 Ttm ar 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 0 Misc a u a m While the City's pension costs have been growing steadily over the past several years, significant m increases are due to the City's decision to implement enhanced retirement plans for all employees. A 4 secondary impact, and of less significance, are increases to the total number of retirees and investment a losses by the City's retirement administrator; the California Public Employee Retirement System c • (Ca1PERS). To mitigate increasing retirement costs and to manage long-term retirement liabilities,the t City reduced its total workforce and implemented a two-tier retirement plan, which provides basic level retirement benefits to all new employees. Q Even after these considerable workforce reductions and numerous other cost-reduction strategies implemented by the City, the General Fund shortfall for 2012-2013 is projected at $45 million, which represents 30% of total projected General Fund Expenditures for the coming fiscal year. The following chart further illustrates the degree to which prior efforts to stabilize operational costs are unsustainable beyond 2011-2012. Table 7- 5 Year(2012-13 to 2016-17)Budget Projections by Department ■Police 2008-092009-102010-112011-12 2012-132013-142014-15 2015-162016-17 us 180.00 ■Fire e —_° 160.00 ■General Government 140.00 ■Public Works 120.00 100.00 ■Community Development 80.00 ■Parks&Recreations 60.00 ■City Attorney t�B 40.00 a 20.00 ■Debt Service m City Clerk m IL ■Finance oI e� N x— O As a result of the above trends, personnel costs are consuming progressively larger portions of the N ^ City's operating budget resulting in unsustainable workforce levels. LU (v; Debt Obligations c ILI m a The City also has significant bond indebtedness obligations. As noted in the chart below, the City's General Fund has roughly $90 million of outstanding debt obligation. Additionally, with the loss of redevelopment and the City's election to be the Successor Agency, the City, has additional debt a obligations of roughly$200 million. ti Closing c m Issuer I, Par Amount Date E r V R City of San Bernardino Lease Revenue Refunding Bonds Series 1996 $16,320,000 12/18/1996 Q San Bernardino Joint Powers Financing Auth Publ is Facilities Lease Revenue Refunding Bonds,1997 Series A $10,370,000 7/31/1997 San Bernardino Joint Powers Financing Auth Refunding Certificates of Particl pation $15,480,000 9/29/1999 City of San Bernardino Taxable Pension Obligation Bonds,2005 Series A-1 $36,050,000 10/28/2005 City of San Bernardino Taxable Pension Obligation Bonds,2005 Series A-2 $14,351,583 10/28/2005 LADED DEBT San Bernardino Joint Powers Fi nanci ng Auth Tax Allocation Refunding Bontls,Series 1998A $27,590,000 4/2/1998 San Bernardino Joint Powers Financing Auth Subordinated Tax Allocation Refunding Bonds,Series 19988 $ 8,590,000 4/2/1998 San Bernardino Joint Powers Financing Auth Tax Allocation Bonds,Series 2002A $ 3,635,000 1/24/2002 San Bernardino Joint Powers Financing Auth 2002 Tax Allocation Refunding Bonds $30,330,000 4/11/2002 San Bernardino Joint Powers financing Auth Tax Allocation Revenue Refunding Bonds Series 2005A $55,800,000 9/30/2005 San Bernardino Joint Powers Financing Auth Tax Allocation Revenue Refunding Bonds Series 20058 $21,105,000 9/30/20D5 San Bernardino Joint Powers financing Auth Tax Allocation Bonds(20%Set Aside(Taxable Series 2006 $28,665,000 4/26/2006 San Bernardino Joi nt Powers Financing Auth Tax Allocation Bonds Series,2010A $ 7,065,000 12/23/2010 San Bernard i no Joi nt Powe rs Pi rand ng Auth Tax Allocation Bonds Series,20308 $ 3,220,000 2/9/2011 ENT.DISTRICT BONDED City of San Bernardino Limited Obligation Improvement Bonds,Assessment District No.985 $ 1,101,682 2/28/1990 City of San Bernardino Limited Obligation Improvement Bonds,Assessment District No.987 $ 709,105 12/18/1991 Prepared by:Urban Futures,Inc. 5 Packet Pg. 68 Budretaa Impacts Unfortunately, there is no "silver bullet' for increasing revenues significantly or stabilizing operational costs. The rapid disparity between revenues and expenses is due to significant declines in general taxes and increases in personnel and debt liabilities. The Budget Sustainability Plan presented to City Council in June 2012 contemplates a range of potential solutions to address the General Fund structural imbalance in an effort to continue to provide essential City services. These strategies are being actively pursued, and include but are not limited to creating a cost sharing retirement program, investigating raising the real property transfer tax, stabilizing medical costs by sharing plan increases with employees, eliminating sick leave payouts, regionalizing services, and reducing the burden of the constant manning provision within the Fire Department. Unfortunately, these solutions alone are not projected to be sufficient. Although the City has been successful in C achieving some cost reductions, other City proposals will require further collective bargaining with its W a employee bargaining units and, in some instances, Charter changes via the electoral process. Further, while additional revenue would be very beneficial, increasing revenue rates and/or sources will, again, m require a vote of the people, with such approval doubtful in the current economic environment. m IL Given all of the above constraints, some have suggested that the City should simply take actions to sell City assets, such as integrated waste operation, lease-revenue opportunities from cell towers located on A City owned land and local water rights. Unless there is a specific and sound basis for selling City assets N which provide continuous annual revenues to the City, this approach could jeopardize the long-term w C sustainability of City operations. W c m San Bernardino faces a service-level emergency and must now address its financial issues through a a comprehensive approach and significant operational and financial restructuring. m v C m IL i IL r C m E r v W a Packet Pg. 69 CONCLUSION (v' The outlook for City services, already reduced over the last three years because of the severe economic downturn, remains bleak for 2012-2013 and beyond. While the City has been managing deficits, the shortfalls in recent years have become increasingly difficult to resolve as wave after wave of revenue losses have continued to hit. The Administration believes that the next round of workforce cuts required to balance the budget in the face of such a severe deficit will be best implemented and managed through an analysis of impacts to the department, organization, individual wards and community compared to prospective financial savings, as outlined in the following matrix. artment w, X c m Organization X a r v Ward X d a c Community X a rn Financial Savings X N O N Using the above methodology, all non-essential programs were evaluated prior to their submittal for w reduction or elimination. The recommendations contained in this report reflect reductions in workforce of or programs based on the lowest possible impact to individual wards and the community possible while m meeting the City's budget reduction goals. v c v a C d a m c d E L U 5 Q Packet Pg. 70 L FISCAL EMERGENCY A. What is the Purpose of a City? In recent years, the City of San Bernardino has made efforts to implement strategies of fiscal prudence and good management. In particular, the City is struggling to balance its budget amid weakened revenues and rising costs, including rapidly-increasing personnel costs. The City is a service organization with approximately two-thirds of the City's General Fund budget attributable to personnel costs. Unlike a private employer, a public agency cannot simply decide to go"out of business"or otherwise stop providing certain essential services to the public. Under the California Constitution, cities have broad authority and responsibility in the areas of public health and safety. See Cal. Const., Art. XI, § 7("A county or city may make and enforce within its limits all local, police, sanitary, and other ordinances and regulations not in conflict or with general laws."). However, while a city's powers are derived from the state constitution and other laws enacted by the Legislature, cities themselves are created only by the request and m consent of the residents in a given area. Because of this, municipal governments are responsible = for providing services that directly affect the lives of their residents. Through fire and police no protection, cities safeguard lives and property. Through public works and other programs,cities construct and maintain streets and look after the health, recreational, and social needs of N residents. Charter cities like San Bernardino are formed when citizens specifically frame and o adopt a charter to establish the organization of and basic laws of the city. y W K The core purpose of the City of San Bernardino is to provide essential services to the public as C established in its City Charter. San Bernardino's essential functions are set forth in its Charter, ii which identifies the establishment of certain City Departments including Police, Fire, Water, Parks and Recreation, and Library. Notably, although the Mayor and Common Council may at any time abolish or discontinue some departments,the Mayor and Common Council is required o to provide those services established under the Charter. a d B. A Service Level Emergency Creates a Fiscal Emergency m E In fulfilling its core purpose of providing essential services,the City must navigate between City S cc Charter requirements and Mayor and Common Council mandates. On the one hand, the City Charter establishes departments as set forth in the paragraph above for the purpose of providing basic municipal services. On the other hand, the City Charter requires the City to balance its annual budget. Currently, the City is unable to comply with both of these City Charter mandates and provide basic municipal services to City residents. Unfortunately, on August 1, 2012, the City filed for Chapter 9 Bankruptcy and will likely be forced to reduce services below those levels acknowledged by the City Council as the baseline for basic municipal services in order to balance its annual budget for 2012-2013. All projections show that recessionary affects will remain and additional cuts may be required to balance the upcoming 2013-2014 budget, as required by the Charter. The meaning of the term "emergency" may vary depending on the context in which it is used. While some courts have defined an "emergency" as "an unforeseen situation calling for immediate action," not all emergencies occur in an instant, like an earthquake. An employer's 9 O dire financial condition —which worsens over a period of time—may qualify as an emergency justifying the suspension or modification of certain contractual obligations. A public agency's inability to provide essential services is a strong indication of a fiscal emergency. As noted by the Governmental Accounting Standards Board (GASB), the common themes that have been either formalized or are working definitions of financial sustainability include the ability to continue public services and/or existing programs. This comports with the definition of"financial condition" adopted by the International City/County Management Association (ICMA). In particular, ICMA defines a municipality's financial condition as the ability to (1) maintain existing service levels, (2) withstand local and regional economic disruptions, and (3) meet the demands of natural growth, decline, and change. ICMA also categorizes financial solvency in four distinct ways: 1. Cash solvency: government's ability to generate enough cash over a 30 to 60 day period to r CO meet its obligations. a t 2. Budgetary solvency: government's ability to generate enough revenues over its normal a budgetary process to meet its expenditures and not incur deficits. ro a 3. Long-run solvency: government's ability to meet expenditures that may not be addressed as part of the normal recurring annual budgetary process. M N 1 4. Service-level solvency: government's ability to provide services at the level and quality that 0 IV are required for the health, safety,and welfare of the community and to meet its citizens' w desires. 19 `.. C m This report focuses on all categories above. Moving forward as a well-run and forward-looking a city, San Bernardino must budget in an effort to meet its contractual obligations, build reserves and ensure that budgetary shortfalls are addressed through balancing actions each year. i c However, the City has reached the point at which previous budget balancing actions combined a with the budgetary outlook for 2012-2013 and beyond have triggered a financial and service- level emergency,jeopardizing the health and safety of San Bemardino's residents. The threat posed by continued service reductions is imminent, and despite all other measures taken to this point and those still to be implemented, no viable alternative plan that is sufficient to address this problem has been identified that does not require major changes in services delivery of all departments and changes to the City's compensation strategy. As such, the Administration believes San Bernardino faces a service-level emergency, a form of fiscal emergency which requires Chapter 9 Bankruptcy protection while we get our fiscal house in order. C. Fiscal Emergency Legal Authority In this plan, the evaluation of conditions for declaring a fiscal emergency and subsequent filing for Chapter 9 protection has focused on the primary causes of the current condition, which are declines in revenue and increases in operational costs. Therefore, the goal has been development of solutions that appropriately addresses the primary causes of the City's current fiscal situation within the City legal limitations. While no California cases have upheld an impairment of a government entity's own contract, case law from other jurisdictions supports the notion that a public agency's inability to provide essential services is a strong indication of a fiscal emergency. In those jurisdictions, courts have recognized that a sharp decline in revenues coupled with the concurrent inability to provide essential services constitutes an "emergency" justifying the impairment of contractual obligations. For example, in Subway-Surface Supervisors v. N.Y.C. Transit Authority, 44 N.Y.2d 101 (1978), the New York Court of Appeals upheld the City's suspension of a wage increase set forth in the City's collective bargaining agreement,where the City's fiscal emergency would have rendered it unable to "provide essential services to its inhabitants or meet its obligations to the holders of outstanding securities," and, without cuts, it would not have been able to pay employee salaries or its vendors and would have defaulted on payments due on other outstanding obligations. Federal and State courts recognize the constitutional power of a local municipality in response m to an emergency to act in the public's interest, to preserve the health, safety and well-being of L, u City residents. The scope of the power includes the ability to impair contract obligations under m certain limited circumstances. As such, the Mayor and Common Council elected to declare c m Chapter 9 Bankruptcy to address the City's structural imbalance while preserving essential a services to the community. N D. Evidence of San Bernardino's Fiscal Emergency c N 1. San Bernardino's Inability to Provide Services at Required Levels W� As demonstrated below,the rise in salary and retirement costs combined with decreased a revenues(which have declined in absolute terms, and are not projected to grow at a rate L, sufficient to keep up with these expenditure increases) have staggering implications on m San Bernardino's ability to provide essential services. The San Bernardino City Charter c provides guidance as to which services are "essential" to the City: Administration, a Police, Fire, Water, Library, and Parks and Recreation are some of the service-providing a departments specifically established pursuant to the City Charter. Other departments, such as Finance, Personnel, and Community Development, are not directly established E by City Charter but are obviously necessary to support the City's operations. Since 2007-2008, the General Fund has experienced shortfalls which were addressed, in R part, with the elimination of approximately 250 positions citywide. Previous budgets closed General Fund shortfalls through a combination of strategies including, reduced/eliminated services, a variety of cost savings strategies, and new revenues. Despite these efforts, prior reductions did not address deferred liabilities, such as other post-employment benefits(OPEB),which are now estimated at more than $61 million. A significant portion of the costs of providing services to the community are the salaries and benefits paid to City employees, with nearly two-thirds of the City's General Fund tied directly to personnel costs. This is because municipal services are generally labor- intensive, with City employees such as police officers and firefighters providing essential services. In an effort to maintain service levels, the City has implemented cost Packet Pg. 73 © control measures, including the following: • Organization-wide hiring freeze, with exemptions based on requests critically necessary to perform essential functions of the department; • Expenditure controls on technology, marketing, office furniture, equipment, and vehicle purchases; • Two-tiered pension plans; • Salary freeze for unrepresented employees (including executives and professionals) and most City bargaining groups; and • 10% reduction in the total compensation (from the baseline 2009-2010 fiscal year) for City employees within the General Unit, Middle Management Unit, Police Management,Fire Management, and the Management/Confidential Unit. c W Persistent General Fund budget shortfalls have necessitated deep service reductions in a departments that rely on the City's General Fund, including freezing vacant positions in c Police and Fire services, the inability to open and operate new City facilities,a reduction in the days and hours of operation of the City's library services. With escalating total no operational costs and declining revenues, the budget shortfalls in the last two years have been the most severe. Staffing levels for the City of San Bernardino have been reduced by 14% since 2007-2008, with the majority of the impact experienced in 2008-09,2009- o 10 and 2010-11. In recent weeks, the City has lost 60 employees due to attrition. As y staffing continues to erode at a rapid pace, the City's capacity to provide the essential rc services set forth in the Charter is diminished. Staffing reductions to date have impaired c the government's ability to provide services at the level and quality that are required for a the health, safety,and welfare of the community. r u C m With the drop in staffing levels and the magnitude of the General Fund shortfalls, no m service area has been spared from deep cuts. In 2000-2001, when retirement costs were at their low watermark, the City had 1,174.5 full time equivalent employees. With the a position reductions proposed in the 2012-2013 Budget, San Bernardino will likely drop c staffing to levels not seen in over 20 years. E v m 2. Service Levels will be Impaired for the Foreseeable Future a While there is much evidence to conclude that the service impairment will rise to the level of an emergency, a critical consideration is whether economic conditions and rising operational costs will further weaken the City's ability to provide public services into the foreseeable future. As demonstrated later in this report that answer is, unfortunately, a resounding "yes." As described in detail below, operating cost increases coupled with the retirement cost increases projected in the next few years will make dramatic service-level reductions a necessity to balance the budget. As noted by GASB, financial insolvency is directly tied to the ability of an entity `to continue public services and/or existing programs." By that standard,the City is already financially insolvent. Without significant operational and financial restructuring, the likely budget balancing scenarios over the next three years include: 12 Packet Pg.74 OPolice Department • Reduction in proactive resources such as District Resource Officers,Narcotics,Gang Officers, Etc. • During peak demand times, police response may be limited to high priority, violent crimes, or crimes in progress. • The average response time for Priority 3 and 4 calls will increase,with some of these kinds of calls going without any response during peak times • The Police Department may reach a point where misdemeanor and property crimes may go uninvestigated, if the Department lacks the resources to investigate all but the most serious crimes; • The City will be unable to respond effectively when multiple critical events occur concurrently; San Bernardino is currently experiencing an increase in overall crime. The increases are a likely to continue as police resources diminish. Community based policing efforts will a also continue to decline as resources are eliminated and the Department adjusts c m resources to respond to calls for service. Community frustration at low service levels a from the police department will likely increase. no CD go Fire Department N r • Response times for fires and medical emergencies will increase, and will, on a N regular basis, likely exceed current standards, leading to increased risk of loss of life W and significant property damage. W • The operational efficiency of several of our specialty programs will be negatively W impacted. Materials Response unit, Urban Search and Rescue unit, SWAT Medic a program, and Fire Investigation unit, among other program areas, will have to be re- c evaluated to see if it is feasible to continue providing these services. y • The City will consider alternative service provision models as necessary to keep m most fire stations open and operational at accepted standards for a City of our size X and call volume. n • The Department will have reduced capacity to respond to two or more sustained structure fires that occur within the same time period, as well as reduced response to E wildland fires and other large scale incidents such as natural disasters, terrorist incidents, civil disturbance, etc. Moreover, as the largest firefighting force in the x County, the Department cannot rely on mutual or automatic aid from neighboring jurisdictions to provide basic levels of fire and emergency medical services. These agencies have had to reduce responding units as well; typically, other agencies rely on SBFD for assistance. • The Department will need to consider whether to continue to provide advanced life support services, as it presently does. Other models of providing this service will have to be studied to provide our citizens the level of emergency medical care provided by the current model. We have established response time standards that have been adopted by the City Council and are regulated by the County. Further degradation in our ability to meet these established standards will necessitate a change in our service delivery method. This could result in a decrease in the level of service and care currently provided as well as a possible increase in cost to our �., citizens. • The Department's ability to provide comprehensive fire prevention services will 3 C continue to erode; this will result in longer delays for developers and builders wishing to start projects in the City. We will continue to experience a decrease in revenue generated by commercial building inspections; this could result in more fires with an associated increase in life and property loss. Library Services • Three out of four currently operational branches are likely to close for the remainder of 2012-2013; • Library programming, including educational programming,will be eliminated; • School-aged children visiting branch libraries after school each day, many of whom are not accompanied by' a parent or caregiver, will no longer have a safe, constructive,and educational after-school option; and • Property values for the homes in close proximity to the closed branch libraries may decrease. c R a Parks,Recreation and Community Services >, U c • All City recreational programs will be discontinued and the City's Community c Centers will be closed unless partner agencies are able to pay operations and facility a overhead; rn • Teen programs will be eliminated; • Gang-intervention and graffiti abatement programs will be reduced to skeletal levels; and ° N • Property values for the homes in close proximity to the shuttered Community w CCenters may decrease. c W Impacts on Other City Services a r v • Traffic maintenance programs will be further reduced, impacting traffic sign m maintenance,roadway striping, and marking maintenance; c • Continued deferred maintenance of public facilities; and d • General Government departments such as Council Appointees, Finance, Human a Resources, Information Technology, and Mayor and Common Council will be c further cut, resulting in reduced staffing for oversight, management, internal E controls, and compliance. r v These public services are essential to the functioning of San Bernardino. In the absence Q of these essential city services, business owners and residents will perceive a disconnect between taxes paid and services provided. The City must avoid this potential downward spiral by working to maintain services that provide social and economic benefits to the community. In conclusion, San Bernardino has experienced a sharp increase in service delivery costs, driven primarily by fast-rising operational costs, in tandem with sustained declines and ongoing weaknesses in City revenues. In turn, in the City's effort to maintain a budget balance,these factors have required year after year of escalating service cuts. Given the extent of these service reductions to date, and the anticipated impact of the next round of cuts to be required if no corrective action is taken, these unsustainable trends have now reached the point of fiscal emergency leading to Chapter 9 Bankruptcy. Packet Pg. 76 DECLLVLVG RE VEIVVES AS A FACTOR CONTRIBUTING TO THE STRUCTURAL DEFICIT A. The Recession has Taken a Toll on the San Bernardino Economy San Bernardino, along with many other cities,has been heavily affected by the current economic downturn. The financial impact from the economic downturn has been severe and continues to linger. However, as discussed below, the City's current crisis has been compounded by increases in operational costs,especially pension and retiree healthcare costs. The City faces a structural budget gap: the growth in the cost of the City's recurring expenditures — most significantly, for employee retirement benefits — outpaces the growth in City revenues. This unsustainable imbalance preceded the decline in City revenues and will continue to imperil City services for years to come if no corrective action is taken. While the City has taken extraordinary steps to address and control these costs shrinking its workforce, decreasing total compensation by 10% across the board, and increasing fees and other revenues c' m the City's ability to fund its remaining services continues to deteriorate and solutions are V becoming more and more elusive. The budget pressures faced by the San Bernardino municipal a government reflect the broader economic problems faced by San Bernardino's residents. By o, almost any measure, the Great Recession continues to have a devastating effect on San N Bernardino's residents and their economic resources: S N U) • The unemployment rate for the City of San Bernardino has doubled since the onset of the W recession. As of June 2012,the unemployment was 16.9%. W • Median single family home sale prices have fallen sharply, to over 40% below the 2007 0 peak annual levels as of June 2012. a • As of June 2012, San Bernardino foreclosure rates are 3.5 times above the national average. d V r In turn, as further detailed in the analysis to follow, these economic factors have weakened the am City's tax base and revenue streams, while adding to community service demands. As in communities around the nation, the downturn has created severe pressures on the City of San a Bernardino budget. m E t While the recession that began nationally in December 2007 may have ended in June 2009, the economy has yet to generate the strong levels of growth required for full recovery. Moreover, even"normal growth"is insufficient to achieve true recovery. Real recovery requires a return to trend— in other words, where the economy would have been normal growth continued without the contraction of a recession. Of further concern, recent projections show economic growth continuing to lag below normal levels through calendar year 2012. In the July 2012,the Federal Office of Management and Budget Mid-Session Review, the 2012 fourth quarter forecast was reduced to 2.3%based on data through June. National forecasters also project prolonged weakness in the labor market, including continued high unemployment rates. In the Second Quarter Survey of professional Forecasters, unemployment nationally is projected to stand at an annual average rate of 8.1% in 2012 and to remain high at 7.7% in 2013, 7.2% in 2014, and 6.6% in 2015. In contrast, the national average in 2007, before the full onset of the recession, was just 4.6%. Statewide, recent j O forecasts estimate double-digit unemployment rates of 10.7%; the third highest in the United States. B. San Bernardino Revenues Have Decreased, With Only Moderate Growth Forecast Going Forward The City of San Bernardino's primary revenue streams are highly sensitive to the overall economy, and have been eroded by the economic downturn. The City's two largest revenue sources, property taxes and sales taxes alone comprise nearly half of overall General Fund revenues, and have both experienced recession-driven declines. At the same time, multiple other significant City revenue streams, including business taxes and many of the City's licenses and permits, have also fallen. 1. Overall Revenue Performance and Projections c M a. Overall, the estimated 2012-2013 General Fund revenue estimates remain 10% lower than peak 2007-2008 General Fund revenues of$133 million. Based on the City's five- m v year General Fund Forecast, which excludes one-time revenues and grants, General ro Fund revenues are not expected to return to previous peaks during the five-year forecast a. period. T A At no point during the forecast period are General Fund revenues projected to approach N what they would have been had growth continued at 3% per year since 2007-2008. w Estimated 2012-2013 General Fund revenues are $21 million lower than hypothetical aV' General Fund revenues of$145 million, assuming General Fund revenues had grown by w 3%per year from peak levels in 2007-2008. L u C 2. Property Taxes 0 C m The chart below reflects the City's property tax base according to land use. Typical of a IL large, older community, the City is fairly balanced with 52% of taxable value as o residential, 19% commercial and 15% industrial. Despite the diversity in property tax m value, 80%of the City's taxable parcels are residential,which points out the relative low t assessed value of the City's housing stock when compared to commercial and industrial x uses. The high ratio of residential parcels is a measure of service demand and an indication that a sustainable and resilient revenue base is vital to support essential City services. ie PacketPg. 78 Table 8-Land Use by Net Taxable Value Cate NetTaaaMeValua NumberofPmcels LandUseb Net Taxable Value Residential $5,337,905,953 44,947 Y Commercial $1,988,781,002 2,295 Mlsallaneous Industrial $1,557,715,525 721 I% Miscellaneous $86,979,310 346 Government Government $5,397,890 12 U% Institutional $56,282,161 207 Dry Farm $1,382,185 7 InrtRutlonal Recreational $25,292,404 58 pyFarm 1x Irrigated $43,094 1 djunkon% astreational Vacant $356,9]8,079 4,524 cep 0% Exempt $0 3,347 0 Volt kriptetl Outer Parcels $7,500 9 4% g% SSE Nonunitary $5,219,n4 54 n Personal(Unsec) $862,093,032 3,%7 Unknown $24,201,315 61 Outer Panels $10,308,219,224 56,526 0% SfiE Nonunitary Sown:HdL 20I113 Proprrry Tavflepon 0% W d Property taxes account for more than twenty percent(22.6%)of projected General Fund revenues in 2012-2013. In San Bernardino, as in communities across California and the nation, the collapse of the U.S. housing bubble in 2007-2008 led to sharp declines in °m home values and significant increases in foreclosures. In turn,as these economic factors CD have worked their way through the property assessment and taxation process, property tax revenues have experienced decline nationally and in San Bernardino. N 0 N In addition to housing market factors, San Bernardino's ability to raise property tax w INC revenue to keep pace with rising expenditures is severely constrained from a structural viewpoint by Proposition 13 and subsequent related amendments to the California a constitution. Proposition 13 limited the ad valorem tax rates to 1% of assessed value La absent approval of two of the city's voters for a higher rate. The proposition also 0 limited any increase in the assessed value of real property to the California Consumer c Price Index up to a maximum of 2% per year, the result of which effectively locked in 4 the total property taxes paid by many California residents to their 1978-1979 levels, d adjusted by a maximum increase of 2% annually. Property that changes ownership or has major alterations may be assessed at current fair market value, and thereafter is E limited to the 2% increase in assessed value per year. Q As shown in the graph below, San Bernardino's property tax revenue collections peaked at approximately $32.8 million in 2008-2009, and then fell sharply for the next two fiscal years to $26.7 million in 2011-2012. As the 2012-2013 Proposed Budget forecasts no significant recovery in this large City revenue source, the projected $26.8 million would still be approximately 18% below the levels reached three years earlier. If the growth_rates assumed in the 2012-2016 Five-Year Forecast issued in June 2012 are applied to the 2012-2013 Property Tax estimate,Property Tax revenues would not be expected to return to pre-recession levels until well after 2014-2015 under the City's best case scenario. Further, at no point during the forecast period do projected revenues come close to the levels that would have been reached had property taxes continued to grow at an annual rate of 3.0% since 2008-2009, shown in the chart below as the top dotted line. Given continued housing market weakness and the legal constraints on 17 Packet Pg. 79 ^ property tax increases in place under the California constitution, property tax revenues f�►r will remain flat for years to come. Table 9—Property Tax Revenue 2002-2003 to 2011-2012 Property Tax Revenue $32,788,532.00 $31,429,967.00 $28,815,780.00 $28,239,909.00 $26,965,590.00 $26,867,362.00 $25,820,605.00 $23,093,720.00 $18,574,168.00 C M IL $8,787,965.00 A U 962,053.00 4a r py � • a c v a m M Oa Oy 06 O� O$ 00 10 �1 titi y3 N cis, O O O O O O O O O O ti '� ti ti ti ti ti v �• T ti N Ov 03 Off` Oy, OV 0Al O$ 0105 10 'titi tiff N O O O O O O O O O O O ti v ti ti ti ti ti ti v ti v w °a\ a\ `yea `yea LcJ P P P P P P P P oa oa yt`a c a U As outlined above, overall economic recovery remains weak and uncertain, and the housing market continues to be similarly challenged. Home prices as of August 2012 d were still at summer 2003 levels on a national basis — down 31.2% from five years m previously(seasonally adjusted;based on a composite of 20 metropolitan areas). a` C Looking at data specific to San Bernardino, median home sale prices for single-family t residences within the City paralleled the regional area trends. As noted previously, San Bernardino median home sales prices remain roughly 40% below peak 2007 annual a levels as of June 2012. As property values drop, so does property tax revenue. Under Proposition 8, temporary reductions in assessments are applied when the current market value of a property is less than the current assessed value. As a result of the housing market downturn,the number of revaluations has increased, contributing to reduced property tax revenue for many municipalities, including San Bernardino. San Bernardino's non-residential sector is even weaker, with anticipated softness in commercial property values throughout the City's 2012-2016 five-year forecast. 18 Packet P9. 80 3. Sales Taxes Sales tax revenues are another important revenue stream for San Bernardino and account for 22% of General Fund revenues in the 2012-2013 Proposed Operating Budget. Sales and property taxes combined account for nearly half of San Bernardino's revenues. Like property taxes, sales tax receipts have declined significantly due to the general economic downturn. The City estimates sales tax revenues peaked in 2005-06 at$36.7 million. In 2009-10 the City's sales tax plummeted to $20.4 million. In recent years, the City has realized growth in sales tax receipts however revenues remain well below peak levels. Overall, estimated 2012-2013 sales tax revenues remain roughly 29% lower than peak 2005-2006 sales tax revenues of$36.7 million. Table 10—Sales Tax Revenue 2002-2003 to 2011-2012 c M Sales Tax Revenue d „_.. $36,753,095.00 -Arm � $34,768,647.00 34 848 749.00 d $32,277,342.00 894 441.00 $29,589,971.00 $27,050,431.00 M $26,024,043.00 N $23,612,474.00 N $20,412,101.00 N W C 4s a T V C 4) C d a w p3 p0' Oh O`° 01 a. 06 09 ,�0 ,y'ti ,y'L ,y3 y0 ,yo y0 ,y0 ,l0 1 y0 y0 y0 t0 ,y0 p1, 03 Oa 1 IS, O, 01' 00 09" ; ,y ,IV ,t0 ,ti0 ,ti0 ,LO ,LO ,ti0 ,LO ,y0 ,y0 ,LO ,y0 £ oe� coe\ Ja\ Ja\ aoe\ Ja\ Ja\ Ja\ abed aSea e�ea v t Q Estimated 2012-2013 sales tax receipts are projected to reach $27 million. This figure factors out a sizeable amount of one time prior year adjustments and applies a 3% economic growth factor. If the growth rates assumed in the 2012-2017 five-year forecast issued in June 2012 are applied to the 2012-2013 sales tax estimate, City sales tax revenues would not be expected to return to 2007-2008 levels until 2013-2014. Further, much as with property tax receipts, at no point during the forecast period are sales tax revenues projected to come close to what they would have been had growth continued at 3.0%per year since 2005-2006. Packet Pg.81 Overall, the Administration anticipates moderate growth in sales tax receipts—with 3% underlying economic growth in 2012-2013 and growth ranging from 2%to 3% annually in the out years of the forecast period. 4. Other Revenue Sources In the aggregate, the City's other revenue sources are projected to generate steady, but not high, rates of overall growth across the City's 2012-2017 five-year forecast period. Major categories for these other sources are outlined below. Utility Tax & Franchise Fees account for approximately 18.5% of estimated General Fund revenues in the 2012-2013. The City collects franchise fees from companies using public property in the distribution of natural gas, and electricity. The City also collects franchise fees from its integrated waste department and cable television providers. w Utility taxes are charged to the users of any given utility (electricity, gas, water, a T telephone). Utility and franchise fees are less sensitive to the economy than sales and C property taxes, and historically have been consistent sources of revenue for San Bernardino in general. At the same time,these revenues are not considered high growth. n m Similar to other major revenues, Utility User Tax (UUT) revenues have declined significantly since the peak of 2006-2007. This is due primarily to the City's exposure o to foreclosures, which were 3.5 times above the national average. The chart below N summarizes the City's collection of UUT revenues over the past 10 years. LU �j c Table 11 —Utility Tax Revenue 2002-2003 to 2011-2012 w a T V Utility User Tax Revenue m a $25,106,730.00 $24,355,172.00 4,093,905.00 S24 407,034.00 $22,089,888.00 $22,500,000.00 0- $22,477,545.00 � 22,630,460.00 $22,500,000.00 C 204,082.00 v m 3 A h O 1 O A O ti ti 3 00 00 00 00 00 00 00 O'ti Oy Oti 01 v ti v ti ti ' ti v ti ti 01" 03 00' Oy O�0 p1 O$ ,t0 ,y0 ,t0 ,y0 ,t0 ,y0 .t0 ,y0 ,y0 ,y0 ,y0 �a\ �a\ a �a� �\ a\ ea ea ea c P� P� p� p� p� JcaOa JcaOa �S��Fa Packet Pg. 82 Transfers and Reimbursements account for funds received by the General Fund from [`/; other City funds through a combination of means, including operating and capital fund overhead charges, transfers, and reimbursements for services rendered. The revenues in this category can vary significantly each year and are influenced by the following: changes in staffing costs, staffing levels, and the relative proportion of services delivered to other funds; the availability of funding in other funds that are appropriate to transfer to the General Fund; and the performance of Gas Tax revenues, which are transferred to the General Fund to reimburse the City for eligible expenditures. Business Registration,Licenses and Permit Revenues are generated from payments for the issuance of Business Licenses, Building Permits, Fire Permits, and miscellaneous health and safety-related licenses and permits. For most licenses and permits, the fees charged by a given department are based on full recovery of the estimated costs c for providing each service. The demand for these licenses and permits, particularly a development-related building and fire permits, are sensitive to economic downturns. c d Other Agencies includes revenues from local agencies, revenues from the State of c California, and revenues from the federal government. City receives revenues from am the State of California in a number of different forms and grants to deliver services. M The federal government also provides grant funding to support a variety of programs N and services. 0 N N W d' Other Revenues include the following categories: Fines, Forfeitures, and Penalties; W Transient Occupancy Tax; Other Revenue; and Use of Money and Property. While some a of these revenue sources are highly dependent upon market performance, such as v c Transient Occupancy Tax and interest earnings, the majority of these revenues are not a driven primarily by economic conditions. a m C. General Fund Expenditures a` c While City revenues have paralleled the weakness in the overall economy, key spending E categories have grown much more rapidly outpacing revenues. Over the past 10 years, General v Fund revenues and expenses have closely followed one another with expenses significant a outpacing revenues since 2007 (see the chart below). City retirement contributions were by far the primary drivers of the City's personnel cost growth across this period. Such benefit cost growth in excess of revenues has severely eroded the City's fiscal resources for maintaining staffing, service,and wage levels, and will continue to do so unless steps are taken. ® Table 12—Revenues vs.Expenditures(10 Year) Revenues vs Expenditures (1 Q Year) 155.000.000 SQS,COD.000 135,000,000 `y''- 125,000,000 C m a U C 115,000,000 d a #� m IL 105,000,000 + N O 95,000,000 N xms zma zms•• zme 2WI :ma• zms zmc 2MO zmz zmz••• W Lu +Actual Funds Awila ble tAsttsal Obducti a.s FY 2011 is unaudited and FY 2012 is mid-year projected C W a The critical takeaway here is that for the City, the cost per employee has been increasing at an > c unsustainable rate as personnel costs have continued to increase. This is most apparent when � looking at the budget information as compared to decreasing positions throughout the City. m Over the past three years, the City has eliminated 250 positions. Meanwhile, as noted the v comparative pie chart below, General Fund departmental budgets have increased by 27% from a $94.5 million in 2001-2002 to $127.2 million in 2011-2012. Because the cost of each employee d has risen, the City and its departments have been forced to reduce staff and services in an effort t to budget in balance. m x Packet Pg. 84 y` Fiscal Year 2011-2012 FY 2001-2002 General General Fund Expenditures Fund Expenditures •Police ■Police 61,161,400 42,004,232 48% 45% •Other ■Other 40 Departments Departments 40 35,083,600 31,446,995 28% 33% Total Public ■Fire Total Public ■Fire Safety 72% 30,927,600 Safety 67% 21,041,818 24% 22% c m a. T C m The City's budget is heavily focused on public services. In turn, governmental service delivery is labor-intensive—relying on the City workforce to patrol the streets, respond to emergencies, i provide libraries and community programs, and deliver the other direct and supporting services M of San Bernardino. Nevertheless, the City must continue to seek services delivery efficiencies N in order to continue to provide desired services within available resources. As a result, and as N noted elsewhere in this report, employee wages and benefits account for two-thirds of the 2012- w 2013 Budget for the General Fund. vC A Summary descriptions for the major categories of General Fund expenditures are as follows: a_ Public Safety: This category represents 69% of the 2012-2013 Budget and reflects the services r provided by the Police and Fire Departments. The major expenditures include emergency r response to calls for service, fire suppression, emergency medical services,and Police patrol and 4 m investigations. a` Non-Departmental.• The Non-Departmental category represents 8.4% of the 2012-2013 C Budget and includes city-wide expenses. The largest components of city-wide expenses t include workers' compensation payments, sick leave cash outs, fleet services, and information m technology. a Community Services: This category represents 14.6% of the 2012-2013 Budget. It covers programs such as public works, parks, libraries, recreation centers, planning and building development services, and code enforcement. General Government: This category represents 6.7% of the 2012-2013 Budget and reflects the cost for all management and administrative functions of the City and independent officials, including Human Resources, Finance, City Manager, Mayor, Common Council, City Attorney, City Clerk, and Civil Service Commission. Debt Service: This category represents 1.3% of the 2012-2013 Budget and reflects General Fund costs associated with the debt obligations to the City's General Fund. This does not include the City's 2005 issue of pension obligation bonds (public safety), as that costs is included with public safety. © Ill PERSONNEL&RETIREMENT COSTS ASA FACTOR CONTRIBUTING TO THE STRUCTURAL DEFICIT It is projected that over the next five years, the City's cumulative retirement contributions will exceed $108 million in all funds with projected annual contributions totaling $19 million in 2012-2013, increasing to over $22 million by 2016-2017. This is not the worst case scenario. Staff was recently informed the CalPERS rate of return for its investment portfolio was 1% for 2011-12 which is 6.5% below the assumed discount rate. This will very likely increase the City's future contributions. This is not simply a short term issue. These costs are growing at such a rate and are of such a magnitude that they require an ever-increasing share of the City expenditures regardless of the program or revenue source. Retirement reform is needed for the long-term sustainability of the retirement plans and in order to continue to provide even the most basic municipal services to the public. a T U C For the purpose of understanding the root causes and likely outcomes of the City's deteriorating financial condition, it is essential to understand certain aspects of the City's pension and Other d a Post-Employment Benefits(OPEB). The key points in this section are the following: m M • The City's pension and OPEB costs are increasing at a rapidly accelerating rate and will N result in broad impairment of the City's services; ° N • The rapid increase in the cost of retirement benefits is due, in part, to improved retirement w pension plans, but also to numerous factors beyond the City's control, including very large X investment losses, the likelihood that the plans will not attain current investment return c assumptions, actuarial losses, changes in actuarial assumptions based on experience, and the a increasing number of retirees relative to active employees; • The expected changes in GASB pension accounting rules, while not directly addressing W changes in funding, will report additional liabilities by requiring public entities to more accurately portray their pension liabilities; a • The impact of these factors will worsen over time and contribute to a dramatic increase in a the unfunded liabilities of the plans, with a resulting rapid increase in annual retirement costs; v • The increased retirement costs that the City will experience are unsustainable;and therefore, • Immediate,major intervention is necessary now. x a A. Overview of Pension Benefits The City provides a pension benefit for vested employees(those with 5 or more years of PERS service credit) based on the member's years of service and his or her single highest year's compensation at the time of retirement. Because the City Charter does not include language regarding retirement plans, the employee labor groups were successfully able to negotiate enhanced pension programs through labor negotiations when the City's coffers and retirement funds were flush. Listed below is a brief summary of the City's enhanced retirement plans. Packet Pg. 86 Table 13 —Enhanced Pension Formulas for the City's Retirement Plans Police and Fire Age and Years of Age 50 with 5 years of service Age 55 with 5 years of service Service Eligibility Benefit Formula 3%of highest year's compensation for each year 2.7%of highest year's of service compensation for each year of service Maximum 90%of final compensation 90%of final compensation Benefit COLA Guaranteed 2%per year Guaranteed 2%per year Average base pay of employee's highest 12 Average base pay of highest 12 Final month period with the City; consecutive month period with the City; a Compensation does not include overtime or excludes overtime and expense allowances cTi specialty pay m Date of c Implementation Fiscal Year 2001-02 Fiscal Year 2007-08 a rn M N O To reduce the future cost of employee pension benefits, the Mayor and Common Council, y © through labor negotiations, implemented the following second-tier of pension plans for safety LU and non-safety employees. m EL Police and Fire Department Retirement Plan U v Base Formate Benefit Year of Change ti Age and Service 3%of final At 55 with 5 years of service a Requirement compensation for 2011 ., each year of service m E Miscellaneous City Employees Retirement Plan m Bane a Femak Beau 1KINNEL Age and Service 2%of final At 60 with 5 years of service Requirement compensation for each 2011 year of service In addition to the plans above, retirees receive an annual 2% cost of living adjustment(COLA), regardless of the CPI or the state of the retirement funds. This guaranteed COLA was added to the plans many years ago, increasing to the total cost of the Police and Fire Plan and the Miscellaneous Plan. Pensions are paid out of retirement funds administered by the California Public Employees Retirement System (CalPERS). The plan is designed to prefund pension benefits, meaning annual contributions made over the course of an employee's career (by both the City and the employee) along with investment earnings are expected to pay for all future pension benefits. The "normal cost" of pension benefits refers to the contribution amount allocated to an employee's current year of service. Separate and apart from the normal cost, additional payments may be necessary due to market losses, retroactive benefit enhancements, unmet assumptions or other circumstances that may result in plan underfunding. B. Overview of Other Post-Employment Benefits The City's retirement plans also provide for other post-employment benefits (OPEB); specifically retiree medical and dental coverage. Generally, employees are eligible for retiree medical insurance coverage after retirement from public service. Employees are eligible to _R retire at pre-Medicare age (55 for Miscellaneous and 50 for Police and Fire), which contributes a T to the significant cost of the benefit. For 339 eligible retirees the benefit covers $112 a majority U of retirees and $200 to $450 based on years of service for retired police officers to cover monthly premium costs for healthcare insurance. A few eligible police retirees receive a similar a benefit as active general employees. This is an anomaly, since retiree healthcare benefits are e, M commonly less than what is provided to active employees. N r O The OPEB plans are funded through separate trust funds associated with the retirement plan. N The plan has an independent actuarial analysis, which establishes the contribution rates and Lu funding levels. Unlike pension costs, retiree medical costs are limited to fixed dollar amounts. Currently, the City's OPEB benefits and unfunded obligations are funded on a pay-as-you-go m a basis. Annually, the City pays roughly $628,000 towards OPEB obligations. Currently, the u unfunded liability for OPEB benefits is $61 million. Similar to pensions,the City's annual pay- d go OPEB costs are also steadily increasing. The Chart below provides estimated growth in pay- d go costs over the next ten years. 4 m CL Table 14—Other Post-Employment Benefits Annual Pay—Go Estimates Q Fiscal Year Pay-Go Total $ Change From % Change From t 2010-2011 2010-2011 2010-11 $628,000 a 2011-12 $738,000 $110000 18% 2012-13 $855,000 $227 000 36% 2013-14 $975,000 $347,000 55% 2014-15 $1,099,000 $471,000 75% 2015-16 $1,220,000 $592,000 94% 2016-17 $1,344,000 $716,000 114% 2017-18 $1,470,000 $842,000 134% 2018-19 $1,603,000 $975,000 155% 26 . T C. The City's Retirement Contributions are Steadily Increasing `.. By any standard, the City's pension and OPEB costs have been increasing and are expected to continue current trends. Because of this, over the past 10 years the City has experienced a profound increase in the percent of payroll that it pays to the retirement plans for these benefits. In 2011-2012,the City spent just over$20 million on retirement benefits. Absent swift action to reduce the cost of these benefits,the City is expected to be required to contribute more than$24 million for pension and OPEB costs in 2016-2017—only four years from now. While these estimates cover all fund sources, the impact on the City's General Fund is significant since it carried the entire burden of public safety costs. Unfortunately, this is not even the worst-case scenario. Future investment losses would increase the unfunded liability,as would actuarial experience losses,and/or decreases in investment earning assumptions. c m The two charts below depict the growth in annual pension costs and unfunded liability. The a City has experienced a significant impact with the implementation of the 2.7% Q 55 benefit enhancement in 2007-08 and with the issuance of pension obligation bonds in 2006-07 for 00 public safety. Both of these events contributed significantly to increasing rates along with a market losses and adjustments to actuarial assumptions. a; Table 15—CalPERS Actuarial Valuation Rate—Miscellaneous Plan c N Fiscal Year Employer Employee Benefit Unfunded w LiabilityK 2012-13 17.355% 8.00% 2.7% 55 $55,855,277 2011-12 17.248% 8.00% 2.7% 55 $53,627,697 a 2010-11 13.276% 8.00% 2.7%@ 55 $27,164,865 c 2009-10 12.544% 8.00% 2.7% 55 $19,572,835 c 2008-09 13.427% 8.00% 2.7%@ 55 $24,580,218 a 2007-08 15.266% 7.00% 2.7% 55 $23,751,661 IL 2006-07 8.947% 7.00% 2%@ 55 $(312,406) :: C 2005-06 7.555% 7.00% 2%@ 55 $(6,769,844) E 2004-05 0.000% 7.00% 2% 55 $(36,697,738) 2003-04 0.000% 7.00% 2%@ 55 $(69,615,583) Q 2002-03 0.000% 7.00% 2%@55 $(77,006,869) PacketPg. 89 © Table 16—CalPERS Actuarial Valuation Rate—Safety Plan Fiscal Year Employer Employee Benefit Unfunded Liability 2012-13 30.115% 9.00% 3% 50 $87,479,247 2011-12 28.279% 9.00% 3% 50 $81,636,613 2010-11 23.105% 9.00% 3% 50 $55,738,948 2009-10 23.356% 9.00% 3% 50 $51,811,181 2008-09 24.009% 9.00% 3% 50 $50,058,297 2007-08 18.600% 9.00% 3% 50 $83,165,714 2006-07 26.882% 9.00% 3% 50 $80,042,391 2005-06* 26.678% 9.00% 3% 50 $72,805,694 2004-05 27.386% 9.00% 3% 50 $59,128,137 c 2003-04 20.902% 9.00% 3% 50 $17,457,260 a 2002-03 12.619% 9.00% 3%@ 50 $(6,953,487) u *City issued $50.4 million in pension obligation bonds(not included in the unfunded liability) m r c As set forth below, in 2000-2001 City pension contribution rates are 7% of pay for a Miscellaneous and 14% for Police and Fire. For 2012-2013, however, the City's contribution Cq rates are expected to increase to 25%of pay for Miscellaneous and to 39%of pay for Police and N r Fire. N H Table 17—City Contribution Retirement Rates(as a Percent of Payroll) LU 2000-2001 2012-2013 _W Miscellaneous 7% 25% a Safety 14% 39% m v C D. The Primary Cause of the Dramatic Increase in Retirement Costs is a a Significant Increase in Unfunded Liabilities i It is important to recognize that the problems leading to this huge increase in retirement costs m cannot be addressed by continuing with business as usual. Absent major changes in the pension t and OPEB programs, retirement costs will overtake available resources, rendering the City unable to provide even the most basic services to the public. a In general, the increasing costs of pension benefits are attributable to a dramatic increase in the plans' unfunded liabilities. Because unfunded liabilities must be "amortized" over the remaining life of a retirement plan, the amount that must be contributed to pay off that liability must also increase. 1. The City's Unfunded Liabilities a. Unfunded Pension Liabilities The most current estimate of the City's total pension liability is $959.2 million. In other words, there should be $959.2 million "in the bank" to assure sufficient funding for pension promises already made. However, the two plans had a 28 Packet Pg.90 combined $639.7 million in assets (market value) or $319.5 million less than what was needed. Thus, using the market value of assets, the City's unfunded liability for both pension plans totaled approximately $319.5 million as of June 30,2010. b. Unfunded OPEB Liabilities Unlike pension benefits, which have traditionally been funded during the working life of an employee, little money was set aside to pay for retiree health benefits — even though, like pension benefits, an actuarial liability arose. In fact, as GASB's adoption of Statements 43 and 45 in 2004 demonstrated, when actuarial studies were required, many cities and counties found they had a very large liability. In San Bernardino's case, this has resulted in an estimated $61 million in unfunded _ liabilities as a result of promised OPEB benefits. c W a c. Funded Ratios have Significantly Declined m V Adequate funding of a retirement plan is often viewed as a percentage of full a funding. As noted earlier, a plan that is fully (100%) funded has all of the assets necessary to pay for the present value of all benefits already earned. The funded ratios of retirement plans have fallen dramatically and are one of many significant A issues facing many municipalities throughout the State. `r W W 2. Underlying Causes of the Increase in Unfunded Liability m There are four major causes of this increase in unfunded liability: a u c 1. Timing of increases in benefits beyond the basic plans, which were not paid for v during the working lives of employees receiving benefits; c a 2. Investment losses, leading to a failure to meet earnings expectations on plan assets; i 3. Actuarial changes in actuarial assumptions based on experience, including increased a longevity; and 4. An increase in the number of retirees and the size of their pensions. a >r These factors have combined to take the pension plans from being at or above full R funding levels during the last decade to being underfunded now. E. The Impact of Enhanced Benefits Over the years, the City Council has increased pension benefits from the basic levels. These changes which included increases in pension formulas (age at retirement, years of service, multiplier, and calculation of final compensation) occurred as a result of bargaining with employee labor groups. The impact of these changes cannot he overstated. Importantly, in the case of virtually every pension improvement, the enhanced benefits have !' been applied to an employee's full service with the City, including service which occurred d.r before the change. These retroactive adjustments have a direct impact on the City's unfunded liability. As an example, consider an employee whose pension formula is enhanced after 29 29 PacketP9.91 years of service. For this employee,the City and the employee had contributed to the plan at the lower rate for 29 years. Then, the employee's formula is converted to the higher rate retroactively, regardless of years served under the lower benefit plan. Therefore, neither the City nor the employee contributed to the plan for 29 years at the level necessary to fund the higher level of benefit that this employee will now receive for all 30 years of service when the employee retires a year later. This difference gets added directly to the unfunded liability. 1. Pension Formulas With respect to pension formulas,the most dramatic changes have occurred in the Police and Fire Plan. Currently, they may earn up to 90%of their final salary. In addition, the minimum retirement age has been lowered from 55 to 50 and changed the determination of final compensation from highest three-year average compensation to highest 12-month average compensation for both plans. m a 2. COLA c d The cost of living allowance(COLA)guarantees annual cost-of-living increases, even in a the first year of members' retirement. The current system provides that all pensions m receive an automatic 2% increase, regardless of actual changes in the cost of living. Because the COLA is effective on a date certain for each plan,a Police and Fire member 0 can retire on January 31 st at 90%of salary and on February 1 st—the COLA adjustment r, N effective date—receive a 2% increase,resulting in a pension of 92% of final salary. z 3. Other Post-Employment Benefits n a T At the time Other Post-Employment Benefits (OPEB) were granted, their cost was c minimal, and it is safe to assume that no one involved fully anticipated the long-term D consequences. Over time, of course, the amount paid and the number of retirees has a increased, and the problem is compounded by lower retirement ages, meaning more i years before a retiree is covered by Medicare. As a result, as noted previously, the City has an estimated $61 million in unfunded liabilities resulting from promised E OPEB benefits. a x F. Failure to Meet Earnings Expectations The cost of increasing pension benefits was masked, to some degree, during the decade preceding 2008 because of rising equity markets leading to miscellaneous plan becoming fully funded and the safety plan in a well funded status. However, with the recession beginning in 2008, the plans became underfunded rapidly and are not expected to recover any time soon. One of the variables responsible for the increase in unfunded liabilities is the failure of the plans to achieve the annual earning assumptions on which they have been premised. Until 2002, Ca1PERS assumed earnings of 8.25% when it began phasing in a reduction of the earnings assumption to 7.75%. From 2000-2002 to 2008-2009, much of the new unfunded pension liabilities were caused by investment losses and adjustments. As this report goes to publication, the Ca1PERS Board has adjusted its assumed earnings rate to 7.50%. 30 Packet Pg. 92 O Even strong returns are unlikely to be able to make up for recent market losses. During 2009- 2010, each plan saw strong net investment returns 12% for both Miscellaneous and Police and Fire. Positive returns were realized in 2010-2011. However, it would take extraordinary returns over a sustained period to make up for the very severe losses in calendar year 2008 —and few are predicting such returns. Indeed, even the very positive returns for 2010-2011 have undoubtedly been eroded by declines in the equities markets since June 2011. Nationally, the trend for earnings assumptions has been downward, reflective: (a) the lower yields on bonds comprising 30-40% of pension portfolios, and (b) reduced expectations for equity (stock) investments given the global overhang of sovereign and consumer debt. If the CalPERS Board reacts to this by reducing the actuarially assumed investment rates of return below its current level of 7.5%, the Unfunded Actuarial Accrued Liability(UAAL) for the plans would increase because the difference would need to be made up in contributions. On the other hand, if the CalPERS Board were to leave the earnings assumptions unchanged, and the actual 9 0. rate of return on invested assets falls below the plans' assumptions, then the UAAL would increase due to the disparity between actual investment results and the actuarially assumed m investment rates of return. c m IL Either way, the amortization of those differences would increase the City's annual required contribution beyond current projections. A 0 G. Increase in the Number of Retirees N LU W Another factor in the increase in pension costs — and one that will likely worsen significantly W over time - is the rising number of retirees relative to active employees. The increasing ratio a creates a risk of even higher future contribution rates. This means that the annual cost to pay L down the unfunded liability is spread across fewer active employees o C c In San Bernardino, as the number of active employees as a percentage of overall pension plan a membership has decreased, the payments to retirees out of the plans have exceeded a payments by active employees into the plans. The negative effect of this maturation of the c plans during a down market cannot be overstated. As a result of the confluence of events, the E impact of negative investment performance is exaggerated because the system has a negative cash flow. With not enough new money flowing in, the system is forced to sell assets at a historically low values, when it should be "buying low" in anticipation of the eventual market recovery. Now the cost of recovering from a recessionary market decline escalates. H. Conclusion Without compensation reforms, pension and OPEB contributions are expected to amount to roughly 14% of total General Fund Expenditures by 2015-2016 totaling about $24 million (excluding pension obligation bond debt). In absolute dollars, San Bernardino's General Fund employee pension costs have risen from $6.2 million in 2000-2001 to $19 million by 2012-2013, and are projected to reach $22.6 million by 2015-2016 if no reforms are adopted—in total,a$3.6 million increase in annual spending. Packet Pg.93 Unsustainable compensation costs are not San Bernardino's problem alone. Retirement costs have significantly increased across the country. Concern about how to pay for retirement benefits is a national issue. What is important to grasp from these increases is that the City has worked very hard to absorb these increases to date. There have been severe consequences to this as we find ourselves facing Chapter 9 Bankruptcy. c m a T V C d C d a m M r N O N N W C A a. v c d v c v a d a Y C d E z m z Packet Pg.94 f IV. EFFORTS TO ADDRESS THE FISCAL CRISIS AND CONSIDERATION OF v ALTERNATIVES TO CHAPTER 9 BANKRUPTCY The City has made reasonable efforts over the last several years to address its fiscal situation, and continues to do so. Most recently, the Mayor and Common Council adopted a Fiscal Emergency Operating Plan to address the City's budget shortfalls. Moreover, as discussed below, the City has considered — and continues to consider - other proposed solutions for addressing the rising personnel costs. However, it must be noted that the service-level impacts are in fact another alternative, albeit one with potentially unacceptable consequences since the City will be rendered unable to provide basic municipal services. That dire situation will be the unacceptable outcome if the City does not swiftly address the fiscal emergency and reduce its operational costs. c The City has also considered and is pursuing other ways to control costs and avoid unacceptable 16 IL service cuts. Some of these are discussed below. Ultimately, even if the City is successful in u achieving all of the ways to control costs outside of changes to retirement benefits, they are m v insufficient to solve the crisis. C m IL A. Past Budget Workshops and the City's Budgetary Analysis and M Recommendation for Budget Sustainability N 0 Over the past decade, the City has balanced General Fund budget shortfalls through a ^' N combination of strategies, including cost reduction strategies and revenue strategies. Given the Wa' severity of the City's current financial condition and immediate cash flow issues, it is no longer feasible to rely on these strategies alone to balance the budget without reducing services and a seeking Chapter 9 Bankruptcy protection. u C m On April 3, 2012, and July 09, 2011, the City Manager presented opportunities and options to m deal with the City's rapidly declining fiscal health to the Mayor and Common Council. It a should be noted that the Common Council has subsequently provided additional direction on a materials presented. The recommendations contained in the presentations were designed to balance cost reduction strategies and revenue enhancements. Following is a discussion of those E strategies, some of which have already been implemented. m x Q 1. Cost Reduction Strategies The budget workshop and Budgetary Analysis and Recommendation for Budget Sustainability Plan identified several strategies to reduce costs, including departmental cuts, reduced compensation for existing employees; reduced costs for sick leave payouts, vacation buybacks and overtime pay; and cost sharing of retirement obligations necessary to avoid further increases in retirement costs. Through bargaining, the City achieved a 10% total compensation reduction from most employees and established a two-tier pension plan for new employees. Although this reduction saved approximately a net $10 million per year, it is not enough to resolve the continuing increases in Cretirement and operational costs. 33 Packet Pg.95 As part of the Budgetary Analysis and Recommendation for Budget Sustainability Plan, \.. the City is pursuing the elimination of sick leave payouts, reduction in overtime and elimination of sellback programs. The City is meeting and conferring with the rest of the bargaining units and will continue to do so through the bankruptcy process. It is the Administration's goal to phase out sellbacks and to pursue changes to overtime identified in the Budgetary Analysis and Recommendation for Budget Sustainability Plan during this round of negotiations. Although the savings above identified in the Budgetary Analysis and Recommendation for Budgetary Sustainability Plan are significant, the most significant are cost sharing of retirement benefits,which will require successful collective bargaining. 2. Revenue Strategies c m The Budgetary Analysis and Recommendation for Budgetary Sustainability Plan identified the following revenue measures: (1) Real Property Transfer Tax; (2) Utility m User Tax Modernization; (3) Transient Occupancy Tax; and, (4) 911 Communications 0 Fee. Each of these revenues measures,however,would require voter approval. d a It is important to note that the City's ability to raise revenue through taxes and fees is severely constrained by the California Constitution, as modified by several statewide o ballot measures, ranging from Proposition 13 in 1978, to Proposition 218 in 1996, to 2010's Proposition 26. w Lu c Proposition 13 limited the revenue that cities may receive from property taxes by a capping both the assessed value of property and the tax rate allowed. Proposition 13 also imposed a requirement that "special taxes" be approved by a two-thirds supermajority of voters. In 1984, Proposition 62 extended a voter approval requirement m to "general taxes" imposed by cities. In 1996, Proposition 218 imposed further m restrictions on cities' ability to impose property-related fees, reaffirmed voter approval a` requirements for all taxes, and granted voters the right to repeal or reduce taxes or fees m through the initiative process. Although Proposition 218 continues to be interpreted s through the courts, it is clear that it has created an additional significant barrier for local governments in attempting to control financial outcomes. Q Proposition 26, the most recent restriction on the City's ability to raise revenue, extended voter approval requirements to "regulatory fees" by reclassifying such fees as taxes. An example of a regulatory fee is a fee imposed on manufacturers of products containing lead to fund health services and mitigation of the environmental impacts of lead. By requiring voter approval for such fees, Proposition 26 significantly restricted one of the few remaining options for cities to raise revenue. A challenge facing Mayor and Common Council whenever evaluating whether or not to place revenue measures before the voters is how to weigh the marginal support typically seen in pre-vote surveys. In judging whether to place a measure before the voters, the Mayor and Common Council must weigh the likelihood that marginal voters who are 34 Packet Pg.96 "leaning" in support of a measure will vote in favor of the measure, against the knowledge that the City generally will only get one "bite at the apple"when it comes to any particular revenue measure, and that the cost for that one "bite" is extremely high, whether it wins or loses. According to most well regarded advisory firms, once voters reject a measure, it is often significantly more difficult to pass in a subsequent election. In other words, the likely chance of passage is reduced once a ballot measure has been rejected. These combined concerns have prompted the Administration to take a cautious approach when considering recommending revenue measures to the Mayor and Common Council. Following is a discussion of each of the four potential tax measures included in the Budgetary Analysis and Recommendation for Budget Sustainability Plan. c Real Proper&Transfer Tax R a. T In California, localities including San Bernardino have imposed a tax on the transfer of property located within the city. The tax, known as the documentary transfer tax or real property transfer tax, is largely based on the federal documentary stamp tax, which was a repealed in 1976. In California, counties and cities have been authorized to impose a tax M on deeds of transfer of realty located within such county or city.The amount of the tax is N based on the consideration or value of the realty transferred. The current County rate is r one dollar and ten cents ($1.10)for each one thousand dollars ($1000)of value. Of that w amount, the City receives $0.55 and the County receives the remaining $0.55. Charter cities, however, may impose transfer taxes at a rate higher than the county rate. The transfer tax must be paid by the person who makes signs or issues any document subject n r to the tax or for whose use or benefit the document is made, signed or issued. Real Estate Transfer Taxes, authorized as documentary transfer taxes by the California c Revenue and Taxation Code on the sale or transfer of real property are currently levied no by all counties and many cities. a Y Real Property Transfer Taxes may be applied only to residential sales or to other types of E real estate transactions including commercial and industrial sales. Revenue raised from the Real Property Transfer Tax is added to the City's General Fund. a It is recommended the City Council consider implementing a rate of$5 per $1000 of value to provide a base level of funding necessary to deliver essential services to the community. The proposed rate would generate roughly$3 million annually. Utility User Tax Many cities charge a tax on utilities, ranging up to 9.5% (Huntington Park). San Bernardino currently charges 7.75%. Each 1% increase on utilities currently taxed (telephone, cable, electric, and gas) would yield approximately $3 million annually. Each 1% on utilities not currently taxed (sanitary sewer service, sanitation, refuse Ocollection)would yield several hundred thousand dollars annually. 35 Packet Pg. 97 Utility user taxes (UUT) are paid by San Bernardino residents and businesses and are collected by the utility providers who serve them. The utility then remits the tax payments to the City. Annual revenue in FY 2010-I1 from utility user taxes (electric, gas, cable, land line phone, and cell phone) was $22 million. The City has made annual revenue projections considering possible tax increases at 1% and 2%. Further, sanitary sewer service, sanitation, and refuse collection are currently not part of the utility user tax. The City may want to consider modernizing and expanding the utility user tax to cover utilities not currently included. A utility user tax increase can only be voted on during a general election. A simple majority is needed unless the City Council declares a fiscal emergency and puts the potential tax increase to a vote during a special election. It should be noted that costs for special elections are higher. For San Bernardino, a special election costs approximately c m $200,000. a t Transient Occupancy Tax a C The Transient Occupancy Tax (TOT) is a tax charged on hotel stays. San Bernardino a presently has a TOT rate of 10%,which is the County average. In the San Bernardino/ Riverside County area, some cities charge as much as 12.7% (Palm Springs). For our A City, TOT generates just under $2,500,000 per year in revenues, meaning that each 1% N of the tax generates about$250,000. w Increasing the rate by 1% would put the rate at the highest level in the County and a would generate only $250,000 in revenues. There might also be some negative impact .9 of the higher tax rate on occupancy rates at the local hotels and spas. For these reasons, c we are not recommending an increase of the existing TOT. c m a 911 Communications Fee m a While often called a"fee,"this potential revenue source is actually a tax requiring voter approval. A 911 communications fee would yield approximately $6.7 million a year. t The tax would be charged on most personal and business telephone lines and cell phones x in the City. Some exemptions typically exist, mainly relating to customers on lifeline service and service to non-profit organizations and government offices. The City of San Jose has implemented this fee and estimates that approximately 90% of the phone accounts in their community are taxed. The justification for charging a fee to telephone subscribers is that only people who have telephones can call 911 for emergency services. As stated in the San Jose ordinance, "Subscribers to telephone service derive significant benefits from ongoing operation of the modernized integrated system installed at the San Jose Emergency Communications Center" in the form of more efficient dispatch of services to a 911 emergency request. O Packet Pg.98 B. Best Cases Revenue Scenario Does Not Solve the Problem Certain measures included in the City's Budgetary Analysis and Recommendation for Budgetary Sustainability Plan have been considered by the Mayor and Common Council in recent years. While approval of all the measures would provide substantial new revenues to the City, placing multiple revenue measures on the same ballot is likely to reduce support for all of them. However, it is important to note that, in the context of declaring a fiscal emergency, all of these potential revenues together would only garner about $12 million annually, which would only cover approximately 27%of the FY 2012-13 projected shortfall. 1. Other Revenue Alternatives Rejected While not included in the Budgetary Analysis and Recommendation for Budgetary Sustainability Plan, the Administration has also reviewed political and voter support for m a number of other potential revenue measures, none of which has demonstrated a sufficient support to merit serious consideration.Among these are: c m v • General purpose taxes requiring a simple majority to pass: a • Increase in the Sales Tax • Parcel taxes requiring a super-majority(two-thirds)to pass: 0 • Parcel tax supporting"landscape and energy-efficient lighting": • Parcel tax to support"police,fire,and other critical services": LU • Parcel tax to help maintain City library services: a • Parcel tax to "protect and maintain City infrastructure services like libraries, L, street and park maintenance, traffic signals and roadway markings maintenance": m v c • Parcel tax to "protect and maintain public safety services like police patrols, 9- a 1-1 emergency response, and fire protection": a Y 2. Spending Down Reserves E E In a time of fiscal crisis, the use of reserves is one of the options to consider as a short- term approach to bridge funding gaps in order to continue providing essential municipal a services. The City has drawn down its reserve levels over the last several years,and this practice has proven unsustainable. Effectively, San Bernardino's actions have been equivalent to those of a homeowner drawing down from their savings account to pay for monthly mortgage and grocery bills that exceed their regular paycheck. So long as the savings last, such a practice can buy time to either find a better paying job, and/or to cut down on monthly expenses. Because insufficient changes were not made with such recurring income and spending, the City's reserves have been depleted. The Administration strongly believes the City needs to implement strategies to restore reserves to address any unforeseen circumstances as it serves as the City's safety net. C Without these funds, the City would not be equipped to address significant unforeseen expenditure needs or to offset large drops in revenues in the future. It is imperative that 37 Packet Pg.99 O the City be in a position to meet its financial obligations each year and must prudently plan to do so. There are strong budgetary and strategic reasons for the City to maintain adequate reserve levels and to avoid using one-time funds to balance the budget. More importantly,because this deficit is structural in nature and because reserves by definition are one-time monies,the City would simply be shifting the budget problem out one year. Then, the City would be worse off the following year as it would have to not only resolve the added gap, but it would also have no reserves or one-time monies to balance the budget or to address unforeseen circumstances. C. CONCLUSION The City of San Bernardino faces a fiscal crisis of staggering proportions. The City has _W attempted to close budget shortfalls every year for the past decade, largely through reductions in n. T staffing and one-time revenues. Citywide staffing levels have dropped by almost 20% in recent years, reserves have been fully depleted and General Fund cash is negative $18 million. c m a Despite these reductions, the City's cost of providing services has continued to rise. Personnel costs are the major factor driving the increased cost of providing services. Expressed as a percent of payroll, retirement contribution rates have increased from 7% of pay for the o Miscellaneous Retirement Plan and 14% for the Police and Fire Retirement Plan to a projected a5 25% of pay for Miscellaneous and more than 39% of pay for Police and Fire. In other words, wa' for every$100 paid for police and fire payroll,the City will be required to pay an additional $25 to$39 into the retirement system. a As a result of these increasing costs, the City projects budget shortfalls for the foreseeable d future. Those shortfalls are anticipated to grow on a cumulative basis, if no corrective action is c taken, from $40 million in FY 2012-13 to over$45 million by FY 2015-16. Absent a dramatic a change to the accelerating cost of employment, the City will have to close these budget gaps by a2 cutting and potentially eliminating already reduced services below acceptable levels. m E For all of the foregoing reasons, the Administration recommended the Mayor and Common Council adopt a resolution of fiscal emergency and seek Chapter 9 Bankruptcy protection based a upon the need to find and implement solutions that may require the assistance from the Bankruptcy Court. is Packet Pg. 100 {' BUDGET&OPERATIONAL RESTRUCTINGPLAN A. Preliminary Fiscal Year 2012-13 General Fund Budget The Preliminary FY 2012-13 General Fund budget of $166.2 million represented a baseline budget, which is a continuation of the status quo with projected increases in pension costs and other post-employment benefits, one time equipment purchases, as well as other services and supplies that must be purchased by the City to maintain the current level of service. The estimates in the Proposed Budget assume the restoration of the employee concessions, many of which have expired, and do not include Cost of Living Adjustments (COLA) or other compensation increases such as step increases. Appendix A is the Proposed FY2012-13 General Fund Budget, which reflects $121.9 million in revenues, not including transfers, and $143.9 million in department proposed expenditures. The m budget includes the Summary of Revenues, Expenditures, and Changes in Fund Balance, a, Requested Budget by Department including Line Item Detail, Salary and Benefit Schedules by m Department, and Department Organization Charts. m a Key expenditure assumptions for FY 2012-13 include: • Significant restructuring is proposed in each department (detailed below). Overall, the o Administration is seeking a 30% reduction in expenses to balance General Fund expenses N co with estimated resources in this fiscal year. W • CalPERS costs are driven by the State's actuarial report that includes a 0.5% lower CalPERS c discount rate for investment earnings which contributes to a 14.4% increase in costs for FY a. 2012-13 and a 4.6% increase from FY 2012-13 to FY 2013-14. Lower City payroll will u drive up part of the CaIPERS liability rate that pays off the unfunded liability. The major risk is additional reductions in the discount rate and/or CalPERS investment performance, CE which would drive employer rates up further. Future labor negotiations or court rulings i could result in changes to the City's costs related to retirement benefits. o Y • Increases in salaries in FY 2012-13 is the result of absorbing the costs related to safety m personnel that had been paid by grants in the past. Changes in safety grant funding have u occurred since the preparation of budget documents. The impact of these changes will be ca addressed later in this report. a • Employee health care costs are estimated to grow by 5%. There is the risk that future labor negotiations or court rulings could result in higher City costs. • Other Post Employment Benefit costs continue to increase. The June 30, 2009, actuarial report assumes annual growth averaging 8 to 9%over the next 5 years. • Net debt and equipment lease costs are projected at$5,185,548. 1 j Key revenue assumptions for FY 2012-13 include: • Pursuant to the revenues budget, property tax will increase in FY 2012-13 by 4%. The FY 2012-13 estimates was provided by HdL, the City's property tax auditor. Looking forward, Proposition 13 will hold down property tax growth as the annual assessed value adjustments of properties, which are already selling at deflated levels, are limited to the lesser of the 39 Packet Pg. 101 change in the California Consumer Price Index (CPI) or two percent, unless sold. Sale prices will depend on the rate at which the market recovers and whether trends shift to renting closer to work, rather than owning property farther away from work. The long-term trend is a straight line,although it is anticipated there will be short term fluctuations. • Sales tax is based on HdL estimates through FY 2015-16, and assumes 3% annual growth per year. Long-term CPI growth is projected at 2.5%. The shift toward non-taxable services and non-taxed internet sales will hold down growth over time. • There is no growth projected for the Utility User Tax as increased utility costs, which would generate more revenue are negated by increased user conservation, vacant properties as a result of foreclosures and cost savings measures. • Business Registration Fees are projected to grow 4% in FY 2012-13 due primarily to increases in sales and business to business activity. • The Franchise Tax is subject to similar user conservation and technology trends, and _W therefore, is anticipated to be flat when compared to previous year revenues. a • New revenues which may be considered and approved by the Mayor and Common Council o in the future aren't included because no new revenue sources have been approved, and even c if approved, new revenues would not be realized until some future date, or would not be a immediately available. N B. Fiscal Year 2012-13 General Fund Reduction Methodology S N Given the limited resources to the City, the recommendations that follow include profound LU budget cuts that in many cases will have significant impacts on service delivery and City's Ir employees. Given the significant cash flow problems facing the City and immediacy of the a problem, the Administration was unable to engage the community in the process of prioritizing n u programs and services prior to making recommendations for service cuts. Despite the inability o to engage the community, the Administration has worked to minimize the impact and preserve m basic services to the community. IL The following core concepts have guided the development of the Proposed FY 2012-13 Budget: m E • Priority was placed on front-line public safety services; • Basic levels of infrastructure and public property maintenance were preserved; Q • As many basic programs and services as possible were retained; • Minimum levels of leadership and administrative support were maintained to the extent practical;and • Opportunities to build operating reserves, begin to fund unfunded liabilities, and to address the cash deficit will require additional cuts, and therefore, the Administration will seek further policy direction from the Mayor and Common Council in the near future. The Proposed FY 2012-13 Budget is a balanced approach which reduces overall General Fund expenditures from the preliminary budget of$166 million to $143.9 million. Recognizing that, the Proposed Budget focused on the elimination of specific non-essential programs and services and related personnel costs. Key elements of the Proposed FY 2012-13 Budget include: as Packet Pg. 102 • Elimination of mid-management positions in the City Manager's Office and reassignment of the Grants Coordinator position to the Parks, Recreation and Community Services Department. • Existing personnel in the City Manager's Office would assume responsibility for the Economic Development programs as a result of the State dissolution of Redevelopment Agencies. • Consolidation of the Finance, Information Technology, and Human Resources Departments into an Administrative Services Department resulting in the elimination of two Department Director positions. • Administrative positions in the Mayor's Office, which were responsible for neighborhood services and environmental programs and projects would be eliminated and the duties absorbed by the remaining personnel in the City Manager's Office. The two Operation Phoenix sites would be eliminated. • The Code Enforcement function, which is currently in the Community Development a r Department, would be moved to the Police Department to provide greater efficiency and m coordination of the various enforcement functions. V C • Disaster Preparedness, which is currently in the Fire Department, would be moved to the a Police Department to provide greater organizational awareness and preparedness. • The Community Development Department would assume responsibility for the Housing A functions previously handled by the Economic Development Agency that was recently N dissolved by the State. w • Responsibility for the maintenance of the City's Landscape Maintenance Districts, park a maintenance, and street tree maintenance could be moved from the Parks, Recreation, and m Community Services Department to the Public Works Department and the work would be a contracted with private vendors. • Custodial services throughout the City would be contracted with a private vendor. c • Workers' Compensation and Risk Management functions would be contracted to a third a party administrator to reduce costs and enhance efficiencies. a • Essential services such as front-line police and fire personnel are preserved; however,cuts to c P roactive policing and fire prevention programs, P arks, community development, libraries, E r and public works programs are substantial. • Personnel reductions and organizational restructuring are estimated to reduce salary and a benefit costs by$15.66 million annually. C. Preserving Essential Safety Services 1. Fire Department Continued cuts to the Fire Department will have a negative impact to internal operations and will affect the residents of San Bernardino. However, the Administration and Fire Department Management, have the responsibility of taking the necessary actions to insure the City will continue to provide essential services to the public for the long term. © Nevertheless, cuts to public safety can't be ignored during a bankruptcy. In fact, necessary but prudent cuts will have to be made. ai Packet Pg. 103 Fire Department Comparisons To put the proposed cuts in context, Fire Management staff researched two cities that have filed bankruptcy in California. The comparison is based on how the cities of Vallejo and Stockton managed their fire departments prior to and after bankruptcy. VALLEJO -Upon entering bankruptcy, four of Vallejo's eight fire stations were closed. These closures caused daily fire suppression staffing to be reduced from 28 to 15 on- duty personnel. Vallejo has since re-opened one fire station after obtaining a SAFER grant. (Information obtained through personal contact with Vallejo Finance Administration Staff and a National Public Radio On-line Report 9-27-10) STOCKTON—Stockton had a fire department that was similar in size to San Bernardino and a population that is larger by approximately 100,000 people, with similar cm demographics. Two years ago, Stockton began by eliminating a five-person truck . company and followed that by closing a four-person engine company. The City of m Stockton continued budget cuts by reducing the 13 remaining engines to three-person staffing and three truck companies to four-person staffing. This resulted in 36 no firefighters being laid off. (Information obtained through personal contact with Dave Rudat, Interim Fire Chief, on July 13, 2012) A 0 In addition to the above, Vallejo and Stockton Fire Department employees gave up H significant salary and/or benefits,either prior to the bankruptcy filing or as a result of the filing. m a Several of the City's neighboring fire departments have reduced fire suppression staffing u the last several years: v c m • Colton Fire Department has eliminated an Engine Company, paramedic squad, and a a d Chief Officer position a` • Rialto Fire Department eliminated an Engine Company, 2 Chief Officers, and the E Fire Marshal position W • Redlands Fire Department has eliminated 3 Chief Officers positions a • Loma Linda Fire Department eliminated a Chief Officer position and is sharing administrative duties with the Colton Fire Department Prior Budget Reduction Actions Like other City departments,the Fire Department's cuts began in 2008 with concessions from the fire management group and then continued with various concessions from all the employee groups within the Fire Department over the following years. Personnel cuts have also been made during this time period and have resulted in some unavoidable negative impacts. 42 Packet Pg. 104 Fire & EMS Program - Eighteen firefighter positions have been eliminated, this resulted in six engine companies being reduced from four-person staffing to three-person staffing. Currently, only two truck companies and one single engine company has four- person staffing. This equates to an 11% reduction in fire suppression personnel compared to 2008 levels. This has caused firefighting companies to lose efficiency on the fireground, as well as other emergency incidents they respond to. Staff members have been asked to "do more with less" and have done a terrific job. The recommended standard as set by the National Fire Protection Association (NFPA) is for engine companies to be staffed with four people. The City's goal was to work toward that recommendation prior to the downturn in the economy. The Administration and Fire Management recommend the City continue to seek the NFPA recommended level of four personnel per company when financially possible. a T V Chief Officers- A total of three chief officer positions (Deputy Chief, Fire Marshal and d Training Division Chief)have been vacated. These vacancies became effective with the action the City Council on July 2, 2012. This has resulted in a daily staffing level of one a Fire Chief during the day and two Battalion Chiefs working a 24-hour shift schedule. ran Prior to this cut, there had already been a reduction of one Chief Officer Position and a r management re-organization to handle the responsibilities in a safe and effective manner. The current management structure of the Fire Department is unsustainable for w any length of time. The Deputy Chief and Fire Marshal positions need to be filled a within this fiscal year. m a The current staffing equates to a 30% reduction of Chief Officers as compared to 2008 levels. c d a Community Risk Reduction Program — To date, a total of 6 of the 15 positions have �+ been eliminated: Senior Administrative Assistant, Fire Plans Examiner, Fire Prevention a Y Officer, Fire Prevention Technician, Code Enforcement Officer II, and Public Education E Officer. In addition, a Fire Prevention Officer (FPO) retired effective August 1, 2012, and the position will be left vacant. Any further vacancies in the Community Risk yR Reduction Program can be held vacant,thereby achieving further cost savings. The continued reduction in staff will result in a loss of revenue, delays of fire plan checks, reviews/inspections, inspections of permitted occupancies (i.e. restaurants, day cares, churches, commercial buildings, etc.), and delays of multi-family housing inspections, as well as a decrease in service to developers interested in beginning projects in San Bernardino. At this time, it is not possible to calculate the loss of revenue. The department will no longer have a proactive Public Education program,and the City will be limited in their participation in community events. During the remaining portion of this fiscal year, the Administration and Fire CManagement anticipate the need to either out-source or hire part time personnel to assist with fire plan check reviews. Primary reasons are due to the complexity of the plans and a3 Packet Pg. 105 lack of staff available to review them in a timely manner. The Community Risk Reduction Program is self-sustaining and provides an essential service. After reviewing the structure and complexity of the program, Administration and Fire Management do not feel that the same job can be"handed off'to someone else to provide the service without a significant loss of revenue and service to the citizens. There would be no viable cost savings associated with any further re-organization of the Fire Prevention Bureau. The current staffing equates to a 30% reduction of the Community Risk Reduction Program compared to 2008 levels. Administration and Fleet & Equipment Program — The Administration and Fleet & Equipment Program has sustained a total loss of three positions: Training Captain, 2 Administrative Assistant Training, and an Equipment Mechanic II. This has left only 0, four personnel in the Fire Shop and seven personnel in Administration. d V c The Fire Department is no longer able to offer training classes, which did provide a y source of revenue,to the department members and to those outside the department. The a; M ability to maintain the fire apparatus is becoming increasingly challenging due to limited S A manpower and lack of funding for replacement parts and/or apparatus. Further cuts to 0 shop P ersonnel would greatly jeopardize response capabilities and the safety of a w personnel. a c Administration and Fire Management recommend no further cuts be imposed in the a Administration and Fleet& Equipment Program area. In the event of future retirements, some of the positions may be held temporarily vacant requiring staff to come in on Imo overtime to continue essential operations based on the need of the department. The m exceptions would be that if either the Emergency Medical Services Coordinator or the a Administrative Analyst II positions become vacant, these positions would need to be a. Y filled immediately. o E r The current staffing equates to a 40%cut of personnel as compared to 2008 levels. Q Disaster Preparedness Program — The Emergency Services Manager assigned to this program was also identified in the City Council action of July 2, 2012,to be held vacant through attrition. Administration and Fire Management anticipate this to occur prior to the end of 2012 calendar year. Approximately 60% of this position is funded by grant monies. At this time, Administration and Fire Management cannot estimate the savings associated with this position. The loss of this position will require the duties and responsibilities be reassigned to another City department as they are vitally important. The loss of this position will severely limit our ability to prepare and respond to both man-made and natural disasters, our ability to recoup our costs associated with providing service during these incidents, leaving the City liable for the cost, and our ability to [ apply for and manage grants that we currently rely on for equipment and training. vvv as Packet Pg. 106 © Emergency Communications—There are eleven personnel assigned to the Fire Dispatch Center, including a Fire Communication Manager and ten Dispatcher II positions. The Fire Department's Emergency Communications Center is located at the Police Department Dispatch Center. This is the minimum number of staff needed to provide for two dedicated fire dispatchers on duty 24 hours a day and supervision. Over the past several years, out-sourcing fire dispatch services has been explored with the dispatch center run by San Bernardino County, known as Comm Center. The result has consistently been that out-sourcing will not provide a monetary savings to the City nor increase efficiency of dispatch operations. This can be explored again as an option. Fire Management has made some preliminary inquiries but would need to receive further direction to pursue an official proposal. c There are several factors that could complicate this potential move. The City has a a contractual obligation to provide dispatch services for the San Manuel Band of Mission Indians(SMBMI)Fire Department. The contract will expire in July 2017. This contract m has been paid in full by SMBMI and would have to be re-negotiated. Also, the City has m a contract with American Medical Response (AMR) which generates approximately a. $320,000 annually in revenue to the City. This is accomplished through an agreement with the Inland Counties Emergency Medical Agency (ICEMA) and AMR, enabling AMR to reduce staffing based on our ability to arrive on scene and provide Advanced N Life Support (ALS) services. A percentage of their savings are passed on to the City, rc based on the response times. These agreements would have to be re-evaluated to determine what, if any, impact there may be if a change were made. A a The City's Dispatch Center also utilizes Emergency Medical Dispatching(EMD),which is now becoming the industry standard. EMD allows the City to prioritize medical c emergency calls and send only an ambulance if appropriate. Comm Center is adopting no this program and this too will have to be evaluated to determine the impact to our a contracts and agreements. c m Administration and Fire Management believe it would take several months, if not longer, to evaluate and implement out-sourcing of our fire dispatch services, if it proved y's to offer tangible benefits. At this time,there are no changes proposed to the Emergency Communications Program for this fiscal year, however, it may be prudent to consider out-sourcing in the foreseeable future. The net result of the cuts currently in place is a total of 25 positions either vacated or eliminated department wide. This includes the retirement of the FPO position on August 1, 2012, which will be held vacant. This is an approximate cut of 15%, department wide, as compared to 2008 staffing levels. Proposed Restructuring in the 2012-2013 Budget \.r As referenced above, on July 2, 2012, the City adopted the proposal for the Fire Department Staffing Efficiencies presented by the City Council. The proposal identified 41 Packet Pg. 107 reductions to areas of the Fire Department that were considered non-critical. The implementation of this proposal was projected to provide $950,000 of cost savings in the Fire Department for FY 2012-13. In addition to this proposal, the Fire Department has reviewed the FY 2012-13 discretionary funds and submitted to the Director of Finance additional proposed savings. The potential savings is $82,200 annually and is attributed to the reduction of non-critical staffing and associated program areas. The combined total is an estimated savings of$1,032,200 for FY 2012-13. To achieve additional budget efficiencies, several measures are recommended. Measure 1 - Eliminate seven vacant firefighter positions which are currently backfilled. This will result in both truck companies and one single engine company being staffed as W three-person companies. This will affect both Truck 224 and Truck 221 on all shifts and . ME231-A Shift. These ladder trucks are housed in the north and south battalions respectively and ME231 is located in the south end of the City on Vanderbilt Way. These positions are currently vacant and there will be no lay-offs of personnel or backfill a required due to constant staffing following elimination. This will achieve an approximate savings of$946,879 annually in salary and benefits. A 0 Measure 2-Unstaff one Engine Company. This will reduce the total number of engine a5 companies in the City from 12 to 1 l and result in a loss of three Fire Captains,three Fire Engineers, and three Paramedic/Firefighter positions. Unfortunately,there will be a total c u of nine demotions as a result of this cut. Each of the individuals demoted will maintain a reinstatement rights for two years. With projected retirements, all but a few will be c reinstated by the end of this calendar year, and the remainder will be reinstated next y C year. a There will not be any lay-offs as a result of this proposed cut. The demotions will be n. absorbed by positions that are currently vacant and are backfilled each day. This cut m will achieve an approximate savings of$1,409,499 annually in salary and benefits. r v There are alternative methods that can be used to facilitate the loss of the Engine a Company,none of which are desirable. • Rotate the closure among several stations throughout the City(Brown Out) • Close one single station in the City 46 Packet Pg. 108 f� Each method has its advantages and disadvantages. After consulting with fire department staff and surrounding fire departments that have had to implement similar cuts, the Administration and Fire Management recommend the brown out option for several reasons. This would allow the City to maintain optimal coverage in the core of the City where the bulk of the call load occurs. It would have the least impact on overall response times and provide reasonable coverage to all areas of the City. It would also provide for the best station security and logistical management of staffing. Based on these desired results,Fire Management proposes browning out the following stations: • Station 225—located near Kendall and University(5th Ward) • Station 228—located at Highland and Orange(4th Ward) • Station 229—located at 2nd and Meridian (3rd and 6th Ward) c Each fire station would be closed for 48 consecutive hours approximately once a week 10 IL for a total of ten days per month on average. The rotation would follow the shift u schedule, allowing for staff and fire personnel to adjust workloads, plan for staffing and 9 maintain station security. Coverage can be adjusted based on weather events, planned ro events within the response district or any other issue that may arise. a a M Each of the stations selected averages four calls per 24-hour period; this would impact A the least number of calls per day and still maintain reasonable coverage to the City. N Station 232, located on Palm and Kendall, does average two calls per 24-hour period but w due to an extended response time into the district from surrounding fire stations and other factors,this fire station was removed from the proposed brown out. A IL v Fire Management remains concerned about the effects of these cuts and the impact they C will have on the following: c m IL • An increased risk to public and firefighter safety due to the inability to provide i sufficient management of incidents. a • A possible increase in response times to both fires and medical emergencies. These E factors could result in an increased loss of life and property. • Potential loss of revenue from our AMR contract. a Fire Management has expressed deep concern about the cuts to staffing and the possible effects these reductions could have on the department's operation. However, given the financial health of the City, severe cuts from all departments, including public safety,are necessary to solve this problem. The cost saving of Measures 1 and 2 outlined above will reduce staffing on a daily basis from 48 on-duty suppression personnel to 43, including Chief Officers. This will still allow for a reasonable fire safety response to the citizens of San Bernardino and achieve the necessary savings. Packet Pg. 109 Fire Department Budget Reductions Summary On June 27, 2012,the Fire Department accepted the 2011 SAFER grant in the amount of $3,363,972. This will allow the City to retain 12 fire safety positions commencing FY 2012-13. The funding awarded is for a two-year performance period and is for the retention of fire personnel and not intended for hiring. With the acceptance of the 2011 SAFER grant, the Finance Department is making the necessary adjustments to the Fire Department's proposed budget for FY 2012-13. The net result, of the proposal the Administration and Fire Management have presented would be an overall reduction of 23% of personnel from the Fire Department from 2008 staffing levels. Personnel cuts and program savings will have been achieved from each division of the department excluding the Emergency Communications Program. Table 18—Proposed Fire Department Staffing Reductions a T r d U Staffing Efficiencies 3 $950,000 a (deleted Public Education Officer, reassign CD Battalion Chiefs to 24 hour shifts, vacant `r' 0 Deputy Chief&Fire Marshal) N y w W Reduction of Discretionary Funds N/A $82,200 c m a Vacant-Fire Prevention Officer 1 $83,600 m a Option 1: Vacate Firefighter positions 7 $946,879 a m (reduce 2 truck companies to 3 person staffing) a c m Option 2: Vacate Engine Company 9 $1,409,499 m (3 Captains, 3 Engineers,3 Paramedic/ Firefighters) Total Reduction 20 $3,472,178 Please note the projected savings amount will be reduced the later these cuts are adopted in the fiscal year. Packet Pg. 110 ^ 2. Police Department f�•/ At the peak of staffing levels, the Police Department had an authorized sworn staffing level of 356 officers and a civilian contingency of 180. Current `actual' staffing levels are 289 sworn and 173 civilian. The current deployment model is based on staffing levels of around 299 sworn and 180 civilian. Any staffing reductions beyond current levels require reorganization and careful analysis of services provided and how those services are administered. The Police Department has been through several rounds of budget reductions in previous years. Reductions of personnel have been accomplished almost entirely through attrition. The remaining employees have had their compensation reduced through labor agreements for the last three years. The Department currently operates "essential" or "first responder staff' on a 24/7 schedule; a significant portion of civilian personnel m work a reduced workweek. IL, v c m The Police Department's budget contains very few discretionary items outside of personnel-related expenses. Over 80% of the budget is allocated to direct costs for a salary and benefits. The majority of the remaining budget includes items such as 0 building,fleet,technology and operating expenses. N e Proposed cuts can be categorized into those achieved through non-personnel reductions, Cr CO) personnel reductions through attrition, and personnel cuts through layoffs. The rc categories also mirror the order in which the Administration and Police Management went about determining proposed cuts. First, the Department went through the budget d line-by-line and reduced or eliminated costs within each category wherever possible. u C Next, Police Management carefully analyzed retirement-eligible population of staff and v conservatively estimated which personnel will leave and when they will leave in order to a calculate anticipated savings through attrition. Based on those estimated savings, Police @ Management looked, as a last resort, at what layoffs would have to be made to reach a a .: 10%reduction goal. o E r Non-Personnel Reductions: Due to the spending cutbacks already made, there is little room for further non-personnel reductions. The Police Department has, however, Q identified another$265,000 in cuts. This includes severe limitations on overtime as well as cuts to training, equipment, ammunition, supplies, and other expenses. Some of these categories will be cut by 60%. Additional details are provided in the impacts section later in this report. It will be necessary to restore many of these cuts in future years. Some of the cuts, such as ammunition, were made based on current inventories and minor changes to regular training and operations. However, the cuts can only be temporary in nature and would need to be restored later to meet long term needs. 49 Personnel Cuts through Attrition- Some of the attrition projections are based on �r commitments to retire while others are reasonable estimations based on employee statements that are not binding. The table below is a summary of the reductions. Table 19—Proposed Sworn Staffing Reductions Captain 1 $238,094 Lieutenant 1 $200,371 Sergeant 5 $840,485 Police Officer 11 $1,459,193 2 m a Totals 18 $2,738,143* c * Projected savings through sworn attrition $2,738,143 a m a The captain position reduction is based on a tentative agreement for funding from the m Water Department. The funding would be for one year, after which the position would be held vacant through anticipated attrition. An agreement is pending for the Water 0 Department to fund the position in exchange for work to be performed on Water N y Department projects. w It is recommended that any positions vacated through attrition be frozen rather than eliminated so it may be filled at a later time when the City's economic situation a U improves. d r c Personnel Cuts through Reduction in Force-At the start of the current fiscal crisis,the a Department accepted a Federal COPS grant which funded the hiring of thirteen police a officers. This grant expires at various times throughout Fiscal Year 2012-2013,based on the hire dates of the officers. Elimination of these positions would not create any E General Fund savings and would create a liability to repay the grant of approximately $3.9 million in part or in its entirety. The Department's civilian staff members are a tremendously valuable to the organization and the services they provide. However, based on the COPS grant commitment, attrition rates, and essential service needs, the necessary reduction of filled positions will center on civilian staff. Civilian staff provides direct services to the public and support services to allow the department to operate more efficiently. The range of these classifications is from cadet (part time entry level positions) to division manager. The part time positions are discussed in detail below by category. The full time position cuts are summarized below and detailed in the table. The Administration and Police Management have carefully evaluated every position in the organization for potential elimination. The positions proposed were identified based on specific function and expense. The vast number of positions proposed for elimination will require significant structural changes, some of -- sa Packet Pg. 112 which are outlined later in this report. Part Time Filled Positions - The Department currently has seven stenographers who produce reports from recordings made by officers and detectives. Three of the seven are part time employees. The three part time positions are proposed for elimination. Under this proposal, the backlog of reports would grow and officers and detectives would now have to type more of their own reports instead of dictating them. The overall impact in the short run would be more officer time spent on report writing. Long term impacts can be mitigated with the implementation of new technology and training options to make it more efficient for officers to type their own reports. The estimated annual savings is $82,000. The Department currently provides crossing guard services to several local school ca districts within the City through various agreements. The cost for these part time i employees is typically shared with each school district. It is proposed the Department terminate the crossing guard program. The contracts would have to be strategically d terminated depending upon the individual contract language. The impact is uncertain c because it is unknown if the districts would fund the program themselves. Although the an function of crossing guards is an essential service, continuing to have it provided by the police department will have negative impacts in other areas of direct police services. N Assuming a quick decision and implementation,the annual net savings is$227,600. S N co The Department currently has an employee in the academy training to become a police War' officer. The position is classified as part time for the purposes of payroll and budget. It c w is recommended the position be eliminated. This person was previously a Community a Services Officer(CSO). If adopted, staff will work with the employee in an effort to get him employed with another local agency upon graduation. A budget savings is not c anticipated as the position is funded through salary savings already. no The Cadet program currently has thirteen cadets and is grant-funded through February a 2013. Barring identification of an unexpected funding source, it is recommended the C program be discontinued at the end of the funding cycle with all remaining cadets being t let go. Elimination of the program is a cost neutral measure. However, the Cadet program provides valuable support services in many areas as well as a valuable Q recruiting and development tool to attract and develop young local residents into full time police employees. Future funding of the program is recommended when economic conditions improve. Full Time Filled Positions-The remaining reductions in force are from full time filled positions. They are listed in the table below. i Packet Pg. 113 Table 20—Proposed Non-Sworn Staffing Reductions Position Title Crrreat Positiois P A!aral U " Kennel Supervisor 1 0 1 $73,055 Executive Assistant 3 2 1 $70,857 Evidence Technician 3 2 1 $74,103 Forensic Technician 12 8 4 $324,456 Dispatch Manager 1 0 1 $104,220 c _m Admin Analyst I 1 0 1 $45,343 a- >1 U C CSO Supervisor 2 0 2 $182,106 r d CSOII 17 13 4 $259,288 C.L. M CSOI 28 11 17 $966,529 N 0 Records Tech UH 26 23 3 $163,287 N C w Pazking Officer 5 3 2 $113,674 � C 10 P&T Manager 1 0 1 $99,603 a I r U C P&T Coordinator 1 0 1 $74,103 w a C m P&T Technician 2 1 1 $70,857 4 v a` Records Manager 1 0 1 $95,229 v Totals 104 63 41 $2,326,078 U z Organizational Impact The enormity of the cuts outlined above will undoubtedly diminish the quantity and quality of services the Police Department is able to provide. The identified positions have been carefully selected in an effort to minimize the impact to core services such as patrol response. However, in order to implement these types of cuts, there will be a significant reorganization and reprioritization of services provided. A sizeable portion of the cuts will ultimately impact wait times for lower priority services and availability of proactive resources (District Resource Officers, Gangs, Narcotics, and others). Our priority during this difficult time will be to focus on staffing at levels necessary to safely respond to emergency calls for service. Other priorities will 52 follow and remaining resources will be allocated accordingly. The City recently entered into an agreement with the Police Executive Research Forum (PERF) to evaluate the Department. Part of the analysis will include prioritization and allocation of resources. Although the Department will focus on priority related call response times, the time spent waiting for reports to be taken or for officers to respond to more minor matters will undoubtedly increase. We will work toward changing the way these services are delivered and make every effort to become more efficient and to utilize technology wherever possible. The non-personnel related cuts will also impact operations. Due to previous budget reductions, the margin to cut from is very thin. The Department's aging technology infrastructure is a major concern. Replacement equipment dollars have been reassigned c or cut completely in the last several budget years. Large-scale technology improvement m funding initiatives will be necessary in the near future. C c m The reductions will also take us backward in many respects to supervision, leadership c and accountability. The cuts significantly reduce the management and supervision ranks a of the organization. In comparison with other agencies for example, we already are low on the number of lieutenants before the cuts. The long-term consequences of reducing N our supervisory and leadership positions could be significant. o N N The implications outlined above are the significant known impacts. There are other UI 1�.► areas that will be impacted not outlined herein; some are known and others are unknown c m at this point. a r 0 Police Department Budget Reductions Summary r v c d The net result, of the proposal the Administration and Police Management have 4 presented would be an overall reduction of 59 personnel from the Police Department. a` Personnel cuts and program savings will have been achieved from each division of the c department excluding the Emergency Communications Program. E r v m x a r Total estimated savings are listed in the table below: Table 21 —Total Estimated Savings 7No'n--swom ngs via attrition $390 635 ia attrition $2,738,143 ed full time positions $2,326,078 Reduction in filled part time positions $309,600 Non-personnel related reductions $265,000 c Total $6,029,456 a U C Ol D. Maintaining the City's Investment in Infrastructure Through Service Delivery r Changes in Community Development, Public Works, and Parks, Recreations & a Community Services _M N r I. Community Development rn w Over the past several years, the Community Development Department staffing has been S reduced significantly. However, the workload of the department has been impacted by W the recession. The number of permits and plan checks significantly declined as investment in the City has dropped with the burst of the housing bubble. The City is beginning to see an increase in development activity for industrial activity. c Additionally, the Successor Agency will soon begin the process of selling the EDA a properties, which could lead to substantial development activity and investment in the 0 0. City. Because of new growth opportunities, it is recommended that reductions be c balanced against the need to ensure staffing and resources are available to meet the E demands of developers and others interested in investing in San Bernardino. U z Proposed Restructuring a Despite previous reductions in workforce,the Community Development Department has options available to maintain basic and essential services while reducing costs. This is possible through adjustments in services delivery; specifically, contracting out and consolidation of duties. It is recommended the City eliminate one Building Inspector Supervisor, one Building Inspector, one Technician one Engineering Associate, one NPDES inspector, one NPDES Coordinator, one Department Accounting Technician, one Administrative O Assistant, and one Customer Service Representative (admin). Most of these duties will be handled by contractors. The Building Official would assume responsibility for supervising the field personnel, which will impact the amount of time available for his 54 other duties. With the elimination of the Building Inspector III position, the City will return the responsibility for the mobile home park inspections to the State. The loss of the Technician position, which currently provides customer service at the front counter, will require moving the Assistant Planner to the front counter to assist customers, which will have some impact on the Planner's ability to write staff reports, prepare zoning verification letters and complete other assignments. As direct customer service will consume much of the time, some of the duties handled by the Planner will be reassigned to the other Planner and the Manager. Despite the reduction, it is anticipated that sufficient staff will remain in order to provide proper oversight to contractor's work. 2. Code Enforcement m CL There is no question that proactive enforcement of the City's codes is needed throughout cti the City. The City is dealing with significant number of foreclosures and a recessionary m a economy which is making general maintenance of some properties less than desirable. C There are currently 3,083 open code enforcement cases within the CRM system as of a.. August 14, 2012. Moving forward, staff needs concentrate on clearing existing cases M and dealing effectively with repeat offenders. A 0 N As part of the restructuring, it is recommended that Code Enforcement be moved to the w © Police Department. Despite the importance of code enforcement efforts and the impact a of the maintenance of the community on investment decisions, given the City's financial m condition, reductions in code enforcement are necessary. d Proposed Restructurm v C m The code enforcement division currently consists of one Code Enforcement Manager, three Supervising Code Enforcement Officers, two Senior Code Enforcement Officers, as 23 Code Enforcement II positions, one Code Enforcement Officer I position, and one m Weed Abatement Coordinator. It is recommended the following positions be eliminated: E L V W • Five Code Enforcement II positions a • One Supervising Code Enforcement Officer • Two Senior Code Enforcement Officers • One Weed Abatement Coordinator • One Code Enforcement Officer I • One Customer Service Representative The annual savings related to these cuts is $937,194. Overall, it is anticipated there will be a reduction in service and an increase in response times based on the proposed cuts. Despite the cuts, 18 Code Enforcement Officer II positions, two Supervisors, and one GCode Enforcement Manager position would remain. ss Packet Pg. 117 (� 3. Public Works The Public Works Department staffing will be reduced by 45 positions. Of these, 34 positions are full time and 11 are part time. The percent deleted is 13% totaling $1.9 million for all funds. The total frozen is $608,000. These represent across the board cuts as follows: Administration • Administrative Division Manager — These duties would be reassigned to the Department Director; Annual savings—$134,000 • Environmental Projects Assistant — There is insufficient projects to justify this expense. All environmental projects will be assigned to one existing environmental projects position; Annual savings—$63,400 10 CL • Executive Assistant — There has been a reorganization of the division under the u director;Annual savings—$72,000 a • Senior Office Assistant— There has been a reorganization of the division under the m IL director. Elimination of this position will require the Administrative Services Supervisor cover assigned duties;Annual savings—$50,039 N • Departmental Accounting Technician —Payment and processing of invoices for the o division will be assigned to the Senior Office Assistant. The total cost of this N vi position is$54,700. X C Ca Integrated Waste a. C • Integrated Waste Operations Supervisor —The total cost of this position is $84,500. a Reductions in revenue and increased operating expenditures require the department m eliminate a supervisor resulting in a savings of$84,500. a • Senior Integrated Waste Operator —The total cost of these 3 positions is $190,200. a Trucks will be rerouted and less vehicles will be used for trash pick-up. The cost of r- 3 leases for trucks is estimated at$150,000 resulting in a total savings of$340,200. t • Integrated Waste Operator — The total cost of three positions is $157,200. Trucks will be rerouted and less vehicles will be used in the operation. The cost of Q equipment is estimated at$150,000 resulting in a total savings of$307,200. • Integrated Waste Operations Manager —The total cost of this position is listed as ,vacant/unfunded'. The division manager will address job duties. Fleet Operations • Fleet Parts Technician — The parts duties will be assigned to the Manager and Supervisor resulting in a savings of$69,478. • Fleet Parts Storekeeper—The total cost of this position is $57,996. The parts duties will be assigned to the Manager and Supervisor resulting in a savings of$57,996. 56 PacketPg. 118 • Fabricating Welder—Welding will be contracted out. The total cost of this position is $72,837. The cost of welding is estimated at $40,000 resulting in a savings of $32,837. Custodial Services • Custodial Maintenance Supervisor—The total cost of this position is $61,600. Due to lack of general funding available for custodial work, the supervision is eliminated and lead personnel will be assigned job duties by the manager. • Supervising Custodian—The total cost of this position is$63,600. Due to the lack of general funding available for custodial work, the supervisor position is recommended for elimination. • Custodian —The total cost of 6 part time positions is $67,500. Assignments will be made in common areas monthly. a. T U C Maintenance s c m a • Extra Relief Heavy Laborer —The total cost of this part time position is $11,250. •• The work will be completed by other laborers as assigned. ^ • Maintenance Worker II — The cost of the position is $57,200. Right of way and 0 graffiti response time will be reduced 30 percent. N Cn • Maintenance Worker II (Signs) —The cost of this position is $60,600. There will be U) a reduction in staffing of 33 percent in sign replacement. Savings: $60,600. • Heavy Equipment Operator —The cost of this position is $72,800. There will be a a reduction in staffing of 33 percent in operating heavy equipment city wide. • Sewer Maintenance Worker— Eliminate 2 positions. The cost of these positions is $132,600. There will be a staff reduction of 20 percent in sewer ops. r a • Electrician I—The cost of this position is $72,300. Street lighting operations will be v staffed less by 33 percent. a. • Extra Relief Heavy Labor— Eliminate 2 positions. The cost of these two part time d positions is $22,500. The response time for right of way and maintenance in public L U areas will be impacted and requests added to the City CRM system. z • Traffic Signal Technician III—The cost of this position is$86,300. The work will be contracted out. The cost for contract work is estimated at $50,000 resulting in a savings of$36,300. Public Works • Construction Inspector II — The total cost of the two positions is $174,956. The work will be contracted out. The cost of contracted work is estimated at $70,000 resulting in a savings of$104,956. • Engineering Assistant III—The total cost of this part time position is $30,650. New capital projects have been deferred resulting in a savings of$30,650. Packet Pg. 119 • Engineering Assistant II—New capital projects have been deferred. The total cost of this part time position is$27,970. Positions that would be held vacant include: • Director of Public Works —The total cost of the position is $245,368. It is temporarily contracted out at a cost of $16,000 per month resulting in an annual savings of$53,368. • Administrative Analyst II position (1) — This position would be held vacant until development activity improves. The total cost of this position is$97,500. • Traffic Operations Systems Analyst —The total cost of this position is $106,800. Traffic engineering has been contracted out to private firms. Estimated cost for contract work is$75,000 resulting in a savings of$ 31,800. • Real Property Manager —The total cost of this position is $104,200. The real a property work is being performed part time by a retired individual. Substantial t development or divesture of EDA properties will require adjustments to meet service delivery. The estimated cost for contract work is $50,000 resulting in an annual m savings of$54,200. a 0 • Fleet Services Manager—The total cost of this position is $137,700. The equipment manager is currently handling the job duties of this position. The City is reviewing 0 proposals to outsource trash hauling that could affect fleet operations. Based on this, '7 w it is recommended the position be held vacant at an annual savings of$137,700. m rc • Senior Civil Engineer—The total cost of this position is $138,807. The work can be c contracted out as capital project funding is identified. The Principal Engineer will 10 IL supervise capital plan development in house. Savings: $138,807. c • Facilities Maintenance Supervisor —The total cost of this position is $93,500. The manager will oversee all work orders for all city buildings and facilities. Savings: a $93,500. 2 IL .0 C m E L V Q Packet Pg. 120 ® Table 22—Proposed Public Works Staffing Reductions Administrative Division Manager Eliminate $134,000 Environmental Projects Assistant Eliminate $63,400 Executive Assistant Eliminate $72,000 Senior Office Assistant Eliminate $50,039 Integrated Waste Operations Supervisor Eliminate $84,500 Construction Inspector II(2) Eliminate $104,956 Engineering Assistant III(PT) Eliminate $30,650 Engineering Assistant II(PT) Eliminate $27,970 E Fleet Parts Technician Eliminate $69,478 a U Fleet Parts Storekeeper Eliminate $57,996 c Fabricating Welder Eliminate $72,837 ri Accounting Technician Eliminate $54,700 Sr. Integrated Waste Operator(3) Eliminate $190,200 0 Integrated Waste Operator(3) Eliminate $157,200 y Extra Relief Heavy Laborer(PT) Eliminate $11,250 w c Custodial Maintenance Supervisor Eliminate $61,600 a Supervising Custodian Eliminate $63,600 v c m Custodian(6 PT) Eliminate $67,500 a m Maintenance Worker II Eliminate $57,200 a. 6 Maintenance Worker II(Signs) Eliminate $60,600 a c Sewer Maintenance Worker(2) Eliminate $132,600 E L Electrician I Eliminate $72,300 i; Extra Relief Heavy Labor(2) Eliminate $22,500 Traffic Signal Technician III Eliminate $36,300 Heavy Equipment Operator Eliminate $72,800 Technician Eliminate $69,478 Total Savings $1,897,645 The net result of the proposal the Public Works has presented would be an overall reduction of 45 personnel from the Department. Personnel cuts and program savings will have been achieved from each division of the department. 59 Packet Pg. 121 Total estimated savings are: Savings via Reduction in Workforce $1,897,645 Savings via Vacancies $606,875 Total $2,504,529 4. Parks Recreation & Community Services Since July 2008, the Parks, Recreation & Community Services Department has experienced a 32%reduction in staffing and a significant decrease in resources available W for maintenance and operations. Given the limited areas in which to further reduce costs and demand for service, the Administration and management have focused on m eliminating programs that had grant funding and identifying more cost efficient ways to c provide service. a M Closure of the Operation Phoenix West and Operation Phoenix East Centers A 0 The Operation Phoenix Program operates two centers including Operation Phoenix West N w located at Anne Shirrells Park (Ward 6) and Operation Phoenix East at Speicher Park rc (Ward 7). These centers are currently being funded by a Department of Justice (DOJ) c grant that was scheduled to run through FY 2012/2013. It is now anticipated that the e earmark will expire in September 2012. Given the fact that continued operation of the two centers would require a General Fund commitment due to the expiration of the DOJ v funding, the Administration recommends closing both of the centers at an estimated m savings of $145,000, which represents the anticipated funding from July 1, 2012, a >n through September 1,2012. a Y C m Impact: The Operation Phoenix West community center is dilapidated and requires E replacement as addressed during a recent site visit by the California State Parks Department. With respect to the Operation Phoenix East, the recent partnership with the Q Disabled Veterans Group/exploratory garden provides the framework for a continued presence as the facility is a major hub for social,recreation and educational activity. LMD. Parks and Tree Maintenance Proerams Contracting out for the maintenance of the City's Landscape Maintenance Districts (LMDs), parks maintenance and tree maintenance and reassignment of these responsibilities to the City's Public Works Department is recommended in an effort to address park and landscape maintenance issues within the available resources. LMD maintenance is addressed under separate cover. t^ Packet Pg. 122 ^ Impact: This action would result in the elimination of 31 positions. Five positions including three landscape inspectors, one park maintenance supervisor and an arborist would be retained to provide oversight of the contract services. Further, this would eliminate the equipment challenges and increase service delivery while providing a more consistent response in the event of emergency call outs. The estimated annual savings of contracting the LMD,park and tree maintenance is$800,000. Department Administration Elimination of the Deputy Director position and downgrading of the Administrative Services Manager position to a Management Analyst is recommended. Impact: In FY 2009, the Department eliminated 2 administrative support positions as part of the 32%personnel reductions. The office maintains one bi-lingual Administrative _W Assistant and one Administrative Assistant assigned to the Main Office and the a. Cemetery operations. Currently, staff work and departmental budgeting and analysis is c m provided by the department head. The elimination of the Deputy Director position and change in the Administrative Services Manager position to a Management Analyst will a� impact the Department's ability to respond to requests for services. The change will result in an annual savings of$230,000. N 0 E. Implementing Service Efficiencies and Consolidation of Administrative Services y Functions W W C 1. City Clerk .5 a. T V Over the past several budget cycles, the City Clerk's Office has largely avoided m personnel cuts by eliminating training, and cutting supplies and other less critical a budgets. With those already cut to the bare minimum, it is clear that in order to � adequately respond to the city's current financial crisis and be a meaningful part of the a budget solution, the City Clerk's office must make draconian cuts, and these cuts must ! include personnel. E r v This situation is not ideal. The Clerk's office can ill afford to lose staff in what is an extremely busy and visible office. Nevertheless, we can continue to provide responsive service to internal and external customers through this difficult time with a combination of lay-offs, back-filling and temporary help for special projects. This is true for both the Administrative Division and the Business Registration Division. Specifically,the Clerk's office proposes a 20 percent cut in its budget, or approximately $432,000, to include $386,175 in staffing and $46,000 in operating costs. The decreased staffing will be addressed with a reorganization of the office, cross training and increased duties on the remaining staff, greater use of technological and online resources, procedural changes in the agenda creation process and project-specific temporary part-time hires. 61 To address the increased workload issues in the City Clerk's Office as well as the City Attorney's office caused by the recent bankruptcy filing,the agenda review timeline will be moved forward, so that documents to be placed on the agenda will be due to the City Attorney's office on the Thursday 12 days prior the scheduled meeting, rather than the Monday seven days prior. This allows the City Attorney's staff and the City Clerk staff extra time for review of the documents being provided in the agenda back-up. Deeper cuts than those proposed herein would lead to unacceptable consequences, including being unable to adequately respond to the plethora of public records requests, business registration calls, and claims filed specifically in response to news of the city's financial crisis and pending bankruptcy. Table 23—Proposed City Clerk Staffing Reductions C to IL t v Customer Service Rep(2) Eliminate $121,114 m V c Accounting Technician Eliminate $52,647 a. e, Business Registration Inspector Under Fill $42,407 `2 N r Assistant City Clerk position Eliminate $105,626 U) © W Executive Assistant to the Director Freeze $64,381 � c m Total Savings $386,175 a. v c V 2. Information Technology m IL we The IT Department proposes staffing reductions of $668,900 from the department's 0. various funds. These reductions will result in an understaffed IT department that can c support only the most basic Information Technology systems and infrastructure. E r v This proposal completely eliminates the Telephone Support program. It also a recommends a reduction in IT Department supplies, outside training, computer replacement funds, contractual services, and the elimination of seven positions,resulting in a 30%cut in staffing. The elimination of the Telephone fund will result in the less-critical Telephone Coordinator duties being discontinued and others, such as telephone bill payment and cell phone support, being absorbed by IT positions such as the Departmental Accounting Technician and the Business Systems IT Analyst II position, respectively. Telephone contract negotiations and vendor management will be absorbed by the Director of Administrative Services. Telephone vendor costs will be moved to the IT Department's operating budget and charged back via the department's current allocation system. City- 62- Packet Pg. 124 provided cell phones will be restricted to public safety, code compliance, and various facilities maintenance staff, resulting in a savings of approximately$60,000 per year. Even with the proposed draconian reduction in staffing, support will continue for network infrastructure, servers, and telephone equipment. Enterprise software system support will also continue, including maintenance of the financial, payroll, email, backup, GIS mapping, agenda management, fleet, fuel, public safety document management, dispatch, content management, water billing, and customer relationship (CRM)systems. However, the proposed cuts will result in an overall service level reduction. Desktop support turnaround times will be increased due to the loss of two desktop support technicians. Web posting will have to be performed by City departments, due to the loss c of the Webmaster position. Network outages may take longer to resolve. Telephone A a support turnaround times will increase. Project-related tasks, such as system upgrades, will take longer to complete. o v C Any further staff or operating cuts would impact the IT Department's ability to continue d to offer core systems and infrastructure support. For example, further operating budget M cuts will result in the elimination of outside support agreements for critical systems, N resulting in systems going down and not being brought back up, software issues arising N without staff being able to get help from software vendors, or state and federally to mandated reporting requirements not being fulfilled due to lack of financial software W support. Mission-critical systems would eventually fail, and the IT Department would m not have the support contracts or staffing in place to recover from such failures. This a could result in an inability to pay employees, provide dispatch services for public safety, � provide mandated financial reporting, send and receive email, protect the City's data c through backups, and more. a m Table 24—Proposed Information Technology Staffing Reductions a c Acfioi E V IT Director Eliminate $214,200 Senior Network Specialist Eliminate $85,300 Telecommunications Coordinator Eliminate $72,000 IT Technician Eliminate $65,100 Senior IT Analyst(webmaster) Eliminate $126,500 IT Operations Supervisor Eliminate $105,800 Total Savings $668,900 63 Packet Pg. 125 3. Human Resources j" The Human Resources Department has three programs that impact the general Fund, Administration, Employee Services and Workforce Planning and Retention, and two that impact the internal service fund; Workers' Compensation and Liability & Risk Management. In the Budgetary Analysis and Recommendation for Budget Sustainability Plan, it was proposed that the Human Resources Department merge with the Finance Department eliminating the need for a Human Resources director resulting in salary savings. However, additional staffing cuts would need to be made to comply with the 30%requested deduction. The following proposals are recommended with the least amount of impact for the effective customer service and compliance with legal requirement (EEO, Workers' Compensation, FMLA, etc). cm a. T Elimination of the Human Resources Director Position -The Director position impacts c m all five Human Resources programs and with the recommendation of the merger with Finance,this will produce a salary savings of$198,397. i o, Elimination of the Executive Assistant Position - With the elimination of the Director position, the need for the Executive Assistant position in unjustified. It is recommended 0 that this position be reclassified to a Human Resources Technician. Assuming the m r'^^ reclassification is implemented, this recommendation will produce a savings of$17,680. UJ Elimination of Me Human Resources Analyst - The duties of this position will fall to 16 IL the reclassified Human Resources Technician position recommended above. The savings from this recommendation is$39,225. m C C Defer Filling the Workers' Compensation Adjuster - The employee currently holding no this position has advised the City of his resignation effective August 31, 2012. Given d the opportunity to review the duties of this position, as well as the City's legal requirements under Workers Compensation, staff will evaluate the need to fill the E position or to seek outside contract assistance in an effort to reduce operational costs. Q Over all, the recommendations above provide savings of approximately $412,683 annually. The table below provides details of the savings. 64 Packet Pg. 126 Table 25—Proposed Human Resources Staffing Reductions Human Resources Director Eliminate $198,397 Executive Assistant Eliminate $78,887 Human Resource Analyst Eliminate $100,432 Workers' Compensation Adjuster Defer $96,174 Human Resources Technician Add $(61,207) Total Savings $412,683 C w a 4. Finance d v c The Finance Department responsibilities have been expanded to include the oversight of a the Human Resources and Information Technology Departments. Essentially, the oversight of the Departments will be consolidated under the Director of Finance, N eliminating the need for two Department Heads. c N rn Additional cost saving measures includes the elimination of three Finance Department LU positions: (1) Purchasing Manager, (2) Deputy Finance Director and (3) a Financial c Analyst. Designed to improve cost containment and fiscal accountability citywide, two 9 IL positions have been added to the Finance Department, Budget Officer and Fiscal Officer. u With the elimination of the three aforementioned positions and the additional v responsibilities of Human Resources Department oversight, the Budget Officer and m Fiscal Officer will provide the City with capacity and structure to improve fiscal d management and sustain basic finance-based services during this very challenging time. a c Precisely, the Budget Officer will primarily focus on the implementation of new budget E policies and practices, annual operating budget, capital improvement budgets and W provide support on grant programs. The Fiscal Officer will provide the needed oversight a for debt management, revenue development and procurement of goods and services. 5. City Manager The City Manager's Office is responsible for implementing the policies of the Mayor and Common Council as directed by the Mayor and implementing the Mayor's policy directives and insuring those directives are acted upon by all supervisors and employees in the Manager-directed departments. The City Manager is also responsible for administering the Manager-directed departments of the City; attending all meetings of the Mayor and Common Council and council committee meetings and participating in discussions without vote; ensuring all laws, ordinances, orders, resolutions, contracts, and franchises are enforced and executed; preparing and submitting the annual budget F and keeping the Mayor and Common Council apprised of the City's financial condition; and conferring with elected officials to obtain and consider advice and counsel. A total of eleven executive, management, mid-management and clerical positions, five call taker positions and one part-time position including the City Manager, Assistant City Manager, Manager of Communications, Assistant to the City Manager, two Management Analysts, Neighborhood Services Coordinator/Assistant to the City Manager, Community Relations Supervisor/Assistant to the City Manager, Project Manager/Assistant to the City Manager (CDBG), Executive Assistant to the City Manager, Administrative Assistant to the City Manager, five call takers (including one senior call taker), and one part-time Administrative Analyst that provide administrative support to the entire department are assigned to the City Manager's Office. While reductions will impact the ability to continue efforts to improve organizational efficiency and effectiveness; improve communication, both internally and externally; improve a customer service; and promote private and public investment in the community, drastic u cuts are needed for the long-term financial health, viability, and sustainability of the v City. m IL Proposed Restructuring in the 2012-13 Budget M N A critical analysis of the City Manager's Office resulted in the identification of non- o N critical program areas and related staffing, which are recommended for elimination. to Specifically, the Beautification Partnership, Citizens' Academy, and public information v and community education programs would be eliminated. W IL Through this restructuring, three positions and funding for one position in the City c Manager's Office would be eliminated including the Neighborhood Services 9 Coordinator/Assistant to the City Manager, Manager of Communications, and one Management Analyst. The Assistant City Manager position would remain in the budget, however, funding would not be allocated at this time. It is further proposed that the a Project Manager(CDBG)position be reassigned to the Parks, Recreation & Community m Services Department to position the Department to pursue other funding opportunities r m and partnerships and reduce the reliance on the City's General Fund. z a Despite the reduction in personnel assigned to the City Manager's Office, through the restructuring, the City Manager's Office would assume responsibility for redevelopment and economic development duties, which were previously handled by the City's Economic Development Agency. Remaining personnel would also assume responsibility for administrative responsibilities related to neighborhood services and environmental programs and projects that were previously handled by the Mayor's Office. Continuing to improve communication and building trust with residents and business leaders in the City would continue to be a high priority. Despite the staff reduction in the City Manager's Office, funding is included for the Call Center as an internal service charge. Until the implementation of the Call Center in 2010, the community did not hh Packet Pg. 128 have a single point of contact into the City to obtain information, to report issues or concerns, or to request service. Callers were expected to know which department handled the specific issue. Departments had varying policies and procedures on answering the telephone, and in many cases, calls are not answered by a human being, which resulted in callers not receiving timely service or simply giving up. This system provided little to no accountability to the public to ensure complaints were resolved. In fact, because of the lack of follow through prior to the implementation of the Call Center, Call Center staff members are in the process of reviewing service requests from the last three years to ensure service was provided or accurate information is provided to the reporting party as to the status of the complaint. This formalized system for handling customer complaints holds Department Directors and staff accountable and makes expectations related to customer service clear. C m 6 Library a u c Article XII of the City Charter establishes the free public library system, which is v governed by a Board of Trustees appointed by the Mayor subject to the approval of the m a Common Council. The Board of Trustees is responsible for making rules related to the administration of the library; prescribe the duties of the officers; determine the number M of subordinate employees; fix salaries; purchase books,journals, publications, and other personal property; and do all that is necessary to carry into effect the provisions of the Cl Charter related to the library. The Charter also provides that, at the request of the Board Lu of Trustees, the Council may levy a tax for the maintenance of the library and for the c purchase of books,journals, and periodicals. The City does not currently levy a library .9 tax. t u C m Based on the City's financial condition and after consulting with the Board President and c m Library Director, the Administration recommends the annual funding allocated to the 36 Library be reduced from $2.2 million to $1.6 million. While the Board of Trustees will d determine the manner in which the funds provided by the City would be allocated and c the specific impact on programs and services, it is anticipated the reduction in funding E will result in the closure of the three branch libraries. As a result of the closures, 0 extended hours and some additional services may be made available at the Feldhym a Library. 7. ice of the Mayor In March 2006, the budget for the Mayor's Office was $1,049,400 with ten full-time positions. Given the fiscal crisis facing the City, the Mayor eliminated four positions and reduced maintenance and operations costs. Some additional contract services will be used to reduce the impact of the cuts at a cost of$90,000,resulting in a net savings in FY 2012-13 of$331,901. The cuts will mean the Mayor's Office will have only two paid positions other than the Mayor including one clerical position and one analyst position, which is a drastic reduction from the ten full-time positions that existed in 2006. Packet Pg. 129 © F. Summary of Proposed Staffing Reductions As addressed above, the Preliminary FY 2012-13 General Fund budget reflects $121.9 million in revenues and $166.2 million in department proposed expenditures. The Preliminary FY 2012-13 General Fund budget represents a baseline budget, which is a continuation of the status quo with projected increases in pension costs and other post-employment benefits, one time equipment purchases, services and supplies needed to maintain the current level of service, as well as the restoration of the employee concessions, many of which have expired, and does not include Cost of Living Adjustments(COLA)or other compensation increases. As proposed,the budget reflects a structural deficit of$45.8 million. Through the development of the Pre-Pendency Plan, all non-essential programs and services were evaluated. The Administration, working with the City departments, has attempted to W propose reductions in workforce or programs that have the lowest possible impact on basic a government services while beginning to take the steps needed to achieve financial solvency. More than one hundred positions are recommended for elimination resulting in a savings of v C $15.7 million. An additional savings of $6.7 million in operational savings have been d identified. While the cuts are significant, the cuts do not close the $45.8 million gap for this fiscal year. Further, the cuts do not address the $18 million cash deficit in the last fiscal year nor do the cuts position the City to build reserves or begin to fund the more than $300 million o in unfunded liabilities. Additional budget balancing and revenue enhancement strategies are N H © needed. w a C If the Council approves the $22.4 in measures proposed in the Pre-Pendency Plan, the deficit 10 a for this fiscal year is projected at $16.4 million. To further close the gap, the Administration recommends discussions with the City's various bargaining groups continue in the interim and m 9 though the Bankruptcy. Several of the City's bargaining groups have agreed to continue the m 10% concessions resulting in a cost savings of$1.5 million. The Administration recommends a seeking, or imposing if necessary, similar concessions from the bargaining groups that have not a voluntarily agreed to concessions as an interim measure, which would result in a cost savings m of$6.1 million. Further labor negotiations would occur through the Bankruptcy process. It is t also recommended elected offices, with the exception of the Mayor's Office and the City Clerk's Office that are included in the reductions noted above, reduce the proposed budgets by Q 30%. This would result in a savings of$1.7 million. Given the need for increased internal controls to protect City receipts, a reduction in the City Treasurer's Office is not recommended at this time. Overall, approval of the additional measures would result in a savings of$9.4 million and a Fiscal Year 2012-13 General Fund deficit of$7.1 million. Exhibit B summarizes the impact of the various budget balancing measures. 68 w Implementation If the Pre-Pendency Plan is approved by the Mayor and Common Council, the reduction in force process pursuant to Civil Service Rule 511 would be immediately initiated. Layoff notices giving at least 30 calendar days notice of separation would be issued to the affected employees. Employees laid-off, transferred to an equivalent classification, or demoted to a lower classification have the right pursuant to the Civil Service Rules to be reinstated to his or her former classification upon the first vacancy in his or her department for two years. Bumping and reinstatement rights are available only within the department. An employee who is laid off may demote into any classification if he or she meets the requirements outlined in the current job description, whether or not he or she has ever held a position in the classification. An employee may laterally bump into a classification of equal c compensation if he or she has more total seniority in class than the employee currently m a occupying the lateral position, provided he or she meets the requirements outlined in the t current job description. An employee may demote into a lower classification even if he or she m has less seniority than the employee occupying the lower position. However, an employee m demoting into the lowest classification in the department must have more total City seniority as a a regular employee to displace an employee occupying a position in the lowest class. e°'n N While the intent is to process the lay-offs as quickly as possible due to the City's dire cash flow N issues, the lay-offs proposed as a result of contracting out services such as LMD maintenance, w tree trimming, park maintenance and custodial service would occur as soon as a contract for the X service is in place to ensure there is no disruption in service to the community. w a Future Actions v C m V While the Administration has attempted to close this year's projected $45.8 million structural m deficit, the proposed cuts are not deep enough to achieve a balanced budget for FY 2012-13, d i and additional measures are required. The following are additional budget reduction and a c efficiency measures: m E r • Contract with one or more private companies for plan check, engineering, collections, and $ information technology services. The cost savings of contracting these services is currently Q being evaluated and recommendations will be presented to the Mayor and Common Council. • Initiate a Request for Proposal process for the outsourcing the City's Refuse Program. It is proposed that a consultant be engaged to assist in valuing the City's operation, identifying expectations, developing a comprehensive request for proposal, evaluating the responses, negotiating a franchise agreement, and implementing the Council's direction. It is anticipated this process could be completed in early 2013. Alternatively, an agreement for the sale of the City's waste stream to a private company for recycling rather than disposing of the trash at the County landfill could result in a source of revenue. This process could be completed within two months. G • Explore the opportunities to contract with a private company or another public agency for the operation of the City's public library system. 69 Packet Pg. 131 • Evaluate the closure of the three community centers-Lytle Creek(Ward 3)Ruben Campos (Ward 1), and Hernandez(Ward 1). The annual cost per center is approximately $132,850. Each of the centers is heavily supported by volunteers. The Hernandez Center recently reopened following the completion of a major construction project, and Ruben Campos is scheduled for improvements funded by State and local grants in early 2013. The closure of the Hernandez Center would result in the closure of the only in-door gymnasium located in a City park as well as the aquatics program. With the proposed closure of the Ruben Campos Center, State grant funds awarded for the construction of Pavilion, will be at risk. The proposed closure of Lytle Creek would eliminate a center that provides significant support to the surrounding community. • Evaluate the termination of the agreement with the Boys and Girls Club, which would result in a cost savings of$85,000 per year, for the programming of the Delmann Heights Center. Unlike the community centers that are solely operated by recreation staff, Delmann Heights r is open Monday through Friday. At its peak attendance, Delmann Heights averaged a approximately 1,400 participants per month. More recently, the Center averages t approximately 200 participants per month. The termination of the agreement and the resulting closure of the City portion of the center may create safety and blight issues that n may also impact the County Head start program directly adjacent to the center. Further a; partnership opportunities may exist that would allow for the continuation of operations at the r site,with revenue potential ranging from $35,000 to$70,000 annually. If that were to occur, c it is recommended that the Boys and Girls Club consolidate their operations at the 9th Street Cl location as they remain a viable community partner. rc • Evaluate the closure of the Verdemont Center (Ward 5). Like other centers, this center c provides significant support to the surrounding neighborhood. .9 • Evaluate the closure of the Senior Centers-5th Street Senior Center(Ward 1)and the Perris t Hill Senior Center(Ward 2) - which provide congregate meals,the Retired Senior Volunteer y Program, Senior Companion Programs, and others. About $588,378 in grant revenue is no received by the City for these programs. There is also a General Fund obligation of i $251,400. Closure of the senior centers would result in the eliminate one Recreation a Y Coordinator position, one Recreation Program Supervisor, one Program Manager and E several part-time employees resulting an annual cost savings of $251,400. The closure would have a significant impact to the seniors and may result in a loss of future grant funding and a degradation of senior services, programs and activities. • Evaluate the closure of Pioneer Cemetery as the cemetery is reaching capacity and the Cemetery fund faces declining revenues and an increasing General fund subsidy. Two positions are funded by the Cemetery fund and any closure would result in the elimination of the funding, resulting in a funding shift or elimination of the positions. Perpetual care is still required of this facility, which will be linked to park maintenance. Total savings to the Cemetery Fund as a result of the elimination of the two positions is $116,000 per year. According to the Historical Society, the Pioneer Cemetery has never been maintained at a higher level; however, without the ability to expand the current site, opportunities to sell the site to a private operator are limited and confined to"caretaking/servicing of pre-needs". OIt is also recommended the Mayor and Common Council review and consider the various revenue enhancement strategies, which have been presented previously, and identify strategies 70 - -- Packet Pg. 132 I -- for further consideration. While the implementation of new measures would not have an immediate impact on the City's financial condition, new sources of revenue are needed for the City's long-term fiscal health. C W a T U c d a c v a LUrn M r N r O N N l Q_• V C a T U C d 9 C N a m a c d E z v m Packet Pg. 133 APPENDIX A — SUMMARY OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE (General Fund) c m a a U C d L C N a m N r O N N W LU C a a U C d C d IL d IL c m E L U A Q Packet Pg. 134 CITY OF SAN BERNARDINO,CALIFORNIA Summary of Revenues, Expenditures,and Changes in Fund Balance General Fund UNAUDITED PROPOSED 2010-11 YEAR END PRELIMINARY PRE-PENDENCY Unaudited PROJECTIONS BUDGET PLAN BUDGET % Actuate FY 2011-12 FY 2012-13 FY 2012-13 $Inc/(Dec) Inc/(Dec) Revenues: Property Taxes 26,373,217 26,096,688 26,867,362 26,867,362 - 0.00% Other Taxes 58,462,657 60,737,290 62,908,081 62,908,081 - 0.00% Licenses&Permits 7,910,202 9,172,900 9,441,900 9,441,900 - 0.00% Fines and Penalties 2,283,426 1,811,800 2,104,300 2,104,300 - O.OD% Use of Money&Property 3,156,270 733,000 733,000 733,000 - 0.00% Intergovernmental 13,481,247 10,583,888 7,297,722 8,797,722 1,500,000 20.55% Charges for Services 7,319,098 6,854,823 6,898,400 6,898,400 - 0.00% Miscellaneous 4,627,935 4,101,750 4,173,400 4,173,400 0.00% Total Revenues 123,614,051 120,092,139 120,424,165 121,924,165 1,500,000 1.25% Expenditures: Mayor 644,437 819,900 931,715 599,815 (331,901) -35.62% C Common Council 459,440 681,700 705,650 705,650 0 0.00% M City Clerk 1,507,051 2,497,815 1,720,468 1,135,333 (585,135) -34.01% D_ City Treasurer 202,524 210,400 226,066 224,866 (1,200) -0.53% C City Attorney 4,095,525 4,441,850 4,959,606 4,959,606 0 0.00% N General Government 2,265,929 4,904,500 21,355,965 16,620,585 (4,735,380) -22.17% C City Manager 1,179,586 1,282,000 1,485,318 1,112,593 (372,725) -25.09% N Civil Service 286,522 356,400 411,275 406,275 (5,000) -1.22% a.. Human Resources 508,371 614,300 778,433 521,524 (256,909) -33.00% Finance 1,902,878 1,895,185 1,801,097 1,682,756 (118,341) -6.57% 1 Community Development 6,275,707 5,474,300 7,951,225 5,951,626 (1,999,599) -25.15% N r Fire 33,506,873 36,339,485 39,123,792 33,253,038 (5,870,754) -15.01% N Police 63,573,080 65,106,500 67,630,580 62,166,248 (5,464,332) -8.08% CParks,Rec.&Com.Svc. 5,067,528 4,894,000 5,425,725 4,649,973 (775,752) -14.30% W Debt Service 4,102,847 1,758,500 1,758,500 1,758,500 0.00% Public Works 8,005,331 8,489,900 9,971,142 8,118,371 (1,852,771) -18.58% C Total Expenditures 133,583,628 139,766,735 166,236,557 143,866,758 (22,369,799) -13.46% IL Excess of Revenues Over (Under)Expenditures (9,969,577) (19,674,596) . (45,812,392) (21,942,593) 23,869,799 U C Operating Transfers In: Gas Tax Fund 3,620,000 3,620,000 3,620,000 - C 4) Traffic Safety 1,200,000 1,400,000 1,400,000 - a 1/2 Cent Sales/Road Tax 1,200,000 1,200,000 1,200,000 - Cultural Development Fund 357,000 357,000 357,000 - LL Storm Drain Fund 132,700 - - - C Refuse Fund 3,721,800 - - - N General Liability Fund 2,000,000 - - - E Sewer Line Maint.&Const.Fund 1,735,900 700,000 700,000 - U ca CFD 1033-Fire Station Fund 585,600 585,600 585,600 - Q Air Quality Fund-AB2766 70,000 70,000 70,000 - TotalOpTransln 13,023,914 14,961,100 7,932,600 7,932,600 Operating Transfers(Out): Animal Control Fund (383,300) (816,000) (745,900) 70,100 Library Fund (2,131,800) (2,221,958) (1,600,000) 621,958 LMD's (200,000) - - - Refuse Fund-Street Sweeping (65,000) (65,000) (65,000) Total Op Trans Out (4,646,233) (2,780,100) (3,102,958) (2,410,900) 692,058 Total Net Operating Transfers In/(Out) 8,377,681 12,181,000 4,829,642 5,521,700 692,058 Excess of Revenues Over (Under)Expenditures and Operating Transfers In/Out (1,591,896) (7,493,596) (40,982,750) (16,420,893) 24,561,857 C 8/23/2012 1 OF 1 Packet Pg. 135 2A.b CITY OF SAN BERNARDINO,CALIFORNIA FY2012-13 PROPOSED PRE-PENDENCY PLAN BUDGET © GENERAL FUND- 001 FY2012-13 PRELIMINARY FY2012-13 2011 Actual 2012 Projected OPERATING PROPOSED PRE- ^/o Inc/ Aacowd Nin dm pagiplpr Amount Ending Budget BUDGET PENDENCY PLAN S Inc/(Dec) (Dec) Department: MAYOR sill.rw 5011 Saanes perMfulltime 353,241 424,500 514,400 225,861 (288,540) -56.1% 5013 Automobile allovrance 1,650 6,900 6,900 6,900 5014 Salaries temp/partdine 29,750 - - - 5015 Overtime 665 - - - Total:Salaries 389.306 431,400 521.300 212761 (288.540) -66.99b Belleft 5026 PERS reUrem 76,244 102,300 123,834 51,398 (72,436) -58.5% 5027 Heats and life insurance 58,760 73,300 76,300 31,800 (44,500) -58.3% 5028 unem*yment insurance 910 1,400 1,500 600 (900) -60.0% 5029 Medicare 5,717 6,400 7,500 3,400 (4,100) -54.7% Total:Benefits 14LG32 183AM 209.134 SIAM (12L936) _%5% Total:Salaries&benefits 578.938 614.800 73DA34 319.959 (410,476) _%8% C Maintenance and Operations W 5031 MOU concession - - - - a 5111 Matarial and supplies 11,018 15,000 15,000 13,000 (21000) -13.3% (Tj 5122 Dues and wbscHpUws 1,507 2,000 2,000 2,000 5131 Mileage 73 500 500 Soo •� 5132 Meehngs and coMerenxes 17,827 25,000 25,000 18,000 (7,000) -28.0% m 5133 Education and training 728 3,000 3,000 2,000 (11000) -33.3% d 5172 Equipment maintenance - 1,000 1,000 1,000 5174 Prinurg charges 2,820 4,000 4,000 4,000 5I75 postage 6,164 5,000 5,000 5,000 r 5176 Copy machine changes 6,682 11,500 11,500 10,500 (1,000) -8.7% N 5186 Civic and promotional 1,468 10,000 10,000 9,575 (425) 4.3% 1 5193 Grant match (5)) 4,500 4,5DO 4,500 (0 Total:Maintenance and 0peraeors 48,237 81,5,500 61,,5500 70,075 (11,475) -14.0% IA Contract Services W 5502 Professiorel/caltractual serves 33,345 13,700 - 90,000 90,000 NDW/01 72 5505 other mfessiaMl services 117 C Total:Corrbacta I Services 33,462 13,700 - 90,000 90,000 *DN/01 W Intemal Service Charges Il 5601 Garage charges 2,000 1,300 200 200 V 5602 workers comperBabon 6,500 4,600 7,225 7,225 C 5603 Liability 4,900 4,000 4,000 4,000 L 5614 IT charges in-house 16,900 65,800 73,062 73,062 5605 Telephone support 4,700 11,400 13,194 13,194 a 5606 Electrk - 22,000 22,000 22,000 r 5612 Fleet charges-fuel 800 800 100 lop LD Total:Internal Service Charges 35,801) 1091900 119,]81 119,]81 - 0.0% a Capital Outlay C 5703 Communiabons equipment - Total:Capital Optlay - ADN/01 L Crecid/billables C1 5910 Cn N-feclecal and state program fund Total:Cnet it/billables - - - - - #DN/01 r' Total:Hon-Personnel Expenses 117,499 205,100 201,]81 27%M 78,575 39.0% Q Deparbnent Total:Mayor 644,437 819,900 931,715 599,815 (3316901) -35.69b 8/23/2012 Packet Pig 136 CITY OF SAN BERNARDINO,CALIFORNIA FY2012-13 PROPOSED PRE-PENDENCY PLAN BUDGET GENERAL FUND- 001 FY2o12-13 PRELIMINARY FY2012-13 2011 Actual 2012 P.jected OPERATING PROPOSED PRE- 0/o Inc/ Account Number Description Amount Ending Budget BUDGET PENDENCY PLAN $Inc/(Dec) (Dec) Department: COMMON COUNCIL Salaries 5011 Salanes perMfulltime 193,202 223,100 292,300 292,300 5013 Au bile allowance ",000 48,300 98,300 48,300 5014 Salaries temp/parltime 17,668 26,200 26,200 26,200 Tplal:SaWies 254,870 297,600 366,800 366,80D - 0.0% Bonaft 5026 PERS retirement 90,880 56,500 74,113 74,113 (0) 0.0% 5027 Health and life inanarce 97,693 123,200 119,900 139,900 5028 Unemployrmnt imurance 622 600 900 900 5029 Medicare 3,723 3,900 4,800 4,800 Total:Benefits 142,918 184,200 199,713 199,713 (0) 0.00/0 Total:Salaries&benefits 39],787 48LBN 566.513 %&513 (0) 0.0% C Maintenance and Operations to 5031 MOU Concession - - - - a 5111 Material and supplies 6,621 15,372 7,600 7,600 >s 5112 Small tools and equipment C 5122 Dues and wtNnipeons 202 200 200 200 13 5142 Meetings and conferences-Ward 1 952 4,890 3,700 3,700 V C 5393 Meetings and conferences-Want 2 2,245 16,439 3,700 3,700 d 51" Meetings and conferercm-Ward 3 275 20,107 3,700 3,700 .. 5145 Meetings and mnfererces-Ward 4 328 10,657 3,700 3,700 (1 5146 Meetings ant confemmes-Ward 5 4,071 6,442 3,700 3,700 M 5147 Meetings and conferences-Ward 6 2,136 16,8D6 3,700 3,700 fV 5148 Meetings and conferences-Want 7 60 8,487 3,700 3,700 5172 EquipmerR 71 400 400 400 N 5179 Printing tltarges 250 1,000 1,000 1,000 fA C 5175 Posla9e 7,022 800 8D0 800 W 5176 Cow machine charges 8,715 6,200 6,200 6,200 5186 Odc and proimb.l 599 1,100 LIDD 1,100 Total:Maintenance and Operations 33,546 108,900 43,200 43,200 - 00°i C Internal Service Charges (L 5601 Garage charges 100 200 200 20D >. 5602 Workers compensation 1,300 3,70D 3,825 3,825 V 5673 UaNlity 7,8DO 7,800 7,800 7,800 d 5604 IT charges in-Muse 7,700 51,800 56,694 56,694 5605 Telephone support 8,400 9,500 9,418 9,418 4) 5606 Electric - 17,600 17,600 17,600 d 5612 Flee[tlurges-fuel 500 400 400 400 d Total:Internal Service Charges 75.800 BLOOD 95.937 95.937 0.0% IL capital Outlay - - 5704 Miscellaneew equipment 2,306 Total:Capital Outlay 2,306 - - - - #DW/01 Total:Non-Personnel Expenses 61,652 199,900 139,137 139,137 - 0.0% t onn Depad,nent Total:Common Council 459A90 681700 705650 705,650 m Q 8/23/2012 Packet Pg. 137 CITY OF SAN BERNARDINO, CALIFORNIA FY2012-13 PROPOSED PRE-PENDENCY PLAN BUDGET GENERAL FUND-001 `�... FY2012-13 PRELIMINARY FY2012-13 2011 Actual 2012 Projected OPERATING PROPOSED PRE- %LM/ Account Number Deaciptlon Amount Ending Bridget BUDGET PENDENCY PLAN S IM/(Dec) (Dec) Department: CITY CLERK Sulerlee 5011 Salaries perm/fulldnie 806,9D8 823,000 959,500 522,400 (437,100) 45b% 5013 Ardorrabile allowance 61600 6,800 6,90) 6,900 5014 Salaries temp/partdme 33,371 36,900 36,900 36,90D Total:Salaries 846,8]9 866,700 1,00$300 566,200 (437,100) -43.6% Bananas 5026 PERS,ebreorem 169,990 202,400 225,833 121,598 (104,235) 46.2% 5027 Health and life insurance 186,068 179,200 174,400 87,200 (87,20(1) -50.D% 5028 UnemdoynnerB insurance 2,165 2,300 2,900 1,600 (1,30D) 44.8% 5029 Medicare 10,559 12,000 14,100 7,800 (6,300) 44.79b Total:Berrefrts 368,782 395,900 417,233 218,198 (199,035) -47.7% Total:Salaries&benefits 1,215,651 1,262,600 1,420,533 784398 (636,135) Maintenance and Operations 5030 PERS credit - - - a 5031 MOU concession - - - 5111 Material and supplies 5,858 9,200 8,200 8,200 ITi 5112 Small tools and equipment 380 2,400 1,500 1,500 5121 Advertising 4,259 4,900 4,400 4,400 'O 5122 Dues and wbscdpbws 1,128 1,815 1,500 1,500 C 5132 Meetings and carYerences 1,760 2,60D 3,500 3,500 d 5133 Education and training - 620 1,000 1,000 5171 Rerttals - - - - M 5172 Equipment mairdenance - - - - e- 5174 Printing charges 10,926 15,930 15,750 15,750 C4 5175 postage 41,438 46,450 46,550 36,550 0 (10,000) -21.5% O 5176 Copy mxcl0ne charges 6,081 8,800 8,800 8,800 N 5181 Other operating eryerrses 4,117 5,100 5,000 5,000 U) 5I83 Managemee[allowarce - 200 200 200 a. Tool:Maintenance and Operatioes 75,948 94015 96AN 96AW (10,000) -10.2% Contract Services - C 5502 Professional/mrtractual services 63,786 935,900 3,600 100,600 97,000 2694.4% 5505 Other professional servicas 46,476 62,000 62,000 26,000 (36,000) -58.1% a Total:Contractual Services 110,262 997,900 63AN 126,600 61,000 6.1% > Internal Service Charges - C 5601 Garage charges 400 200 300 300 9 5602 Workers mmpensadon 7,900 15JDD 9,300 9,300 5603 Liability 3,100 3,000 m 3,100 3,100 D 5604 Rcharges in-house 90,200 100,100 96,220 96,220 01 5605 Telephone support 2,700 6,600 6,715 6,715 d 5606 Electric - 22,100 22,100 22,100 5612 Fleet charges-fuel 500 500 200 200 Total:In ter. Service Charges 104.800 138.600 137.935 137.935 - 0.0% E Capital Outlay 5702 Cangler equipment 380 700 O Total:Capital Outlay 380 ]00 - - - 100.0% Total:Non-Personnel Expenses 291,390 1,235,215 299,935 350,935 51,000 Department Total:City Clerk 1,507,051 2,497,815 1,]20,468 1,135,333 (585,135) -23.4% 8/23/2012 Packet Pg.138 �.J CITY OF SAN BERNARDINO, CALIFORNIA FY2012-13 PROPOSED PRE-PENDENCY PLAN BUDGET GENERAL FUND - 001 FY2012-13 PRELIMINARY FY2012-13 2011 Actual 2012 Projectetl OPERATING PROPOSED PRE- %Inc/ Accuuot NueWar Descnpnon Amount Ending Budget BUDGET PENDENCY PLAN $Inc/(Dec) (Dec) Department: CTTY TREASURER Salaries 5011 Salaries pemoffullb- 112,506 110,100 124,100 124,666 566 0.5% 5013 Automobile allowance 6,6DD 6,900 6,900 6,900 Total:Salaries 119,106 117,000 131,000 131,566 566 0.5% Benefits 5026 PERS retiremerd 24,030 27,900 30,900 30,900 5027 Health aotl life insurance 39,200 33,600 32,700 32,700 5028 Unempoymert insumnce 266 400 400 400 5029 Medicare 959 1,700 1,%0 1,900 Total:Benefits 64.455 63,600 65,900 65,900 0.0% Total:Salaries&benefits 183,561 180,600 1 96,900 197466 566 0.3% Maintenance and!Operations C 5031 MOU concession - - ig 5111 Material aM supplies 995 1,100 1,100 1,100 d 5112 Small tools and equipment - 300 300 300 T 5122 Dues and subsaiploons 756 1,300 1,300 1,000 (300) -23.1% C 5132 Meetings and conferences 1,273 2,700 2,700 2,700 5171 Rentals - - V 5172 Equipmcvd mairdaame 4,155 4,500 5,066 4,000 (1,066) -21.0% C 0) 5174 Printing charges 39 300 300 300 d 5175 Postage 35 200 200 200 ' 5176 Copy rmchine charges 1,092 900 9D0 9D0 M Total:Mai.[aMncelost Operagoes 8,345 11,300 11,866 10,500 (1,366) -121% r- Contrast Services - N 5502 Profesaoral/contractual services 3,119 4,400 4,400 4,000 (400) -9.1% p Total:Contractual Services 3,119 4,400 4,400 4,000 (400) 9.1% N Internal Service charges N Uj 5602 Workers conpenmbon 1,400 2,100 900 900 Q. 5603 Liability 1,DD0 1,000 1,DD0 1,DD0 5604 IT charges in-Muse 5,000 - - C 5605 Telephone support 100 - - - T 5606 Electric - 11,000 11,000 11,000 d Total:Intemal S ce Charges 7,500 14,100 2,9 17,900 100 - 0.0% rj Total:Non-Personnel Expenses 18,963 29,800 29,166 27,400 (1,766) -5.9% C 0) Department Total:City Treasurer 202,524 210,400 226,086 224,866 (1,200) -0.6% 'a C 01 a m CL C E r U A Q I 3 a i { 8/23/2012 Packet Pg. 139 CITY OF SAN BERNARDIW CALIFORNIA FY2012-13 PROPOSED PRE-PENDENCY PLAN BUDGET GENERAL FUND - 001 FY2012-13 PRELIMINARY E 2012-13 2011 Actual 2012 Projected OPERATING PROPOSED PRE- %Inc/ AOCermt Number Deviplbn Amount Ending Budget BUDGET PENDENCY PLAN $Inc/(Dec) (Dec) Department: CITY ATTORNEY AbriaF 5011 Salanes perm/ful me 1,884,727 1,776,200 1,933,400 1,933,400 5013 Auromoblle alto araa 6,600 6,900 6,900 6,900 5014 Salaries temp/parts 173,558 173,000 265,160 265,160 5015 Os Mrne 6,554 7,100 7,100 7,100 Total:5alarles 2,071,439 1,963,700 4217,560 2,214560 - 0.0% Benal"s 5026 PERS rednement 339,343 "7,500 456,430 456,430 5027 Heats and life inswance 215,288 229,400 207,100 207,100 5028 Urerriployment ireurance 5,728 5,100 6,100 6,100 5029 Medicare 30,225 26,000 28,200 28,200 Total:Benefits 590,583 708,000 697,830 697,830 - O.OWo Total:Salaries&benefits 2,662,022 7.671,200 2,910,390 2,91%390 f0 Maintenance and Operations IL 5031 MOU concession - - - - T 5111 Material and supplies 17,321 12,907 16,000 16,000 C 5112 Small tools and equipment 6,768 3,007 4,400 4,400 N 5121 Adserhsing 2,485 5,800 4,300 4,300 C 5122 Dues and subscripbons 11,576 6,863 14,000 14,000 4) 5123 Library books 70,769 66,976 75,000 75,000 (L 5131 Mintage - 1,000 300 30D 5132 Meetings ant conferences 1,469 3,600 3,000 3,000 ch 5133 Education and training 1,185 7,272 10,500 10,500 5152 Gas charges - - - - 5171 Rertals 8,490 8,318 6,300 6,300 5172 EquiwW mairlerance 4,106 3,457 91000 9,000 5174 Printing charges (351) 4,666 6,000 6,000 W 5175 Postage 8,566 6,882 7,100 7,100 Q: �. 5176 Copy machine charges 8,060 7,134 11,100 11,100 5177 Litigation expenses 262,890 475,329 421,376 421,376 C A 5183 Management albwarice 474 593 600 600 d Total:Maintenance and Operations 403,808 623,804 588,976 5811,976 Cantmo.'t Services - u 5502 Professioral/cortractIal services 5,539 18,927 25,727 25,727 C 0t 5503 Utigafion-outsicte attomeys 982,137 1,048,165 1,345,376 1,345,376 C 5505 Other Professional services 420 454 454 454 01 Total:Cernbachral services 988,095 1,067,546 1,371,557 071,557 - O.OoPo d Intannal service Charges - - 5601 Garage charges 2,2D0 5,100 5,253 5,253 (L 5602 Workers compensation 12,400 11,500 11,845 11,845 5603 Liability 9,900 9,800 10,094 10,094 C d 5604 IT Charges imtpuse 7,400 23,700 24,411 29,411 5605 Telephone support 4,700 8,400 8,652 8,652 U 5606 00cbk - 22,100 22,763 22,763 A 5612 Fleet charges-fuel 5,000 5,500 5,665 5,665 Q TWI:Internals ca Charges 41,600 86,100 81 88,663 Capital outlay 5702 Computer equipment - 2,500 - - 5709 Miscellaneous equiprrert - 700 - - Total:CapltalOWay - 3,200 _ _ _ 0.0% Debt Service 5803 Lease paYrnenbi Total:Debt Service - - - kDW/01. Total:Non-Personrnel Espenses 1,433,503 1,770,650 2,049,216 2,049,216 - 0.00/0 Depinb w t Toal:City Atroraey 4,095,575 4,441,890 4,959,606 4,959,606 8/23/2032 Packet Pg. 140 CITY OF SAN BERNARDINO,CALIFORNIA FY2012-13 PROPOSED PRE-PENDENCY PLAN BUDGET GENERAL FUND - 001 FY2012-13 PRELIMINARY FY2012-13 2011 Actual 2012 Projected OPERATING PROPOSED PRE- !o Inc/ ACcUaB Nunbee DeK ption Annoau Ending Budget BUDGET PENDENCY PLAN $Inc/(Dec) (Dec) Department: GENERAL GOVERNMENT& DEBT SERVICE Porsar" Salaries 5. PARS 31,991 160,800 500,000 500,000 5015 Overtlme 30,819 - - Total:Salaries 62,809 160,800 500,000 500,000 - 0.007o OMa 5024 PERS retirees health 448,906 6001000 6,658,000 625,000 (6,033,000) -90.6% WORK COPM WORKERS COMP UNFUNDED PORTION 249 - 3,269,239 3,269,239 GEN l3A81LnY GEN LIABILITY CLAIMS 2,735 - 4,920,071 4,920,071 CASMOUTS CASHOUTS-HISTORICAL AVERAGE 576 - 3,453,175 3,453,175 OUw Total: Other 452,466 600,000 18,300,48.5 12,267,485 (6,033,000) -1005.5% C Total:Salaries 6 benefits 515,275 760,800 18,800,485 12,767,485 (6,033,000) =793.0% t0 Maintenance and Operations d 5030 PERS creck - - - - U 5031 MOU cos mcn W 5032 Reimbursetl nonMath benefit (29,885) 5111 Marenal and wpplles 8,983 5,000 5,000 2,500 (2,500) -50.0% 5122 Dues and subscdpdons 124,861 125,000 125,000 115,000 (10,000) -8.0% (L 5133 Edumtion and training 3,245 - - - 5174 Printing charges 4,349 7,000 7,000 5,000 (2,000) -28.6% (3) 5175 Postage 1,157 5184 Lox ircome rebates 836 1,000 1,000 1,00D N 5185 Fine art funding 133,500 133,500 133,500 133,500 O 5186 Ovic and promotional 166,462 223,500 83,500 IOO,OOD (123,500) -55.3% N Total:Maintenance and Operations 414508 495,000 494000 357AN (MOOD) -27.9% W Contract Services w 5502 ProfessionalVcc macWal services 1,129,446 3,448,700 1,296,100 1,296,100 vinous Phone sv h and rvM+ork infraWtr r, - - 564,380 - (564,380) 5505 Otiier professional services 202,700 200,000 200,000 2,200,000 2,000,000 1000.0% !0 Total:CovMacWal Services 1,332,116 3,648,700 2,060,480 3/196,100 1,435,620 39.3% d Debt Service T U 5803 Lease paymerRS 2,071,832 1,758,500 1,758,500 1,758,500 C Total:Debt Service 2,071,632 1,758,500 1,758,500 1,758,500 - 0.0% V Total:Non-Personnel Expenses 1,750,654 4,143,100 2,555,480 3,853,100 1,297,620 31.30% C Depabnent Total:General Government 2,265,929 4,9101,500 21,355,965 16,620,585 (4,735,380) -%.6% EL Deparboent Total:Debt Service 4,102,847 1,7 1,]58,500 1,756,500 - 0.0% y OL Z.; m E L U R a 8/23/2012 Packet Pg. 141 CITY OF SAN BERNARDINO,CALIFORNIA FY2012-13 PROPOSED PRE-PENDENCY PLAN BUDGET GENERAL FUND - 001 FY2012-13 PRELIMINARY H2012-13 1011 Actual 2012 Pm)ected OPERATING PROPOSED PRE- %Inc/ Account Number Description Amount Ending Budget BUDGET PENDENCY PLAN $Inc/(Dec) (pc) Department: CITY MANAGER Pcswnel Salaries 5011 Salaries pernVfullEme 825,992 848,000 1,002,986 735,971 (267,015) -26.6% 5012 Special salaries - (53,600) 11,040 11,040 5013 Anknneblle allowance 17,370 19,600 18,555 13,455 (5,100) -27.5% 5018 Vaatlon pay 13,882 - - - Total:Salaries 857.245 IBM 1037.581 760AG6 (2711351 -33.4% BerNlb 5024 PERS retirees heats - - - - 5026 PERS retirement 156,977 217,100 200,123 151,113 (49,010) -24.5% 5027 Neagh artl life imnince 81,239 89,60D 91,233 58,533 (32,700) -35.8% 5028 Unemployment insurance 2,462 2,60D 2,973 2,173 (800) -26.9% 5029 Medicare 11,938 12,800 14,865 10,765 (4,100) -27.6% Total:Benefits 252,616 3A100 309,194 222.584 (86,510) -36.9% d Total:Salaries&benefits 1,109,861 1,136,100 1,341,775 983,050 (3513,725) -31.6% >+ Maintenance and Operations - - C 5111 Matenal and supplies 4,370 4,500 4,500 3,500 (1,000) -22.2% 5121 AAertising - - - - C 5122 Oues and subscni bons 4,377 6,000 6,000 3,000 (3,000) -502% 5132 Meetings and conferences 13,393 10,500 10,500 7,500 (3,000) -28.6% d 5133 Education and training 392 500 500 500 "- 5174 Printing charges 5,345 5,000 5,000 4,000 (1,000) -20.0% Cl) 5175 Postage 633 500 500 500 5176 Copy machine charges 3,914 6,000 6,000 6,000 N 5181 Ogler upending expenses 3,741 1,000 1,000 1,000 p 5182 Bad debfs/uncollatide aam nts - - - - N 5183 Management allowance - 600 600 600 y LU 5184 Low i..rebates - - - - 5199 Depreciation expense - - Total:Maintenance and Operations 36,165 34AW 34,600 26AN (8,000) -23.1% C Contact Services - - 5502 Professional/contractual services 2,560 6,000 6.000 - (6,000) -100.0% 11 Total:Contractual Sen kes 3,560 GAI D 6,000 - (6,000) -100.0% U Internal Service Charges 5601 Garage charges 400 5602 Workers compensation 3,800 4,700 7,625 7,625 C 5603 Liability 7,300 7,300 7,300 7,300 4) 5604 Rchan in-house 16,800 65,700 61,254 61,254 d 5605 Telephone support 2,500 - 5,600 4,764 4,761 5606 Ekstrk - 22,000 22,000 22,000 d 5612 Fleet charges-fuel 100 - - - C Total:Internal Service Charges 31,000 105,300 102,943 10;943 - 0.0% 4) 7451 Tamfers out - - - - E Total:Tanners On V Total:Non-Personnel Expenses 69,725 145,900 143,543 129,543 (14,000) 9.6% M DepaMreat Total:City Manager 1,179,586 1,282,000 1,485,318 1,112,593 (372,725) -29.1% Q 8/23/2012 2A.b CITY OF SAN BERNARDINO,CALIFORNIA FY2012-13 PROPOSED PRE-PENDENCY PLAN BUDGET C GENERAL FUND - 001 FY2012-13 PRELIMINARY FY2012-13 2011 Actual 2012 Protected OPERATING PROPOSED PRE- %Inc/ Acwunt NMllbu D44o7p414tt Amount Encling Budget BUDGET PENDENCY PLAN 41nc/(Dec) (Dec) Department: HUMAN RESOURCES Prawnnl sabaie 5011 Salanes perrrVfulthav 303,119 308,200 433,250 268,940 (164,310) -37.9% 6012 5prial salaries - - - - 5013 Au bile allowrxe 3,960 4,200 4,140 - (4,140) -100.0% 5014 Salanes temp/Parterre 32,757 20,000 20,000 20,000 5015 OveMme 24 - - 5016 face account labor 5018 Vacation pay - " Total:Salaries 339,060 33 2,400 457,390 288,940 (168AW) -5D.7% Benefib 5024 PERS retirees heaft - - C 5026 PERS retimmet 64,680 77,800 105,865 64,136 (41,729) -39.4% W 5027 Heald,aM life insurance 40,106 47,000 52,270 33,240 (19,030) -36.4% d 5028 Unemployment insurance 1,021 1,000 1,220 660 (560) 45.99b T 5029 Meliam 3,810 4,600 6,360 3,920 (2,440) -3&4% u Total:Benefits 109,618 130,400 165,715 101,956 (63,759) -48.9% C 9 Total:Salaries&benefits 419,476 462,800 673,105 390,896 (732,209) -50.3% C Maintenance and Operations; 4) 5030 PERS peek 5031 MOU concession - 5032 Reimbu sed nonheafth benefit - - - 5111 Material and supplies 2,965 3,800 4,300 2,800 (1,500) -34.9% N 5112 Small tools and equipment - - C 5113 Motor fuel and lubriaM 5114 Raw foods U) 5120 Media expense - - W 5121 Advertising 200 8,000 7,000 3,500 (3,500) -50.0% [v 5122 Dues and subscriptions 2,281 2,900 3,700 3,000 (700) -18.9% 5123 library boPla C A 5129 Street sweepers LP a 5131 Mileage 5132 Meetings and conferences - 2,400 2,400 1,200 (1,2110) -50.0% V 5133 Eduction and training 2,489 3,800 3,700 2,000 (1,700) 45.9% 5172 Equipment maintenance 128 500 500 500 'p 5173 Outride vehicle maintenance - - - C 5174 Printing charges 1,654 6,200 6,000 2,000 (4,000) -66.796 d 5175 Postage 1,129 2,000 2,000 1,000 (1,000) -50.0% y 5176 Copy machine charges 1,773 2,500 2,500 2,000 (500) -20.0% 5183 Malagsnsnt allowance 103 600 600 - (600) -100.0% a r 5199 Depreciation expense Taal:MalnH nce and Operations, 12,722 32,700 32,700 ISAW (14,700) -45.0% E Contract Snakes - 5505 Cdnr professional services 19,970 10,000 10,000 - (10,000) -100.0% L u 5506 Landsape contracts - - 5507 Facilities services - 4( Total:Cantracloal Services 19,970 1%000 10,000 - (10A M) -100.0% Ini Srvice Charge ' 5601 Garage charges - - - 5602 Worles cumperBabon 3,000 5,200 2,585 2,585 5603 li U14 9,000 7,100 7,100 7,100 5604 IT charges in-house 9,000 64,800 71,865 71,865 5605 TelspM support 5,200 9,700 9,078 9,078 5606 Electric - 22.000 22,000 22.000 Total:Internal Service Charges 26,200 104800 113,628 112,629 - 0.0% Total:Non-Personnel Expenses 54893 154500 155,329 130,628 (24,700) -16.3% Deparbnent Total:Human Resources 504371 614,300 774433 521,524 (256,909) iIz% 8/23/2012 Packet Pg. 143 CITY OF SAN BERNARDIN , CALIFORNIA FY2012-13 PROPOSED PRE-PENDENCY PLAN BUDGET GENERAL FUND - 001 H2012-13 PRELIMINARY FY2012-13 2011 Actual 2012 Projected OPERATING PROPOSED PRE- %Inc/ Acca nt Number Description Amount Ending Budget BUDGET PENDENCY PLAN $Inc/(Dec) (Da) Department: FINANCE Personnel salmi. 5011 SMarles purn/fulltime 950,192 1,039,900 1,097,151 1,019,189 (77,962) -7.1% 5012 Special salaries 1,80D 1,800 1,740 1,680 (60) -3.4% 5013 Au[orrodle allonarce 10,698 12,100 11,643 6,543 (5,100) 33.8% 5014 Salariestemp/parttime 29,820 50,000 - - 5015 Overtime 1,471 500 - 5016 Force account labor - - - 5018 Vacation pay 3,766 - - - Total:Salaries 997,746 1,101,300 1,110,534 1,027,412 (83,122) -7.5 9/a Benefits 5024 PERS retirees health - - - - 5026 PERS retirement 203,414 257,000 252,668 229,702 (22,966) -9.1% f0 5027 Hearth and life insurance 126,990 145,300 139,129 127,639 (11,490) -8.3% Cl- 5028 Unemploynert insurance 2,997 3,200 3,372 3,397 25 0.7% U 5029 Medicare 11,357 15,200 16,349 15,561 (788) 3.8% C Total:Benefits 344,758 420,700 411,518 376,299 (35,219) -8.4% 9 Total:Salaries&benefits 1,342,504 1,525,000 1,522,052 1,403,711 (118,341) -7.8% C Mai nom and Operations 5111 Material and supplies 9,326 9,600 9,600 9,600 d 5112 Small tools and equipment 285 2,000 2,000 2,000 O 5121 Ativeatislrg 2,897 2,600 2,600 2,600 5122 Dues and subscriptions 2,329 2,300 2,300 2,300 N 5132 Meetings and co fenences 1,808 5,800 5,800 5,800 O 5133 EtluratiwnaM training - 200 200 200 tV 5171 Rmlals - - - (%) 5172 Equiprrent maintenance 472 600 600 600 W 5173 Outside vehicle maintenance 5174 Printing charges 2,580 9,401) 9,400 9,400 C 5175 Postage 6,006 8,185 8,200 8,200 R 5176 Copy machine charges 4,521 4,50D 4,500 4,500 d 5181 Other operating expenses - - - - T U 5182 Bad iatio exoeRide accounts 5199 Depreciation expense - - - N Total:Maintenance and Operations 30,225 45,185 45,210 45,200 C Cenbect Services N 5502 Professiorel/contractual sere - 1,000 1,OOD 1,000 d 5503 Lbgaton-oulaide attorneys - - - 55D4 Construction - - - - d 5505 Other professional services 3,349 13,100 1,000 1,000 5506 landscape contracts - - - - C 5507 FacilOies services - - - - E E Total:Contractual Serv'res 3,349 14,100 2,000 2,000 - O.OMo L Internal SerMce changes lVg 5601 Garage charges - - - - Q 5602 Workers compensation 12,000 8,700 12,700 12,700 5603 Liability 9,000 91000 9,000 9,OOD 5604 11 charges in-house 504,600 264,900 181,660 181,660 5605 Telephone support 1,200 5,600 6,485 6,485 5606 Electric - 22,000 22,000 22,000 5611 Fleet charges-lease payrrert� 5612 Fleetcharges-fuel - - - Total:InEer cad Se vice Charges 526,800 310,200 23LM 231,845 - 0.0% Capital Outlay 5702 Computer equipment - 700 - - 5720 Land - - - Total:Capital Outlay - 700 - - 0.0% 7451 Transfers out - - Total:TransfersOut - - - Total:Non-Personnel Expenses 560,374 370,185 279,045 279,045 - 0.0% Department Total:Finance 1,902,878 1,895,185 1,801,097 1,682,756 (118,341) -6.2% 8/23/2012 Packet Pg. 144 CITY OF SAN BERNARDINO,CALIFORNIA FY2012-13 PROPOSED PRE-PENDENCY PLAN BUDGET GENERAL FUND- 001 FY2012-13 PRELIMINARY FY2012-13 2011 Actual 2012 Preje OPERATING PROPOSED PRE- %Inc/ Ax ffl Number Description Amount Ending Budget BUDGET PENDENCY PLAN $Inc/(Dec) (Der) Department: CIVIL SERVICE Personnel Salaries 5011 Salaries Perayfulltime 198,773 199,100 233,870 233,870 5012 Special salaries - - - - 5013 Mrtonioblle allowance 6,600 6,900 6,900 6,900 5014 Salaries temp/parlime - - - - 5015 Overtime - - 5016 Force acmak labor - - - - 5018 vacaMn pay Total:Salaries 205,973 206,000 240,770 240,7/0 - 0.0% Berlits 5024 PIERS retirees heshh - - - - S026 PIERS retirement 42,431 50,200 55,900 55,900 C 5027 Health and life ireur,x 20,288 28,500 27,700 27,700 5028 unemploynent insurance 616 600 600 6DO d 5029 Medicare 2,118 3,100 3,400 3,400 U Ties&Benefits 65AW 02,400 67,600 67,600 0.0°/s 4) Total:Salaries 8 benefits 270,826 280y400 328,370 37$3]0 - 0.0% .6 Maintenance anal Operations - 0 5030 PERS aetl6 5031 MOU concession - - - 5032 ReMMrsea"Ineabh benefit - - - - Of 5111 Matenal ant supplies 302 2,600 1,250 1,250 1 5112 Small tools and equipment 1,670 400 2DO 200 N 5122 Dues ant subscriptions - - 1,850 1,850 5132 Meetings aria conferences - 150 5172 Equipment mair4enarxe 174 200 2DO 200 W 5173 Outside charge mairrterance - - - - ar 5174 Printing clangers 22 100 100 100 5175 Postage 466 640 400 400 R 5176 Copy ntadnine charges 2,063 2,110 2,200 2,200 1 5177 Litigation egenses - - - - >, 5199 Depreciation expense - - - C Total:MaintenaMe and Operations 0,6% 6,200 6,200 6,200 Cmtrac!Services C 5502 Profe venal/mrdract al services - - - - d Total:Contractual services - - . - kDIV/01 ll Internal Service Charges - - d 5601 Garage charges - - - - 0. 5602 Workers compensator, 2,000 1,100 1,875 1,875 5603 Liability 2,000 2,000 2,000 2,ODD C 5604 IT charges in-Muse 6,800 55,200 60,286 55,286 (5,000) -8.3% 4) 5605 Telephone support 200 1,500 1,544 1,544 L 5606 Electric - 11,000 11,000 11,000 0 Total:Internal Service Charges 11,000 70,800 76,705 71,705 (5,000) -7.1% 03 Towl:Non-Personnel Espesces 15,696 77,000 82,905 77,905 (5,000) -6.5% Q Deparhnent Total:Civil Sevice 786,523 365,400 411,275 406,275 (5,000) -1.4% 8/23/2012 Packet Pg. 145 z.n.n CITY OF SAN BERNARDINO, CALIFORNIA FY2012-13 PROPOSED PRE-PENDENCY PLAN BUDGET GENERAL FUND- 001 FY2012-13 PRELIMINARY FY2012-13 2011 Actual 2012 Projected OPERATING PROPOSED PRE- N.Inc/ Aoount Nrndm OavlPtim Amount Ending Budget BUDGET PENDENCY PLAN §Inc/(Dec) (Da) Department: COMMUNITY DEVELOPMENT Penn S.I.w 5011 Salaries perm/fultime 3,564,995 2,681,100 4,202,100 2,993,900 (1,208,200) -28.8% 5012 Special salaries 8,750 5,400 9,600 7,200 (2,400) -25.0% 5013 AutomoNle allowance 24,788 10,600 6,825 6,825 - 0.0% 5014 Salariestemp/parhime 70,816 73,000 66,000 - (66,000) -100.0% 5015 Overtime 12,301 5,000 18,000 - (18,000) -100.0% 5016 Face account labor - - - - - #DW/01 5018 Vacation pay 10,108 - - - - #DIY/0! Total:Salaries 3,691,757 2,775,100 4,302,525 3,007,925 (1,294,600) -46.7% Bewl(b #DN/01 5024 PERS retirees hea8h - - - - - #DN/01 5026 PERS retirement 712,361 672,900 1,048,237 750,601 (297,636) -28.4% C 5027 HeaBh and life insurance 402,174 338,600 441,800 316,500 (125,300) -28.4% 0l 5028 Unemployment issuance 11,091 8,400 13,000 9,500 (3,500) -26.9% d 5029 Medicare 47.085 39.100 60.825 43,325 (17,500) -28.8% A Total:Benefits 1,172,710 1,059,000 1,563,862 1,119,925 (443,936) 41.9% N Total:Salaries&benefits 4,854,468 3,834,100 5,866,387 4,127,851 (1,738,536) 05.3% 4) Maintenance and Operations 9 C 5111 MaterialaM SUpplia 56,703 SO,OOD 89,000 47,300 (36,700) -03.7% d 5112 Small tools and equipment 237 16,600 16,600 3,300 (13,300) -80.1% 5121 Advertising 15,210 14,000 27,600 13,500 (14,100) -51.1% 5122 Dues and subscriptions 4,816 7,500 18,200 500 (17,700) -97.3% CO) 5131 Mileage - 500 3,500 - (3,500) -100.0% N 5132 Meetings and conferences 313 5,000 25,500 - (25,500) -100.0% C 5133 Education and training 5,999 15,000 42,400 500 (41,900) -98.8% N 5165 SIRdeductible y ] Ic 5171 Rentals -82 - 2,100 200 (1,900) -90.5% W 1 5172 Equipment mainterance 1,195 1,500 8,000 1,900 (6,100) -76.3% 5173 Outside vehicle maintenance 5174 Printing charges 11,812 16,000 53,500 16,501) (37,000) -69.2% C 6) 5175 Postage 52,509 60,000 75,400 55,7DD (19,700) -26.1% a 5176 Copy machine charges 9,263 6,000 20,600 15,600 (5100D) -24.3% T 5181 Otlw operating expenses 30 7,500 21,800 8,500 (13,300) 61.0% U 5183 Management allowance 136 600 600 600 y Total:Maintenance and Operations 158.304 ID0.200 399.800 160.100 (235.700) -117.7% 9 Cantina Services C d 5502 ProfessianaUcontractual services 303,065 393,400 393,900 390,000 (3,400) -1.0% d 5503 LNOation-outside aDomeys - - - - ` 55M UmGuctlon - - - - d 5505 Odw prolessbrel services 211,395 259,400 259,063 237,100 (21,963) -8.5% i+ 5506 landscape contracts 109,775 29,200 53,00D 53,000 C 5507 Facilities services - - - - 01 Total:COntrscWal Barite 624,235 632,000 655,46.7 630,100 (25,361) d0% t Internal SeMce Charges 01 5601 Garage charges 49,200 55,200 43,700 43,700 INS 5602 Workers compensation 116,800 23,800 96,600 %,600 Q %03 llabllity 170,200 280,000 280,000 280,000 5604 IT charges in-Muse 187,900 249,200 378,486 378,486 5605 Telephone support 66,000 118,700 151,189 151,189 5606 Electric - 33,000 33,000 33,000 5612 Fleet charges-fuel 38,600 41,100 46,600 46,600 Total:Intrmal Serrke Charges 629,700 7 96,000 1,029,575 1,029,575 - 0.0% Capital Outlay 5702 Computer equipment - 8,000 - - 5703 Communications equipment - - - - 5704 Miscellaneous equipment - 4,000 - - Total:Capital Outlay - 12,000 - - - #DN/0! Total:Non-Persons Expenses 1,411,239 1,640,2110 2,086,836 1,823,775 (261,063) -12.5% Deparb nt Community Development 6,275,707 5,474,300 7,951,225 5,951,626 (11999,599) -25.1% 8/23/2012 Packet Pg. 146 2A.b CITY OF SAN BERNARDINO,CALIFORNIA FY2012-13 PROPOSED PRE-PENDENCY PLAN BUDGET GENERAL FUND - 001 H2012-13 PRELIMINARY FY2012-13 2011 ARual 2012 PmleCted OPERATING PROPOSED PRE- %o Inc/ Aa nt Number Description Amount Ending Budget BUDGET PENDENCY PLAN $Inc/(Dec) (Da) Department: FIRE DEPARTMENT 1,999.599 Perswmel Salaries 5011 Salaries peas/fulb. 17,359,660 18,100,000 18,411,241 16,243,505 (2,167,736) -11.8% 5012 Speoal salaries 307,511 303,600 293,075 97,979 (195,096) -66.6% 5013 Automobile albwame 3,850 - 6,900 6,900 5014 Salaries tempyparttime 20,065 15,000 117,400 117,400 5015 Ow+time 6,631,957 6,30,0 6,184,090 5,584,090 (600,000) -9.7% 5018 Vacation pay 361,359 390,000 - - Total:Solaris 24,686,402 25,100,600 25,01;706 22,049,874 (2,962,832) -11.8% Berrdlb 5024 PE9 re0rees beats - - - - SD26 PERS retirement 4,038,510 4,744,400 5,550,200 4,837,159 (713,041) -12.89b 5027 Health and ife insurance 1,802,542 1,725,000 2,014,053 1,741,217 (272,836) -13.5% C 5028 Unempoyment insurance 73,941 75,000 57,415 50,537 (6,878) -12.0% N 5029 Medimm 271,246 275,000 273,749 239,358 (34,391) -12.6% d Total:Benefits 6,185,739 61819AN 7,895,417 6,868,271 (1,027,146) -15.1% V Tafal:Salaries 6 benefits 30,870,141 31,928,000 32,908,123 28,918,145 (3,989,978) -125% C Maintenance and Operations m 9 5032 Reimbumetl nwnhealth benefit (19,355) 5111 Material and wpplies 291,061 415,900 450,70 415,900 (34,800) 4J% d 5112 Small tools and equipment 80,407 97,500 85,30 85,30 5113 Mob7r fuel and lubric;aM 10,971 19,100 19,100 19,100 0 5121 Advertising 21,782 20,000 20,000 20,000 n 5122 Dues and subscriptions 3,387 4,900 4,700 4,700 C4 5129 Street sweepers tP 1,197 - - - G 5131 Mileage 500 500 500 N 5132 Meetings ant caderenKes 697 2,500 4,200 2,500 (11700) 40.5% r O 5133 Edmition and training 27,094 33,700 45,200 34,000 (11,200) -24.8% W 5171 Rertals 7,627 12,000 12,000 12,000 5172 Equipment mainrtenarce 29,917 75,000 100,500 100,500 C 5173 Outside vehicle maintenance 23,673 80,000 110,000 0,00 (30,000) -27.3% t8 5174 Printing charges 7,289 12,000 16,500 12,000 (4,500) -27.3% d 5175 Postage 14,664 11,000 14,700 14,700 T 5176 Cagy nsrtliiie charge: 10,925 11,50 15,100 15,100 U C 5179 Dump/waste fees I,871 2,000 2,200 2,200 m 5181 Other operating expenses 20,060 15,000 20,000 20,00 C 5183 Managementallowance 9 600 600 600 m 5193 Grant mntch 14,861 9,80 - - d Total:Maintararrce and Operations 548,136 623,000 921,30 839,10 (82,200) -10.0% G Contlact services - d 5505 Other professorial services 161,231 195,000 240,30 240,300 C 5507 FadliOps serw.es 7,866 13,500 77,50 77,50 4) Trial:Cadrx6ul San foes 169,097 208,500 317AN 317,800 Internal Service Charges U Z 5601 Garage change - - - - 5602 Worlars canpensatim 598,930 808,10 fl39,00 834,050 Q 503 Laulity 156,00 230,00 230,000 230,000 5604 IT Charges in-house 564,500 654,20 570,753 570,753 505 Telephone pport 68,00 97,90 91,566 91,566 5606 Electric 141,90 149,00 149,000 149,000 5612 Fleet charges-fuel 149,400 10,20 167,40 167,40 Total:Inbenul Servi®Charges 1,720,130 2,045,400 2,042,769 2,062,769 - 0.0% Capital Outlay 5703 Cnmmunimtions equipment - - 60,00 - (60,000) -100.0% 5704 Miscellaneous equipment - 21,50 - - 5706 AO ar ins and remvations 2,500 - - - P15 Assets acquired-Three Fire Engines 1 96,570 98,285 1,650,000 - (1,650,000) -100.0% Total:Capital Outlay 199,069 119,785 1.710A0 (1.710,00) -1427.6% Debt Service 5803 Debt Payments-Pension Bonds - 1,214,800 1,223,800 1,135,224 (88,576) -7.2% Tohl:Debt Service - 1,214,800 1,223,800 1,135,224 (88,576) -7.3% Total:Non-Personnel Expanses 2,636,732 4,411,485 6,215,669 4,334,110 (1,880,776) -426% Deparhrrrnt Total:Fire 33,506,873 36,339,485 39,123,792 33,253,038 (5,870,754) -16.2% 8/23/2032 Packet Pg. 147 CITY OF SAN BERNARDINO, CALIFORNIA FY2012-13 PROPOSED PRE-PENDENCY PLAN BUDGET GENERAL FUND- 001 FY2012-13 PRELIMINARY FY2012-13 2011 Actual 2012 Projected OPERATING PROPOSED PRE- %Inc/ Account Number Description Arnount Ending Budget BUDGET PENDENCY PLAN §Inc/(Dec) (Dec) Department: POLICE DEPARTMENT Personnel Salaries 5011 Salaries perm/fulltime 38,754,880 36,824,200 38,079,345 34,290,363 (3,788,982) -10.0% 5012 Special salares 757,915 723,600 723,600 666,000 (57,600) -8.0% 5013 Automobile aMwance 4,675 6,900 6,900 6,900 5014 Salaries tamp/partGme 922,498 988,000 938,000 763,000 (175,000) -18.7% 5015 Overtime 2,537,262 2,136,600 2,136,600 2,136,600 5018 Vacation pay 82,156 - - - Tofal:Salaries 43,059,385 40,679,300 41AK"5 37,86 2,863 (4,021,Sg2) -9.9% Beblb 5024 PERS retirees hil - - - - 5026 PERS retirement 9,249,979 10,371,lDD 11,342,600 10,334,950 (1,007,850) 5027 HeaOh and life insumme 2,930,464 2,735,800 2,620,700 2,277,150 (343,550) -13.1% W 5028 UtKttgbynaR insurance 129,390 113,300 118,700 107,200 (11,500) -9.7% 1 5029 Medicare 529,209 5 96,500 536,900 482,050 (54,850) -10.2% a Total:Benefits 12,839,043 13,816,700 14,619,100 136201,350 (1,417,750) -10.3% U C Tdbl:Salaries&bents 55,898,478 54,496,000 $6,503,545 51,064,213 (5,139,332) -10.0% 4) Maintenance and Operations C 5032 Reimbursed mnheafth heneft - - 5111 Material and supplies 366,010 460,000 429,000 429,000 d 5112 Small tools and equipment 66,655 45,000 132,600 132,600 5113 Motor fuel and lubricants 300 300 300 300 tq 5121 Advertising 50 1,900 1,900 1,900 v- 5122 Dues and subscriptions 17,369 48,500 41,700 41,700 N 5132 Meetings and conferences 10,051 15,000 23,700 23,700 N t 5133 Education and training 14,091 31,500 53,500 53,500 Of 5134 Training-post reimbaseable 88,847 150,000 205,000 205,000 ()J O 5155 Cellular service 1,487 1,500 1,500 1,500 R' 5171 Rentals 2,292 20,000 46,400 46,400 5172 Equipment mairdererice 31,862 100,000 154,500 154,500 C 5173 Outside vehicle mainterance 45,503 53,500 53,500 53,500 t0 5174 Printing charges 24,831 20,000 32,800 32,800 d 5175 Postage 23,808 26,003 40,500 40,500 LTj 5176 Copy machine charges 40,371 47,000 52,200 52,200 0 5181 Ober operating expenses 6,453 15,000 12,500 12,500 'I3 5183 Management allowance 190 600 600 600 C 4) 5197 Police reserves 13,133 17,000 20,400 20,400 d Total:Maintenance and Operations 753,260 1,052,800 1,302,600 1,302,600 - 0.0^/0 y Contract Services - - d 5502 Professional/contractual semces 59,594 45,000 60,000 60,000 5505 Other professional services 458,584 600,000 619,400 619,400 C Total:Contractual Services 514178 645,000 679,4110 679,400 - 0.0°/0 L E v Inh ial Service Charges 5601 Garage charges 492,300 893,300 763,800 763,800 U A 5602 Workers mrtpensation 1,635,200 1,574,000 1,]96,9]5 1,]96,4]5 j5 5603 Liability 806,900 1,042,700 1,042,70D 1,042,700 Q 5604 IT charges in-Muse 1,489,200 1,416,800 1,442,424 1,442,424 5605 TekpMne support 168900 352,600 234,136 234,136 5606 Electric 291,600 - - - 5607 Gas 36,000 - - - 5608 Water,sewer,geottermal 6,000 - - - %10 Communications - - - - %II Fleet charges-lease payments 844,679 881,200 881,200 881,200 5612 Fleet charges-fuel .597,700 485,000 755,600 755,600 Total:Internal Service Charges r068,479 6,645,600 6,916,335 fi,916,335 - 0.0% Capihl Outlay 5702 Computer equipment 27,752 5,700 - - 5703 Communications equipment - - - - 5704 Miscellaneous equiprent 6,983 39,000 - - 5705 Departrent computer equipment - - - - 5706 Alterations ant renovatlons - 50,000 25,000 - (25,000) -100.0% Tobl:Capital Outlay 34,735 94,700 25,000 - (29,000) -25.4% Debt Service 5803 Pension Bond payment 2,172,400 2,203,700 2,203,700 Total:Debt Service - 2,17;400 2,203,700 2,203,700 0.0% Total:Non-Personnel Expenses ],6]4,652 10,610,500 11,127,035 11,102,035 (25,000) -0.2% Department Total:Police 63,573,080 65,106,500 67,630,580 64166,248 (5,464,332) -8.4% 8/23/2012 Packet Pg. 148 CITY OF SAN BERNARDINO, CALIFORNIA FY2012-13 PROPOSED PRE-PENDENCY PLAN BUDGET GENERAL FUND- 001 "2012-13 PRELIMINARY FY2012-13 2011 Actual 2012 Projected OPERATING PROPOSED PRE- s/n Inc/ Acmrrt NPndw Denatptlon Amount Ending Budget BUDGET PENDENCY PLAN $Inc/(Dec) (Dec) Department: PARKS&COMMUNITY SERVICES Personnel sabres 5011 Salaries perm/fulbime 1,783,611 1,392,520 1,824,130 922,400 (901,730) -49.4% 5012 Special salaries 1,025 - - - 5013 Automobile allowance 12,840 13,600 13,530 8,430 (5,100) -37. % 5014 Salaries tenp/parthme 417,701 440,000 278,300 278,300 5015 Ow:rtime 48,565 43,000 38,900 38,900 5018 Vacation pay 11,218 - - - Total:Soleness 2,274,990 3,889,120 2,154,860 1,248,030 (906,830) -48.0% Barents 5024 PERS retirees health - - - - 5026 PERS retirement 350,270 345,000 452,818 230,776 (222,042) 49.0% 5027 Hearth and We insurance 253,338 212,300 209,770 93,300 (116,470) -55.5% � R 5028 Unemployment imance 6,839 5,300 5,020 2,790 (2,230) 44.4% d 5029 Medicare 27,970 26,500 26,420 13,240 (13,180) 49.9% Total:Benefits 638,417 589,100 694,028 340,105 (353,922) -60.1% C Taal:Salaries&benefits 2,913,406 2,478,720 2,848,888 1,588,136 (1,250,752) -50.9% 4) Maintenance ant Operations - - 9 Sill Material and supplies 256,681 293,700 316,000 306,000 (10,000) -3.2% C d 5112 Small tools and equipment 23,944 5,700 8,965 8,965 IL 5114 Raw foods - - - - 5121 Advertising 7,80D 7,500 17,500 12,500 (5,000) -28.6% ty 5122 Dues and subscriptions 2,185 4,000 4,600 4,600 5131 Mileage 1,669 3,500 4,900 4,90D 5132 Meetings and conferences 325 3,000 5,600 5,600 N 5133 EdlxabDn and training - 80 4,400 4,40D 5161 Insurance premiums 11,475 7,500 14,235 14,235 LU 1 © 5171 Rentals 9,461 7,500 13,400 13,400 5172 Equipment maintenance 81 300 3D0 300 5173 Outside vehicle maintenance - - 5174 Pdrrtrg charges 3,426 4,000 9,800 9,800 d 5175 Postage 4,129 4,500 5,300 5,300 T 5176 Copy machine charges 8,368 7,500 7,500 7,500 C 5181 Other operating egenses 42,553 38,000 - - d 5193 Grant match 369 - 85,400 85,400 C Total:Maintenance and Operations 372,465 386,780 497,900 482,900 (15,000) -3.9% N Contract Services (L 5502 Professsmai/contradual services 376,994 371,800 371,800 871,800 500,000 134.5% 5505 Other professional ser ces 93,550 100,100 124,80) 124,800 d 5506 Landscape contracts 50,542 73,000 54,%) 54,900 5507 Facilities services 18,534 26,000 37,200 37,200 r 000 87.6% 4) Total:Contrachal Siarvioea 539,619 570,900 588,700 1,08B,700 500, E Internal Service[hinges - - t 5601 Garage charges 82,200 134,400 175,500 175,500 U R 5602 Workers romgerlsa[bn 88,200 168,900 209,665 209,665 5603 Uadlity, 70,000 87,500 87,500 81,500 Q 5604 rr charges in house 63,000 116,700 99,972 99,972 5605 Tdephoww,support 65,900 113,600 71,700 71,700 5606 Electric; 613,600 752,700 752,700 752,700 5607 Gas 41,000 - - - %w Water geothemral 119,000 - - - 5612 Fleet charges-fuel 60,500 84,300 93,200 93,200 Trial:inteuml Service Charges 1,203p00 1,458,100 1,490,237 1,490,237 - 0.0% capital 0ntlay - - 5704 ML Hareous equipment 23,637 - - - W06 Afteratioms and renc,"Dons 15,000 - - - Total:Capital Outlay 38,537 - - - - #DW/01 Total:Non-Personnel Expenses 2,154,122 2,415,780 2,576,837 3,061,837 485,000 20.1% Department Total:Parks Recreation&Community 5,067,52& 4,894,000 5,425,725 4,649,973 (775,752) -15.9% 8/23/2012 Packet Pg. 149 CITY OF SAN BERNARDINO,CALIFORNIA FY2O12-13 PROPOSED PRE-PENDENCY PLAN BUDGET GENERAL FUND - 001 FY2o12-13 PRELIMINARY FY2012-13 2011 Actual 2012 Projected OPERATING PROPOSED PRE- /o Inc/ Account Number Description Amount Ending Budget BUDGET PENDENCY PLAN 9 Inc/(Dec) (D.) Department: PUBLIC WORKS Personnel Salaries 5011 Salaries perm/tulltime 1,903,789 2,000,000 3,227,650 2,267,355 (960,295) -29.8% 5012 Special salaries - - - 5013 Automobile albwance 2,100 3,000 4,275 2,550 (1,725) 40.4% 5014 Salaries tenp/parttlme 392,223 481,600 475,600 315,730 (159,870) -33.696 5015 Overtime 107,563 115,D00 60,900 60,91)0 5018 vacation pay 27,251 - - Total:5alaries 2,473,92E 2,599,800 3,768,415 2,646,535 (1,121,890) -43.2% Be e11 5024 PERS retirees heath - - - - 5026 PERS retrem 43 553, ert 421,659 495,000 780,8672 (227,171) -29.1% 5027 Heath and life insurance 295,914 300,000 374,465 265,435 (109,030) -29.1% W 5028 Unemployment insurance 7,307 8,300 9,935 6,950 (2,995) -30.0% 5029 Medicare 27,843 41,100 46,655 32,810 (13,845) -29.7% a Total:Banality 752,723 844AOD 1,211,898 854867 (353,031) ♦1.8% (22 Total:Salaries 8 berreRts 3,185,849 3,44,000 4,980,323 3,505,402 (1,474,921) 428% Maintenance and Operations 9 5111 Material and supplies 763,880 790,300 1,012,000 826,800 (185,200) -18.3% C 5112 Small tons ant equipment 4,486 10,000 14,500 7,500 (7,000) 48.3% d 5121 Advertising 1,554 1,000 1,000 1,000 •• i 5122 Dues and subscriptions 4,293 5,500 5,900 3,900 (2,000) -33.9% M 5132 Meetings and conferences 1,465 2,500 4,000 - (4,000) -100.0% 800 -77.3% N 5133 Education and training 2,798 2,000 8,800 2,000 (6, ) � 5171 Rentals 33,338 42,000 31,600 31,600 I 000 6,200 1,800 -22.5% N 5172 Equipment maitenarce 8,511 19,900 8, ( ) y 5173 Outside vehicle maintenance - - - LU 5174 Printing charges 772 1,000 1,400 650 (750) -53.6% 5175 Postage 340 1,500 1,500 1,500 5176 Copy machine charges 6,760 20,50) 9,100 5,600 (3,500) -38.5% C W 5181 Otlw operating expenses - 10,000 40,500 - (40,500) -100.0% a 5183 Management allowance - 3DO 300 - (300) -100.0% T Total:Maintenance and Operations 878,197 896,500 1,134600 884750 (251,850) -28,1% C Contract Services - - O) 5502 Professional/contractual services 390,549 514,100 512,200 421,200 (91,000) -17.8% C 5505 Otirer pmlessbnal services 266,498 390,700 354,400 354,400 m 5507 Facilities servces 367,337 320,000 281,400 261,400 (20,000) -7.1% d Total:CadrscBUl Services 1,024,384 1,274,8110 1,144000 1,037,000 (111,000) Internal Service Charges - - d 5601 Garage charges 198,000 174,400 180,000 180,000 5602 Workers compensator, 216,900 C 135,000 137,730 137,730 C 5603 Liability 270,70) 141,000 141,000 141,000 E 5609 IT charges in-house 134,600 306,200 148,522 148,522 5605 Telephone support 43,5(10 181,500 74,867 74,867 0 5606 Electrk 1,934,6DO 1,899,200 1,899,200 1,899,200 1.3 5607 Gas 9,800 - - - Q 5608 Water,sewer,geothermal 39,200 - - - 5612 Feet charges-fuel 104,900 87,30) 107,900 107,900 Total:Internal Suvtce Charges 2,952,100 2,924,600 2,684219 2,689,219 0.0% Capita Outlay - 5703 Communications equipment - - - - 5704 Miscellaneous equipment 13,034 - 15,OOD - (15,000) -100.0% Total:Capita Outlay 13,034 - 15AN - (15,000) 100.0% Credit/billable - 5949 Billable to Water depaMwt 1,668 - - - Total:Credit/billables 1,668 - - - - #Div/w Total:Non-Personnel Expenses 4,819,682 5,045,900 4,994819 4,612,969 (377,850) -7.5% Department Total:Public Works 8,005.331 8,4891900 9,971,142 &116371 (1.852.771) -21.8% 8/23/2012 Packet Pg. 150 ® APPENDIX B-FISCAL YEAR 2012-2013 PRE-PENDENCY PLAN c m a U C d U C d a rn M N O N N W ® r C a u c m s c d a d a c m E L U m Q Packet Pg.151 CITY OF SAN BERNARDINO,CALIFORNIA FY2012-13 Pre-Pendency Plan FY2012-13 Preliminary Operating Budget: Revenues $ 120,424,165 Expenditures 166,236,557 Net revenues/(deficit) (45,812,392) Revenue Budget Measures: Revenue-SAFER Grant Award for FY2012-13 1,500,000 1,500,000 (w) Cost Reduction Measures: Proposed Workforce and Service Reductions 15,659,404 Maintenance and Operations-line item reductions 767,675 Contractual Service Reductions 152,763 Miscellaneous 93,576 A Cost Reduction Offsets: a Outsourcing services (651,000) Financial and restructuring costs (2,000,000) m s Funding Deferrals: d Deferral of Retiree Health Contribution(ARC) 6,033,000 a rn Equipment Replacement Deferrals: Phone switch and network infrastructure 564,380 w Fire Truck Replacement(3 Engines) 1,710,000 r Equipment(Police and Public Works) 40,000 h W K Cost Reduction/(offset)Measures 22,369,798 (x) c Net FY 2012-13 Structural Excess/(Deficit)before transfers (21,942,594) m IL Net Transfers In/Out 5,521,700 Net FY 2011-13 Structural Excess/(Deficit) (16,420,894) (y) Additional Measures: IL 30%of Common Council 211,695 a 0%of City Treasurer's Office(c) - 30%of City Attorney's office 1,487,882 1,699,577 E Concessions(b): cc Voluntary 10%Concessions(All Depts except Safety) 1,497,900 30%Concessions by Fire and Fire Management(a) 2,176,999 a 10%Concessions by Police(a) 3,990,579 Potential-Adjusted Net FY 2012-13 Structural Excess/(Deficit) ($7,055,839) Notes: (a)-Interim Measure;to be addressed more fully in mediation/bargaining (b)-the 10%calculation is after Proposed Workforce and Service Reductions (c)-Internal control procedures, no further reductions to the City Treasurer's are advised 8/23/2012 Packet Pg. 152 1. Parking Control Officers- Do not cut, but create proper training and benchmarks as to how,where and when to properly ticket vehicles, including doing the vehicle abatement duties. Each officer has the ability during regularly scheduled hours to cover their own salary,plus some. These are extra ears and eyes on the streets which is beneficial. While creating cash flow,they have the ability to report other critical public safety and compliance issues.Net positive revenue potential. K2. Revisit closing The Veteran's Community Center at Speicher Park in six months. Leave it open for now as new grant funding i in the works and Mr. Hawkins has stated there is DOJ grant funding that can sustain it for anothetimonths.No net cost for at least 6 months. 3. Revisit closing Rowe Library in six months. Leave it open for now and reconsider closure in six months $5000 in revenue necessary for this. 4. Do NOT cut any code enforcement officers. The savings is slated to represent$937,194. Those 10 officers can sustain their cost by the following formula: 10 employees,gaining compliance by writing ONE ACP per day equals in very conservative estimates $960,000 annually. No net cost to general fund / 5. Compliance of businesses operating without proper registrations or under the moratorium can be fined $1000 per day. Clerk's office has inspectors that should conservatively be able to generate an additional a $250,000. 6. Refuse Fund services paid for by that enterprise fund for/or on behalf of the general fund,nor their d transfers in,have been reflected in the budget document. In year's past that amount of money has been between 8 and 12 million. Without any transfer in,we are being asked to cut more essential city serviceE a than necessary. M / 7. Internal Service fund transfers and charges have not been justified and documented in a clear and N ✓ understanding fashion. o �. Timely(since March of this year)negotiations with employee groups asking for serious concessions Ch have not proceeded prior to bankruptcy as this council directed. z d ��7fZwse, `�.r✓i eco Entered Into Rec. at MCC/CDC Mg: by: 0 Agenda Kern No: � IL A by: d CHy C6VCDC SeeWary E CHy of San Bemardho a Packet Pg. 153 0 CITY OF SAN BERNARDINO INTER-OFFICE MEMORANDUM FIRE DEPARTMENT TO: Mayor and Common Council c FROM: Paul Drasil, Interim Fire Chief` a T V C SUBJECT: Recommendations for the Fire Department Budget as part of the Pre- 9 Pendency Plan a DATE: September 17,2012 N COPIES: Andrea Travis-Miller Interim City Manager; Jason Simpson,Director of Finance LU N M On August 29, 2012, the City held a Special City Council meeting to review and discuss the City's Pre-Pendency Plan. At the meeting Council Member Chas Kelley submitted a document 0 with several proposals that he recommended be included in the Fire Department's section of the E Pre-Pendency Plan presented to Council for consideration. At a subsequent.Council meeting on w September 5, 2012, the Fire Department budget was removed from the Pre-Pendency Plan, and I o was directed to return with a new proposed budget on September 17, 2012. I have reviewed the proposals outlined in Mr. Kelley's document and I am providing my findings in this memo. The m summary section contains my proposal for the Fire Department budget to be included in the Pre- T Pendency Plan. m v C Overview d a i The following 8 proposals have been presented to the Mayor and Common Council in place of n. the recommendations presented in the City's Pre-Pendency Plan for the Fire Department. E t: 1. Staffing Efficiencies Previously Adopted by Council ($950,000) d 2. Cut One Battalion, reassign personnel to engine companies ($713,431) o 3. Eliminate P1 position (4a'FF on ME231) ($150,000) LL 4. Eliminate Dispatch Supervisor($100,000) 5. Eliminate Discretionary Money($82,000) �+ 6. Eliminate Vacant Fire Prevention Officer($83,000) d o_ T Consolidate Fire and City Mechanic Shops (building lease amount $60k, staff, utilities, economy of scale) ($60,000- ???) d 8. Eliminate Emergency Medical Services (EMS) Coordinator Position($100,000) z As identified by Councilman Chas Kelley each proposal has an associated projected annual a savings, for a combined total of $2,238,430 (Attachment A). (Attachment A provides a comparison of the proposal presented by Mr. Kelley and budget numbers we were able to verify.) My best estimate of savings associated with Mr. Kelley's proposal, based on the actual budget amounts is $1,964,640. 1 Pacw Pg Im In reviewing the document, there are some valid proposals that the Fire Department had taken into consideration and had incorporated in the City's Pre-Pendency Plan prior to the release of Mr. Kelley's proposal. The Fire Department section did include the adoption of the Staffing Efficiencies proposal (based on Council's figure), elimination of discretionary funding, the elimination of firefighter positions(s) and vacating the Fire Prevention Officer position. c m a T U C Council Member Kelley's Proposal: o The document contains eight proposals, four of which are contained, at least in part,in the a current proposal. I will briefly discuss each below. a� M r 1. Staffing Efficiencies Previously Adopted by Council ($950,000) —This was included in N I the original proposal, after closer review of the numbers projected savings would be N $748,496 (Attachment A). The City Council adopted these efficiencies on July, 2, 2012; W therefore, I included them in the City's Pre-Pendency Plan for the Fire Department. I am W not in favor of these cuts and I have attached a memo that addresses my concerns which I r directed to the Mayor, in July, concerning this action(Attachment B). N 2. Cut One Battalion, reassign personnel to engine companies ($713,431)—My estimate of .2 actual annual savings is $681,722 (Attachment A). I am opposed to this proposal, this a would effectively cut our Chief Officer ranks by 60% from 2008 levels. The City Attorney's Office issued an opinion, in 1995 that outlines the legal concerns if Battalion T Chiefs are cut (Attachment Q. Please refer to the summary at the bottom of page 3. This c document was prepared in 1995, not only are the concerns still valid today, I believe in c light of the challenges we face today as a result of the attacks on 9/11, the need for Chief a Officers is greater than ever. Below is a partial list of my concerns. a Our ability to provide the following essential services would be severely compromised or E eliminated: r m CL a. Adequate command and control of large incidents (earthquake,high rise and large c commercial fires,large wildland fires,multiple fires or rescues etc.) LL b.. Staffing for the Emergency Operations Center during times of disaster, leaving the City unable to manage an incident to mandated standards (National Incident Management System) g Y ) � c. Daily supervision of both routine and emergency operations 24/7, 365 days a year. There would only be one shift Battalion Chief on duty 24 hours a day, they E would have a span of control that doubles the accepted standard of 1 to 7. This will increase the risk to firefighter's lives and the public's safety, as well as x expose the City to more liability(Attachment Q. a The Kelley proposal indicates that administrative duties may fall behind and assistance from other qualified personnel would be implemented.Fire Administrative staff has analyzed this over the past several years and have been unable to identify a method to complete these duties 2 Packet Pg. 155 (personnel investigations, maintaining training records, hiring new employees, promotional testing, oversight of safety equipment,uniform budgets, IT, radio support, oversight of Dispatch, . the EMS Coordinator, Shop equipment, resolve specific discipline issues, applying for and management of grants, etc.). The Kelley proposal does not identify any personnel or method to absorb these functions, at the same time it does propose to eliminate more non-safety personnel, the Dispatch Supervisor and EMS Coordinator,further impacting the remaining Chief Officers. c m Some of these tasks could be assumed by on-duty safety personnel or those on "Injury' but a released to modified duty status by their doctor. Currently, safety members released to modified duty are not required to report for duty. Fire Administration has tried to re-instate a "Modified Duty" program to provide administrative assistance throughout the department, but has not been a able to get agreement from the labor group. If this program were to be re-instated some of the proposals, including items #1, 2, 4, 6 & 8 outlined in the Kelley Proposal document could be viable. 0 N The Kelley Proposal further states: w Ix "This initial assignment would reduce the initial attack capability by one person, rather than the "Brown Out" alternative, which reduce the initial fire attack by one engine and THREE E firefighters, eliminating any possibility of rescuing a person in need." y This statement is false and misleading. The quote refers to an Engine Company Captain assuming the Incident Commander duties on an incident thereby reducing there crew strength to r two, and fragmenting the crew for the duration of the incident. Currently our initial response to a > structure fire is 4 Engine Companies, 1 Truck Company and 1 Chief Officer. The quote states c that this initial response will be reduced by 1 Engine Company during a"Brown Out", this is not true. We will continue to send the same number of units to a structure fire; if a station were a `Browned Out"the next closest Engine Company would respond. This happens daily under our current staffing configuration. The quote also mentions that the possibility of rescuing a victim a would be eliminated. This is also a false and confusing statement; any two firefighters can E perform a rescue of a victim involved in a fire or other emergency. The statement is very r confusing, the author does not state why or how the opportunity to perform a rescue with on d scene firefighters would be eliminated. 13 d There reaches'a point when the expectation for staff members to continue to absorb more responsibilities becomes irresponsible. With three fewer Battalion Chief Officers, it will be H virtually impossible to perform essential emergency operations and administrative duties. The City will also recognize a decrease in service to the community, and an increase in unsafe c working conditions. v E L 3. Eliminate P1 position (4s' FF on ME231) ($150,000) — The actual annual savings would be approximately$137,003. This position was included in our original proposed savings, a in addition.the 4a' firefighters on both truck companies were also included, and this provided a projected annual savings of$946,879. s JW*et Pg. 156 4. Eliminate Dispatch Supervisor' ($100,000) — Actual annual savings would be approximately $105,505. The Fire Communications Manager (FCM) position provides daily supervision of our Emergency Communications operations, as well as performing other essential tasks that we are mandated to perform to maintain compliance with EMD and our AMR contract. As part of our Emergency Medical Dispatch (EMD) system we are mandated to perform quality assurance (QA) reviews on an on-going basis in order that we stay in compliance. I have met with both American Medical Response (AMR) A and Inland Counties Emergency Medical Agency (ICEMA) they have significant a concerns of our ability to maintain compliance with mandated standards if this position, as well as the EMS Coordinator are eliminated. The immediate effect, of the loss of "o FCM, would be the loss of our current AMR contract which currently generates a approximately $250,000 annually. Additionally if we were unable to complete the QA portion of the EMD program we may have to consider eliminating the EMD program, M which would increase the call volume for our engine companies. N 0 N The Kelley proposal mentions that "a shift Battalion Chief who is assigned as the administrator w of dispatch can remain responsible to oversee administrative operations, and the on duty W Battalion Chief would be able to make day to day decisions...:' The Kelley proposal advocates H the reduction of three additional Battalion Chiefs (BCs), this already doubles the supervision E responsibilities of the one remaining BC per day, and it is not safe or reasonable to expect that w the additional daily oversight of Emergency Communications Program could be assumed by a 24 .2 hour shift BC. a As mentioned in the original Pre-Pendency Plan proposal we are exploring the option of out- sourcing our fire dispatch operations to Comm Center. This will take several months to see if it is viable to enter into an agreement with them, once all the information has been obtained we will bring it forward for consideration. We are also in discussion with the Police Department on the a feasibility of combining the police and fire dispatchers within out dispatch center. We may be a able to realize a costs savings and improve some of our operations by combining. Our staff will analyze both options, out-sourcing with Comm Center and combining police and fire within our E own dispatch center. We will bring back to Council our recommendation if one of them should t be adopted, or to maintain status quo. d 0 d 5. Eliminate Discretionary Money($82,000)—The actual saving is estimated to be$82,200 a annually. This was included in the original proposal. After further review of the discretionary budget I have identified an additional $124,700 in savings, bringing the total to $206,900. These additional savings will result in the elimination our Wellness & Fitness program and the restructuring of our Traffic Collision Recovery Program. v 6. Eliminate Vacant Fire Prevention Officer ($83,000) — The actual estimated annual r savings is $85,689. This was also included in the original proposal. The Kelley proposal a would eliminate this position, I support that we leave the position vacant with the option to fill the position at a later date. This is a revenue producing position. Additionally a limited number of future openings can be left vacant, for a period of tune. Revenues and the associated work with those positions will not be realized and they will need to be filled at some point in time. Contrary to the Kelley proposal which states the duties have ate. 4 effectively been reassigned, many of these duties are not being performed and revenue and service are being lost. See page 43 of the Pre-Pendency Plan under the heading "Community Risk Reduction Program"for more detail. 7. Consolidate Fire and City Mechanic Shops (building lease amount $60k, staff, utilities, economy of scale) ($60,000 - ???) — There are no projected savings from the Fire Department's budget if adopted. The building and subsequent lease are part of EDA, r therefore, there is no savings to the Fire Department's budget associated with this a T proposal. c d a This option has been explored several times and again recently while developing our proposal. a The Kelley Proposal states that our current Fire Department Fleet &Equipment Program can be consolidated with the City Maintenance operations. This is not possible for several reasons. The current City.Maintenance shops do not have enough room to allow for the added volume of work required to maintain our fire equipment, expansion of the current facilities would be required.At our current shop facility we store our reserve apparatus and fire equipment, both of which have w to be secured inside a building, and have 24 access and security. Again there is no room at the P current city maintenance facility to store this equipment, additional secured storage areas would have to be identified. When we looked at the possibility of combining maintenance facilities previously we also found that very little of the-parts stock is compatible, as stated in the Kelley Proposal document. In addition,there would be an increased delay in maintenance and repairing v fire apparatus due to that the City's Maintenance Shop services the Police Department, a Integrated Waste, Public Works, and all other city vehicles. Also, the City's Maintenance A personnel will need to be trained and certified to perform maintenance on the fire apparatus due ; them personally, and take away time from their daily job as a Fire Captain. I anticipate that the Captains would have to be relieved of their duties as a shift Captain on a daily basis for several hours; this would require that other personnel do their work, as well as causing the truck or engine company to be on ,"2nd call" which would delay their response, or backfill with an off-duty Captain. The last sentence of this section of the Kelley Proposal states "In addition, EMD should become the responsibility of the EMS Coordinator and Committee with the elimination of the dispatch supervisor." This sentence makes no sense, as the Kelley Proposal calls for the elimination of the EMS a Coordinator position,therefore how can the duties be re-assigned to that position? d r The EMS Coordinator is essential to the entire Fire Department operation. Our current contract with AMR requires that the City have employed at all times key personnel responsible for the following: Quality Improvement Program, Training and Education Programs, Overall Analysis and Coordination of Resource Deployment, and a Safety Committee. The EMS Coordinator r, performs several of these duties, in addition to assisting with the oversight of the EMD program with the Fire Communications Manager. It should be noted that the Safety Committee was under w the supervision of the Training Division Chief, and this responsibility has not been reassigned as W of yet. It is unknown if the shift Captains will be able to perform these duties and others, additional time may be needed requiring them to work overtime on their day off, this would E require overtime and off-set projected savings. w a ICEMA is in the process of an overhaul of the emergency medical transportation plan throughout a the entire County. This will allow all first responder agencies to determine how they would like to provide emergency medical service within their jurisdiction. This is mentioned on page 13 of a the Pre-Pendency Plan under the Fire Department heading, 5h bullet point. The EMS r Coordinator will play a key role in this process and his expertise is essential to ensure we pursue c the correct course. Along with the transportation plan review, ICEMA has required all agencies a to participate in electronic Patient Care Reporting (ePCR). While we are currently one of the few first responders in the County that meet this requirement, the software that supports this is a changing as well as other components. The EMS Coordinator has played an essential role in this process and will continue to do so over the next several years, without direct involvement in this R process we may not be able to meet our obligations. It is doubtful that shift personnel can fulfill d these duties. ° d LL The cost benefit achieved by the elimination of the EMS Coordinator would be minimal, due to the projected need for overtime, and the work load that would be placed upon on-duty shift personnel would exceed their ability to perform the EMS Coordinator responsibilities adequately. As I mentioned above I have met with ICEMA and AMR, both agencies have • identified this position as essential to allow us to continue to operate as an Advanced Life Support provider. There is a critical need for this position and I am not in favor of eliminating it from our operation. 6 Packet Pg. 159 Efficiencies to Defer Administrative Expenses 1) "Reduce Firefighter Overtime by Filling Vacant Firefighter positions" — Currently there are 20 vacant safety positions within the department, these are backfilled each shift. Filling the vacancies will eliminate a portion of the overtime for existing firefighters as stated; the associated costs of filling these vacancies would then become salary and r benefits. Estimated costs to equip a new firefighter with uniforms and safety clothing is a over $5,000.00 per individual, therefore an additional $200,000 would have to be identified from within the budget. c d a The proposal I am presenting will require the immediate hiring of 7 new PM/FF's rather than 20. With expected retirements, I would anticipate the department will need to hire an additional 10 personnel by the end of the fiscal year. This will be necessary regardless of which plan is adopted. I would recommend that we begin the testing process to establish a new hire list as soon as our current list is exhausted. This should occur by the end of the w calendar year. N 2) "Extend Current Promotional Lists until exhausted" — The current lists will likely be exhausted prior to their expiration dates, due to anticipated retirements. This will U) necessitate new promotional tests to have to be held. If the lists are not exhausted, I would extend them,per Civil Service rules. Q C N 3) "Train new firefighters during shift training, instead of a Fire Training Tower" — The statement provided is inaccurate in many areas as to what is required for our new employees. I will only mention one as an illustration. The author states that no medical training is performed, while part of this is true, there is training required for new a personnel to learn ePCR procedures and to become accredited in the ICEMA region if they are not currently. There is training and a minimum number of supervised calls personnel must perform as part of the accreditation process. This is but one example; I a, do not feel this is the document to explain why all of this training is necessary. We would look at shortening the length of the training tower to the absolute minimum required to d provide mandated training, thereby minimizing costs. m LL ,a d N d r C d E L V N L. Q 7 Padwt Pg.UM i Summary If the proposal presented by Councilman Chas Kelley were to be adopted, approximately $1.9 million in savings would be realized. There would be a minimum of 2 layoffs, 8 demotions and would include the elimination of essential positions from within the department. a u c I am proposing a plan that will save approximately$2.9 million annually. If adopted there will be no layoffs or demotions, although there will be a loss of 13 vacant safety positions. The loss of a these positions will cause all engine and truck companies in the City to be staffed by 3 people and the loss of a 2 person paramedic squad. There will be no fire station closures or "Brown- roi outs". N 0 N I would urge the Council to restore all safety positions that have been loss since 2008 when w financially able. Once this is started, I would like to develop a plan to re-establish the non-safety X positions that have also been deleted to enable the department to begin to build back the entire a organization. E U The proposal will also work towards including several of Mr. Kelley's ideas into future cost v saving measures. These include: a • Re-location the Fire Maintenance Shop to the City Maintenance facility if feasible. This may be possible if the Refuse division becomes out-sourced. Staff will again look at the L possibility of marketing.our shop to provide maintenance for other local fire departments to off-set our costs. c • We are currently evaluating the feasibility of out-sourcing our Fire Communications aa) division to Comm Center or combining the Fire and Police dispatchers within our own i communications center. If either option proves workable and provides a cost savings we c will pursue the appropriate option. °' E t: m a m 0 d E 'O d W d r C CD E L u m a 8 Pacimt Pg.im The following table contains the new recommendations for the Mayor and Common Council to consider being included in the City's Pre-Pendency Plan for the Fire Department's section. Description #of Annual Estimated Estimated Savings Positions Savings 9 months)** Staffing Efficiencies Proposal (deleted Pubhc 3 $748,496 $748,496 c Educatim Officer, Reassiped Chief Officers; Vacant 1c CL Deputy Chief&Fire Marshal) u Fire Prevention Officer 1 '$85,689.21 $78,548.47* a c Eliminate the Traffic Collision Program N/A $112,500 $112,500 a Eliminate the Wellness & Fitness N/A $12,200 $12,200 °C' Program N 0 Reduction of Discretionary Funds N/A $82,200 $82,200 ,ten W Firefighter 7 $959,023.31 $719,267.24 Paramedic/Firefighter 6 $914,258.73 $685,693.49 Totals 17 $2,914,367.24 $2,356,705.10 E *employee retired on August 1, 2012-savings is for 11 months v **The table above identifies both estimated annual savings and the actual savings for the F/Y assuming an implementation date of October 1,2012. a a r Traffic Collision Program: d In the memo that was submitted to the City Manager regarding the reduction of discretionary C funds for the Fire Department, there was a reference to the potential elimination of the Traffic 4 Collision Program. This program was established in 2009 for the Fire Department to start a` charging insurance companies for hazardous spills resulting from traffic collisions. The fee is to recover costs for actions taken at traffic collisions that leave hazardous materials on public right E of ways. The projected revenue for the program was $197,900 and the City has received $26,025.35 for the past three years of the program. We will re-structure the program to eliminate o any costs the department currently incurs and only charge for traffic control services and victim ` extrication costs. Staff will bring this to Council as soon as possible. LL a m N Additiona[Discretionary Funds: The Fire Department is recommending that the funding appropriated to the Wellness & Fitness c Program for safety personnel be included as a cost savings for the City. The potential savings for E this program is $12,200 annually. a; a Respectfully, Paul Drasil Interim Fire Chief 9 Packet Pg. 162 Council's Proposal Budgeted FY P sed Elimination Program# 7/2/12 12/13 - Position Status F, hter Cadet Program 0046-2020 $ - $ 48,700.00 Personnel-10 cadets Public Education Officer 0047 $ - $ 80,600.00 Deleted TOTAL PROPOSED(elimination): $ - $ 129,300.00 Council's Proposal Budgeted FY Proposed Vacant Position Program# 7/2/12 12/13 Position Status c Deputy Chief 0044 $ - $ 271,300.00 Filled m Division Chief/Fire Marshal 0047 $ - $ 223,200.00 vacant a Emergency Services Manager 0048 $ - $ Filled*Grant funded,$138,800 TOTAL PROPOSED(vacancy): $ - $ 494,500.00 IL Council's Proposal Budgeted FY a Proposed Reorganization Program# 7/2/12 12/13 Position Status M Reassigned 3 Division Chiefs to Battalion Chiefs multiple $ $ - Filled no additional savings/costs N Extra Regular Hrs(BC Coverage) $ $ 124,696.00 0) W TOTAL PROPOSED(reorganization): $ - $ 124,696.00 W TOTAL PROPOSED SAVINGS(Personnel) $ 950,000.00 $ 749,496.00 y E w Council's Proposal Budgeted FY Proposed Elimination Program# 8/29/12 12/13 Position Status Q Fire Communications Manager 0051 $ 100,000.00 $ 105,505.21 Filled c R Fi vention Officer 0047 $ 83,000.00 $ 85,689.21 Vacant o_ Em—eency Medical Svs Coordinator 0044 $ 100,000.00 $ 124,024.83 Filled TOTAL PROPOSED(elimination): $ 283,000.00 $ 315,219.25 c d Council's Proposal Budgeted FY a m Proposed Elimination Program If 8/29/12 12/13 Position Status M Battalion Chief(56 HR) 0044 $ 237,810.33 $ 227,240.74 Battalion Chief(56 HR) 0044 $ 237,810.33 $ 227,240.74 E Battalion Chief(56 HR) 0044 $ 237,810.33 $ 227,240.74 0. m D TOTAL PROPOSED(elimination): $ 713,430.99 $ 681,722.22 ` Firefighter 0044 $ 150,000.00 $ 137,003.33 U. Council's Proposal Budgeted FY N Proposed Maintenance&Operations Program# 8/29/12 12/13 Position Status > Eliminate discretionary money $ 82,000.00 $ 82,200.00 Consolidate Fire&City Mechanic Shop $ 60,000.00 $ - TOTAL PROPOSED M&O $ 142,000.00 $ 82,200.00 E L V TOTAL PROPOSED SAVINGS(Personnel&M&O) $ 1,288,430.99 $ 1,216,144.80 a GRANT TOTAL PROPOSED SAVINGS $ 2,238,430.99 $ 1,964,640.80 Attachment A Padlu t PW 163 0 SAN BERNARDINO CITY FIRE DEPARTMENT INTEROFFICE MEMORANDUM To: Honorable Mayor Patrick Morris a From: Interim Fire Chief Paul Drasil,9 v d Subject: July 2,2012 Council Item"Fire Department Staffing Efficiencies" a Date: July 10,2012 N Copies: Interim City Manager Andrea Travis-Miller N cn w o: N Mayor Morris, d E On July 2, 2012 the City Council voted to adopt the agenda item entitled"Fire Department Staffing Efficiencies"introduced by Councilperson Chas A. Kelly. The adopted motion identifies the"efficiencies"as a method to have the least impact on service delivery and further identifies them as "non-critical'. The staff report also refers to "several meetings and gathering a of information", I am unaware of any meetings that any Council member had with Fire Management regarding this proposal. I feel strongly that before a proposal like this is brought before the City Council it should be discussed with the affected department head, so that a potential liabilities can be vetted. a I did meet with Labor, San Bernardino City Professional Firefighters Union(SBCPFF)Local d 891 President Scott Moss, and Interim City Manager(CM)Andrea Travis-Miller on two E occasions to discuss our budget reduction proposal,as requested by the CM, and the SBCPFF a proposal,which is the same as this agenda item. We were unable to reach agreement on how to 0 incorporate the two proposals, SBCPFF declined to discuss any proposal other than their own. U. The CM and I had deep concerns regarding the depths of their cuts proposed to the Fire Administrative Staff, and we discussed the implications of these cuts with Mr. Moss. d I do not agree with all of the components of the agenda item,I do not feel that the Fire Y Department can operate safely or efficiently given the severity of the actions called for. I also d fear that if all of these proposed vacancies were to go unfilled,the City and Fire Department E could be exposed to serious liabilities that are preventable. x Attachment B Packet Pg. 164 0 The Council action calls for the following: • Eliminate the Fire Cadet Program. • Reassign the three Administrative Battalion Chiefs to shift duty. • Temporarily leave the following positions vacant through attrition,until such time the City can afford to fill the positions: Deputy Chief, Division Chief and Fire Marshal(FM). • Vacancy through attrition of the Disaster Preparedness position. • Eliminate the Public Education Position. a r U C While I have concerns about each of these items, and the negative impact each will have on our operation, I want to focus on the three chief officer(CO)positions and the Disaster Preparedness d position. a M Maintaining the vacancy of the three CO positions will effectively cause a 30%reduction in the N CO ranks as compared to 2008 staffing levels. The Fire Management staffing that will result N from this plan will only leave the Fire Chief and six shift Battalion Chiefs. The Fire Chief will be w responsible for the duties of the Fire Marshal, Deputy Chief, and directly supervising the g Battalion Chiefs as well as the day to day operation of the entire Fire Department. Below are a few of the areas of concern that I have: d E • We will have limited operational depth to be able to respond to large scale emergencies within or adjacent to the City. Surrounding Departments have also reduced their COs a (Colton,Rialto,Loma Linda and San Bernardino County)the ability to rely on them for _R mutual aid assistance, at the CO level, is limited.The result will be an inadequate a command and control presence at these incidents, which will result in: an increased risk U to firefighter and public safety,the inability of the Fire Department to properly manage an incident by following accepted best practices(Incident Command System ICS)which a could result in the exposure of the City and Chief Officers to liability claims. • The ability to apply,manage and seek out grants for both personnel and equipment will a be severely limited. The effort and time to perform all of these functions cannot be done E by shift personnel. Currently all grants are applied for and managed by the Deputy r Chief, Fire Marshal or the Disaster Preparedness coordinator. The City was just awarded d 3.3 million dollars in the form of a SAFER grant;this will continue funding for 12 0 firefighter positions, further grants such as this are in jeopardy. U. • There are numerous standards and regulations (NFPA, OSHA, CFR, Health and Safety Code etc.)that spell out accepted best practices and dictate certain requirements be met N concerning how Fire Departments are to be organized and managed. Our ability to comply with these regulations and standards will be severely comprised. • The ability of our Fire Prevention bureau to adequately complete their duties will not be E possible without a full-time Fire Marshal. This will result in a direct loss of revenue L from inspection fees,the inability to respond in a timely fashion to developers who wish to build in our City. (The Southgate development is an example) Several developers a have stated that they will go elsewhere if there are more delays than then currently endure. Attachment B Packet Pg. 165 o Attached are two memos written by the City Attorney's office that highlight many of my concerns, all of the items are still valid today, if not more so. The memos are; "Liability Exposure of Fire Department Cuts"June 23, 1995,Dennis A. Barlow, Sr. Asst. City Attorney. "Fire Inspection Services"February 16, 1990,Denice E.Brue, Sr. Assistant Attorney. a T U c I would like to quote from each of the memos: v a Barlow Memo— M Page 1 N In February of 1995, OSHA cited the U.S. Forest Service (USFS) and the Bureau of Land N Management (BLM)for unsafe conditions on the South Canyon Fire, which resulted in 14 w firefighter fatalities. "The unsafe conditions were primarily the fact that the agencies failed to provide sufficient d management oversight to ensure that existing safe firefighting practices were followed. The E citation noted"plain indifference"on the part of management' a I believe our inability to provide adequate management on large scale incidents could r expose us to a similar citation. a u C Brue Memo— a Page 3 a "The common sense approach to the requirements set forth in these sections (referring to the Government Code) is that the legislative intent is to make sure that fire protection and fire a protection services are carried out by people who are specifically trained in fire protection E services to provide for the health, safety and welfare of the public at large. Therefore the r code section mandates that these duties be carried out by none other than regular full-time w members of an organized fire department of a city, county, or district providing fire o protection services and cannot be delegated to other departments with a local entity." LL My professional opinion is that the duties of the Fire Marshal are unique and specialized to w the degree that other personnel cannot"assume these duties"as has been suggested by some. I feel that without a full-time FM,or a similar position,our Fire Prevention bureau will be unable to fulfill their mission,thereby putting the public at further risk,cause a loss of E revenue and cause unacceptable delays in the building permit and plans check process. E m z a Attachment B Packet Pg. 166 In light of the severity of the current budget situation and this Council action, I would like to bring to your attention another quote from the Brue memo. (Page 9). "Therefore the City may also contract with the County for fire prevention and suppression services which include fire inspection services." Given the state our Fire Department will be left in, if these"efficiencies"are implemented R for any considerable length of time,our ability to manage the organization may leave us a vulnerable and alternative solutions,as mentioned in the above quote,may need to be explored. I hope this is not what the City Council had in mind when they adopted this item. I am convinced that our department has the means and ability to provide all the services a required,if we are allowed to manage the organization ourselves. M I feel that it is incumbent on me to inform you of the implications of these"efficiencies"that N the Council has adopted and the risk at which they put our citizens, firefighters,chief N officers and the City. I cannot take responsibility for any negative outcomes that may occur w as a result of this action imposed on the Fire Department by the City Council. N r Respectively Submitted, d E N 7 Paul Drasil a Interim Fire Chief `m a C d C d a w a c m E r m CL W 0 d LL d N d r N E L V A L.' Q Attachment B Packet Pg. 167 2Ad C I T Y OF S A N B E R N A R D I N O INTEROFFICE ;MEMORANDUM TO: Mayor and Common Council FROM: Dennis A. Barlow, Sr. Asst. City Attorney DATE: June 23, 1995 IL RE: Liability Exposure of Fire Department Cuts T u c v v c v a The Mayor and Common Council have before them proposals to m reduce the number of fire department Battalion Chiefs and to eliminate a truck company from the Fire Department. With only two truck companies serving the City this results in a 50% cut with a ° resultant loss of 3 captains, 2 engineers, and 3 firefighters. d) These cuts and others are apparently directed to reorganize the day w to day management of the department and of the conduct of fire suppression. H c d In this context it is important to note serious challenges E faced by other fire suppression agencies due to alleged management failings. Q c In February of this year the Federal Occupational Safety and 0 Health Administration (OSHA) cited the United States Forest Service a and the Bureau of Land Management (BLM) for various unsafe c conditions that led to the death of 14 firefighters in a wildland v fire near Glenwood Springs, Colorado (The South Canyon Fire) . The m unsafe conditions were primarily the fact ,that the agencies failed a to provide sufficient management oversight to ensure that existing a safe firefighting practices were followed. The citation noted "plain indifference, " on the part of management. r Closer to home the San Bernardino Sun reported on Saturday, a June 17, 1995 (page B3 ) that the U.S. Forest Service and BLM d settled a S2 million suit relating to the death of a young firefighter working out of the Corona office while fighting a 1990 LL fire northwest of Sacramento. Also alleged in this suit were a serious management deficiencies. u m In 1970 the City faced the Bear fire which burned 53, 100 acres and destroyed 51 homes and 11 structures. Then in 1980 San c Bernardino experienced one of the most devastating fires in this E state ' s history. The Panorama fire destroyed 325 homes, burned 23, 600 acres, resulted in a property loss of $40,000,000, and took A the lives of 4 individuals. The Panorama fire cost $6 million in suppression efforts. To now make significant cuts in the City's ability to respond co such disasters just because we haven't faced such fires in recent years, is both shortsighted and exposes the DAB/js [FireCu[s.Meml Attachment C Packet Pg. 168 z.n.a To: Mayor and Common Council From: Dennis A. Barlow, Sr. Assistant City Attorney Date: June 22, 1995 Re: Liability Exposure of Fire Department Cuts Page 2 City' s residents and firefighters to unnecessary danger. With the mediterranean climate of San Bernardino and the regular hot, Santa Ana winds it is not a question of if another devastating fire will occur, but when. a T U In addition, by making such cuts, the City itself could face m a loss of its historical immunity by such an unfounded action in c light of all the facts and circumstances, similar to what occurred a. in relation to the U.S. Forest Service and BLM noted above. It is a a maxim among lawyers that bad cases make bad law. Not long ago the governmental entities in this state enjoyed broad immunity to r protect their decisions in a whole myriad of activities. o Gradually, more and more of these immunities have been lost through N "bad cases" . For instance, the design immunity is provided to public agencies by Government Code §830.6. It states that such agencies are not liable for injuries due to a defective design of a construction or improvement to public property where such plan or v design was approved in advance by the legislative body or by an E employee exercising discretionary authority. However, judicial decisions have significantly eroded this immunity by finding 4 negligence on the part of the public agency independent of the design (Hefner v. County of Sacramento (1988 ) 197 Cal.App.3d 1007) , m or by finding changed circumstances (Bane v. State of California a. ( 1989 ) 208 Cal.App.3d 860; Compton v. City of Santee ( 1993 ) 12 U Ca1 .App.4th 591 ) , or by finding, in the situation of a bridge, that it was not the design of the bridge that caused the accident but the accumulated ice ( Flourney v. State ( 1969) 275 Cal.App.2d 806) , a or where the court decided that the design was unreasonable (when m faced with the death of a 4-year old child) (Davis v. Cordova a Recreation & Park District ( 1972) 24 Cal.App.3d 789) . m E In addition, as the City is encouraging the construction of several taller buildings both in the downtown area and on o Hospitality Lane, it seems both foolish and dangerous to eliminate the ability to respond to fires and to provide rescues on higher LL stories. v d N It should also be remembered that San Bernardino lies at the > conjunction of several major earthquake faults including the San Andreas Fault. Seismologists tell us that this area is seriously overdue for a major quake. It is well known that a major effect of earthquakes is not only the initial damage but includes the resultant fires. The fire suppression needs and rescue efforts E following a major earthquake will be extensive. A court might find a it unusual and significant that a city sitting on several major DAB/is (Firecu[s.mem7 Packet Pg. 169 2A.d To: Mayor and Common Council From: Dennis A. Barlow, Sr. Assistant City Attorney Date: June 22, 1995 Re: Liability Exposure of Fire Department Cuts Page 3 earthquake faults and overdue for a disaster would cut its truck companies in half and thereby its ability to respond to such a disaster. a Finally it is certain that these cuts combined with others that are proposed in the Fire Department will seriously affect the City' s ISO rating. The rating now stands at a 2 and will certainly m go to a 3 and perhaps to a 4 with such cuts. This will translate a into higher insurance rates for property owners in the City, m because what it reflects is an inability of the City to provide as high a response as it has in the past in fire situations. �+ 0 All of the above will be relied upon by a court in determining N to whether the traditional immunity of the City in case of a w significant fire loss should be sustained. N We also note that it may be contended that mutual aid will E satisfy the need for fire response in serious fire incidents. E Mutual aid, however though important and necessary in finally putting out a fire, does not satisfy the need for immediate, ° initial response. It is the response at the inception of the fire c which determines whether the fire will be contained or will result m in a lon g, ex p ensive fi g ht. It is consistently shown and can be a � demonstrated in both the Panorama fire and the Malibu fire of the c 196O ' s, that mutual aid cannot be relied upon for that all- a important initial response. For that each agency must look to its v own resources. A court will look to the management decisions to a. maintain and use the resources versus their elimination; and false a reliance on other agencies for early response. c m In summary, we have the following legal concerns if the number E C of Battalion Chiefs is reduced and/or a truck company is o eliminated: 0 v 1. Federal or state administrative action against the city LL for management failure, N 2. Workers' compensation lawsuits by survivors of m firefighters killed, or lawsuits by firefighters injured due to management failure, E 3. Loss or erosion of traditional municipal immunity and resulting damages in civil lawsuits. a e _ Dennis Barlow DAB/j9 (Firecuts.Meml Packet Pg. 170 `.. I RESOLUTION NO. 2 RESOLUTION OF THE MAYOR AND COMMON COUNCIL OF THE CITY OF SAN BERNARDINO ADOPTING THE FISCAL YEAR 2012/13 AND FISCAL YEAR 3 2013/14 GENERAL FUND BUDGETS AS REVISED BY THE CHANGES 4 DESCRIBED IN THIS REPORT, WHICH INCORPORATE BY REFERENCE THE PRE-PENDENCY PLAN INCLUDING THE 9-POINT ADJUSTMENT PLAN 5 ADOPTED ON SEPTEMBER 5, 2012, AND THE REVISED FIRE DEPARTMENT ADJUSTMENTS ADOPTED ON OCTOBER 1, 2012; AND AUTHORIZE THE 6 CONTINUATION OF THE FISCAL EMERGENCY THROUGH JUNE 30, 2014, AS 7 ADOPTED BY COUNCIL RESOLUTION NO. 2012-205 OF THE MAYOR AND COMMON COUNCIL ADOPTED ON JULY 16,2012; AND AUTHORIZE THE CITY 8 MANAGER TO APPROPRIATE 1/12 OF THE FISCAL YEAR 2010/11 OPERATING a BUDGET PER MONTH THROUGH DECEMBER 31,2012. 9 m 10 BE IT RESOLVED BY THE MAYOR AND COMMON COUNCIL OF THE c CITY OF SAN BERNARDINO AS FOLLOWS: a 11 M 12 SECTION 1. That the Fiscal Year 2012/13 and Fiscal Year 2013/14 General Fund N Budgets as revised by the changes described in this report, which incorporate by reference C74 13 the Pre-Pendency Plan including the 9-Point Adjustment Plan adopted on September 5, 2012, W 14 and the revised Fire Department adjustments adopted on October 1, 2012; and attached hereto as Exhibit"A" is adopted; and G Y 15 0 16 SECTION 2. Authorize the continuation of the Fiscal Emergency through June 30, 2014, as adopted by Council Resolution N o. 2012-205 of the Mayor and Common Council w 17 adopted on July 16,2012; and a 18 SECTION 3. Authorize the City Manager to appropriate 1/12 of the Fiscal Year V 19 2010/11 operating budget per month through December 31,2012. d 20 21 22 23 24 25 26 27 28 Packet Pg. 171 1 RESOLUTION OF THE MAYOR AND COMMON COUNCIL OF THE CITY OF SAN BERNARDINO ADOPTING THE FISCAL YEAR 2012/13 AND FISCAL YEAR 2 2013/14 GENERAL FUND BUDGETS AS REVISED BY THE CHANGES DESCRIBED IN THIS REPORT, WHICH INCORPORATE BY REFERENCE THE 3 PRE-PENDENCY PLAN INCLUDING THE 9-POINT ADJUSTMENT PLAN 4 ADOPTED ON SEPTEMBER 5, 2012, AND THE REVISED FIRE DEPARTMENT ADJUSTMENTS ADOPTED ON OCTOBER 1, 2012; AND AUTHORIZE THE 5 CONTINUATION OF THE FISCAL EMERGENCY THROUGH JUNE 30, 2014, AS ADOPTED BY COUNCIL RESOLUTION NO. 2012-205 OF THE MAYOR AND 6 COMMON COUNCIL ADOPTED ON JULY 16,2012; AND AUTHORIZE THE CITY 7 MANAGER TO APPROPRIATE 1/12 OF THE FISCAL YEAR 2010/11 OPERATING BUDGET PER MONTH THROUGH DECEMBER 31,2012. 8 I HEREBY CERTIFY that the foregoing Resolution was duly adopted by the Mayor and a T 9 Common Council of the City of San Bernardino at a meeting C m v c 10 a thereof,held on the day of ,2012, by the following vote,to wit: 11 M r 12 Council Members: AYES NAYS ABSTAIN ABSENT N 0 13 MARQUEZ w Uj 14 JENKINS c 0 15 VALDIVIA o 0 16 SHORETT c 17 a 1g KELLEY C m 19 JOHNSON m IL 20 MCCAMMACK m E 21 W 22 Gerogeann Hanna, City Clerk 23 The foregoing Resolution is hereby approved this day of 2012. 24 25 Patrick J. Moms, Mayor City of San Bernardino 26 Approved as to form: JAMES F. PENMAN, 27 City Attorney 28 By: Packet Pg. 172 PENDENCY PLAN City of San Bernardino Prepared by: Andrea Travis-Miller,Acting City Manager Jason Simpson,Director of Finance Michael Busch, President,Urban Futures, Inc. November 19,2012 SUMMARY This report proposes to take a number of actions related to the City's budget that combined r represent the Citys financial plan for Fiscal Years 2012-13 and 2013-14 and, if approved by the a Common Council, will serve as the City's Pendency Plan. The City's Pre-Pendency Plan submitted to 0 the Mayor and Common Council by the City Manager on August 29, 2012, September 5,2012_ and October 1, 2012 included a plan for all of the City's funds for Fiscal 2012-13. It was noted that the m General Fund remained out of balance while the City worked through labor negotiations and a discussions with its creditors in an attempt to restructure financial obligations that would balance the Cq fund. While the negotiations process continues, the City must present a balanced financial plan, or N Pendency Plan, for the General Fund that allows the City to continue to provide effective service. This Pendency Plan would serve as the City's budget while it is under Chapter 9 protection and is w presented for Council consideration as part of this staff report. z c The Pendency Plan provides a balanced General Fund through cost reductions to labor, benefits, a debt and other obligations, the details of which are provided below and in the supporting financial v schedules. It should be noted that solvent funds may experience some beneficial impact of the v Pendency Plan changes due to organization wide changes to labor agreements. After the Pendency m Plan is approved, staff will return to the Mayor and Common Council and present the balance of the a non-General Fund operating and capital budgets for approval. c m E DISCUSSION v m a The City of San Bernardino has reached a cross roads. Years of financial struggles and challenges from declining revenues and increasing fixed costs have placed in the City in the position of making difficult service delivery decisions and financial restructuring a necessity. Continued financial imbalance between revenues and expenses have now exhausted the City's general financial reserves and burdened it with obligations it cannot pay, obligations that exceed its current year General Fund resources by $45.8 million in Fiscal Year 2012-2013 and that, unless addressed structurally to be sustainable, will continue to grow in future years. Like most cities in the State, the City of San Bernardino enjoyed the building boom in the past decade and the aggressive asset valuation and increasing sales tax growth that followed. Unfortunately, when the boom ended, San Bernardino found itself terribly exposed to the combined impacts of the Great Recession,the collapse of the housing market and the credit/b anking crisis of 2008-2009. Revenues plummeted combined with generous pay and benefit packages, became unsupportable. This situation _ is further exacerbated by a high foreclosure rate and one of the highest unemployment rates in the country. This Council has had to deal with plummeting revenues and steadily increasing fixed costs that increased the City's vulnerability to the economic storm. Despite efforts to reduce expenditures and put the City's financial house in order, the City is insolvent. During the past two years it became clear the City's financial position was weakening and its employment contracts, post-employment benefits and unfunded liabilities incurred over the last 15 years cannot be supported if the City is to continue delivering services crucial to protecting the health, safety and welfare of the community. The overall poverty level in the City has steadily increased over the past 15 years and the City has few resources to support its most vulnerable citizens. At the same time, drug and gang activity have left the City growing concern for increasing levels of violent crime. As described in extensive reports to the Mayor and Common Council in recent months, the City is insolvent. Now, only the difficult process of restructuring its long-term financial obligations and fixed costs will enable the Mayor and Common Council to protect the community and make a sure that the City emerges from this financial crisis as a viable, sustainable institution. The Mayor and Common Council began that work on June 26, 2012, when it authorized the City Manager to 9 develop a financial and organizational restructuring plan necessary to balance revenues against d expenses. a a The City is working with its employee unions and associations, and its creditors, to reach agreements that would restructure the City's unsustainable financial obligations. Negotiations continue as this N report is being drafted. y w a At this time, however, the City cannot assume that agreements reached will enable the Mayor and c Common Council to completely close the budget gap. The City must be prepared to balance its a budget through a Pendency Plan implemented in the Chapter 9 case.. The alternative to a Pendency Plan that imposes selective reductions in the City's financial obligations are deep service reductions m that are simply unacceptable because they are dangerous to our citizens or they threaten the future ro economic viability of the City. Should any tentative agreements be reached by the parties, they will a be honored and will contribute to the City's ability to use bankruptcy as efficiently and d expeditiously as possible. If agreements are reached and ratified with some or all of creditors after E adoption of this agenda item and its contents, those new Memoranda of Understanding or agreements W would modify the actions in the Pendency Plan. a Without the changes incorporated into the budget as part of its Pendency Plan for the General Fund,the City cannot adopt the balanced budget required by its Charter and the State Constitution. This would affect its ability to pay its employees and suppliers and further interrupting critical service delivery during the fiscal year. In fact, by approving this Pendency Plan, the Mayor and Common Council will be protecting critical services and the San Bernardino citizenry. The City's Capital Improvement Program (CIP) is a five year plan that addresses facility and infrastructure needs for the City and is currently being updated and finalized for review once the Pendency Plan measures are known. The bulk of the funding for Capital Improvements come from restricted sources such as Measure I, a half-cent voter approved sales tax for street improvements, State Gas Tax or from the City s utility funds restricted for improvements to the utility systems. 2 Packet Pg. 174 Although the CIP will not receive funding from the General Fund in Fiscal 2012-13 nor under the Pendency Plan. This level is f a r below the amount needed to address existing deficiencies or ongoing needs for maintenance of capital assets essential to functions funded through the General Fund. An amendment to the California Constitution intended to limit growth in local government spending requires establishment of a maximum limit for expenditures from general taxes. The limit is indexed to specified growth factors approved by the Legislature. The City's annual appropriation limit will be calculated once the Pendency Plan measures are known for 2012-13 pursuant to the requirements of the California Government Code. This limit pertains to appropriations from general taxes and is far above the general taxes the City has available to appropriate. The City of San Bernardino uses the "change in California per capita personal income" for the "change in cost of living" component of the calculation of the appropriation limit. The growth of the index and recent declines in tax revenues leave the appropriation limit much higher than the general taxes available for expenditure. H. PENDENCY PLAN c m v The Preliminary FY 2012-13 Operating Budget included a General Fund deficit of $45.8 million and m indicated that a contingency, or balancing, plan to close the gap would be forthcoming. That plan is a known as the Pendency Plan. N The Pre-Pendency Plan presented on August 29, 2012, and the amendments to the Pre-Pendency N Plan referenced in this Report, together, represent the City's Fiscal Years 2012-13 and 2013-14 Budget w and will serve as its Pendency Plan during the bankruptcy proceedings and will allow the City to 0: balance its budget. The Pendency Plan represents the spending levels the City needs to implement w to become and remain solvent. Those spending levels are lower than the levels that would be a required to deliver adequate services and meet all the requirements of the City's contractual obligations. Spending levels adequate to pay contractual obligations would exceed revenues and there are no m reserves to make up the difference. The California State Constitution and the City Charter prohibit m the City from adopting a budget that is out of balance, preventing the City approving expenditures a unless the budget is balanced. Without restructuring its finances or maintaining the protection of C Chapter 9, the City could not pay its employees,retirees, bondholders or vendors. This would result r in uncontrolled default and, presumably, a collapse of public services. W a Bankruptcy protection assures that this will not happen in San Bernardino, though we cannot say how much creditors will, or will not, receive. The term "Pendency Plan" was developed in the City of Vallejo Chapter 9 case to describe the plan the City would operate under pending the completion of the bankruptcy process. Amendments to the plan or extension of the plan into future fiscal years could occur. Because the Great Recession struck Vallejo after it filed for bankruptcy protection it had to make many changes in its plan to adjust to worsening economic conditions. During the period the City operates under the Pendency Plan in bankruptcy, the differences between payments required by contracts and the amount actually paid become claims in bankruptcy and are resolved through negotiations and, ultimately, the Plan of Adjustment submitted to the creditors for approval and to the bankruptcy court for confirmation. In Vallejo, after three years, all classes of creditors voted to accept the Plan of Adjustment; however, under the Bankruptcy Code, 3 Packet Pg. 175 2J1.f the court can confirm a Plan of Adjustment even if some classes of creditors disapprove; a process known as "cram down". The Vallejo Chapter 9 case took many months because suits determining General Fund access to restricted fund resources and issues regarding bankruptcy court jurisdiction and California labor laws had to be decided. We hope decisions in this case will provide the appropriate guidance in our case and reduce the litigations costs while in bankruptcy. Amendments to the Pre-Pendency Plan This Report describes further changes to the Pre-Pendency Plan required for solvency in Fiscal Years 2012-13 and 2013-14 under the protection of Chapter 9. The changes are based on adjustments intended to implement important principles that have guided the preparation of the Proposed Budget, especially in the General Fund. In addition minor technical corrections in estimates and calculations have been included based on actuals for the first quarter of the fiscal year. The changes described below will be important to the City's creditors. A description is included below of these principles and how they play out in the budget balancing plan. a T V C Promote Health. Safety and Welfare — Protecting the health, safety and welfare of the 9 community continues to be the top priority for the financial restructuring process. Service levels are a inadequate throughout the City, though public safety has received special attention as the City balances competing demands for resources. Given the extremely high crime rates in San M Bernardino, the foundation of the City's future must be safety, and the City's actions to assure that grant funded public safety positions continue to receive funding as grant funds expire reflect the N commitment to that. Due to turnover, the base budget also includes funding to assure that the Police w Department has resources to recruit and train new officers to fill vacancies, to take advantage of M new staffing grants, and to assure that services are available for the community. This principle m shaped the decision to recommend no additional significant service reductions. it C Minimize Impact on Future Services - The future also depends on stewardship of public assets in 0 the form of maintenance, repair and replacement. Unfortunately, funding limitations do not allow `r even the modest expansion of these investments in the Pendency Plan despite ongoing deterioration a of assets. In fact, some minor reductions in Public Works contract work and transfer of right of way m median maintenance to Gas Tax funding is included. Other services that will assure the City can E rebuild its reputation as a great place to live and invest continue with only very minor cost reductions planned for recreation, parks and libraries. The City's sewer and integrated waste utilities and other solvent funds are structured to operate with only indirect impacts from the insolvency of the General Fund and the Pendency Plan. Solvent funds, like utility enterprises will actually benefit from some of the organization wide reductions made as part of the Pendency Plan. Maintain Competitive Compensation Packages — It is essential the City maintain competitive pay and benefit programs to retain and attract qualified, motivated employees. In the past, the City's pay and benefit packages were among the most generous in its market area, sometimes significantly above the regional market. The City has, through negotiation or through imposition of reductions covered by its fiscal emergency powers,reduced compensation and benefit packages for its employees. These include employee payment of their PERS contributions, capping contributions to employee health plans and reducing costs by changing carriers, limiting pay outs, seeking new, lower pension benefit levels for new hires and eliminating retiree health insurance for new hires. The additional, but 4 Packet Pg. 176 selective, changes here continue to address situations where compensation is above market and has created excessive liabilities that cannot be paid without unacceptable reductions in service. The primary reductions proposed herein relate to retirement costs and benefit structure. Balance Costs and Service impacts of Reductions — Cost reductions in the Pendency Plan have been designed to minimize service impacts. As noted above, reductions in employment benefits will not affect service levels. In comparison, significantly reducing salaries could have immediate direct impacts on current employees and would make recruiting and retaining qualified staff nearly impossible. Build Fiscal Sustainability — The Mayor and Common Council's often-stated goal for the restructuring process has focused on sustainability, which means building adequate reserves, covering the full cost of operations, implementing proper stewardship of public assets and building competitive, affordable compensation packages over the long run. Inadequate financial resources result in compromises in the Pendency Plan. Elements of the Proposed Budget aimed at stabilization and sustainability like maintenance investments are deferred in the Pendency Plan. Other sustainability measures like restoration of adequate, pay-as-you-go funding of internal service costs a. and the basic commitment to competitive compensation remain. The Pendency Plan must 0 appropriate funding for restructuring expenses because sustainability is central to the City's effort to return to fiscal health. d a General Fund Spending Changes Implemented in this Pendency Plan The principles built into the Pendency Plan come in different forms. They include suspension of N debt payments and payments for legal claims, continued reductions on pay and benefits imposed W under emergency powers, reductions to over market compensation components, transfers of eligible W costs to other funds, necessary legal and financial consulting services to pursue the City's interests c via bankruptcy an m p y d, possibly, via labor negotiations and limited revenue increases. These changes iC eliminate the $45 million F Y 2 01 2- 13 General Fund gap identified in the preliminary budget and begin to address the City's General Fund cash deficit of$18 million. The City's current deficiency a and efforts taken to date are addressed in greater detail on page 8 of this Report. r a The further reductions proposed in the Pendency Plan are detailed on pages 9 and 10 of this Report. r Impacts are ongoing in nature unless otherwise noted and are reflected in the attached schedules. E L u Summary of Pendency Plan Reductions and Deferrals a Salary,Wages, and Benefits Balancing Measures ($26,064,125) 1. Complete implementation of the Pre-Pendency Plan approved by the Mayor and Common Council. 2. Eliminate vacant sworn positions in the Police Department. 3. Achieve employee concessions that reflect fiill implementation of the State's pension reform. 4. Eliminate the Constant Manning provision in the Fire Department which results in a 35% reduction in overtime. S. Phase out the Other Post Employment Benefit(OPEB)implied subsidy for retiree health. 6. Reduce the OPEB direct payment for health care for police retirees to the amount afforded to other employees. 5 Packet Pg. 177 7. Eliminate the 9%Employer Paid Member Contribution(EPMC) for police and fire. Deferral of General Fund Obligations ($34,959,311) 1. Defer reimbursement of the Restricted and Non-Restricted Funds. Reimbursement would be addressed in future years. 2. Defer the CaIPERS payments less the Employee Withholding and negotiate repayment over time. 3. Suspend Paid Time Off payments to al] employees. 4. Defer debt service on 2005 Pension Obligation Bonds. 5. Discuss the reamortization of the CalPERS liability with CalPERS actuarials. Revenue Related Balancing Measures While new revenues are not projected in FY 2012-13 due to the timing of implementation, it is recommended the Council consider and provide direction related to new revenue measures to be explored further. The Pendency Plan identifies four measures for Council consideration or the Council may identify other measures. r m IL Indirect Impacts on Other Funds d The Pendency Plan focuses on the insolvent General Fund but has implications for other funds. a All reductions apply to employees equally regardless of their fund assignment or allocation, and all funds will have cost reductions associated with personnel cost changes. Potential changes in required subsidy levels from the General Fund resulting from those savings have not been programmed at this time. N U) W The primary impact of these Pendency Plan changes on other funds is a reduction in salary, wages, M and benefit costs. These changes will be offset by allocations of costs related to the Chapter 9 `m process and continuing efforts to work with investors, rating agencies and insurers of bonds to iC emphasize and clearly disclose the strength of the revenue and cash balances that support repayment of these bonds. v C V STATE OF FISCAL EMERGENCY a c m The Mayor and Common Council, by Resolution 2012-205, declared a state of fiscal emergency u based on fiscal circumstances on July 16, 2012. It is recommended the Council authorize the x continuation of the Fiscal Emergency through June 30, 2014. With respect to MOUs that have expired and to the extent that the meet and confer process under the Meyers Milias Brown Act is not yet complete, the Council hereby finds that the need to immediately implement the Pendency P Ian constitutes an emergency within the meaning of Government Code section 3504.5, authorizing the immediate implementation of such plans while the City completes any remaining aspects of the meet and confer process. This emergency is based upon the findings in this Report, and in the staff report and accompanying Resolution adopted by the Mayor and Common Council. CONCLUSION Despite the drastic reductions in,staffing and service levels, the City of San Bernardino is insolvent from both a financial and service delivery perspective. Further reductions to service levels would jeopardize the health, safety and welfare of residents, and would severely limit the City's chances for economic �w 6 Packet Pg. 178 development. The City has a responsibility to provide the services the citizens deserve and require, and the limited resources available to the City need to be focused on preserving basic services and providing for public health and safety given the high crime rates, poverty levels and other socio-economic challenges facing the community. It is with hope for a financially stable and fiscally responsible future, that the proposed Pendency Plan is submitted. We are committed to continuing to participate in good faith negotiations with our creditors going forward in the bankruptcy process and remain committed to getting San Bernardino to a position of fiscal solvency such that it can remain able to deliver essential services. c a a U C U a c d a rn M N r O N N W it r A a Q U C d C d a c m E s U m Packet Pg. 179 0 CITY OF SAN BERNARDINO, CALIFORNIA PENDENCY PLAN FY 2012-13 and IY 2013-14 CURRENT FINANCIAL SITUATION General Fund Cash Projection FY2013 Base Year Receipts $ 120,424 Disbursements (166,237) Deficiency Before Transfers (45,812) Transfers 4,830 Total Operating Deficiency (40,983) S Initial Cash Deficit 10 (18,946) a Integrated Waste Fund Transfer Reversal (3,722) U Total Beginning Cash Deficit (22,668) Total Deficiency (63,651) a. Pre-Pendency Plan 9,318 9-Point Plan Adjustment (296) 0 Net Pre Pendency Impact 9,022 rNb w Total Deficiency with Pre Pendency (54,629) c m a T V C Projected Average Deficiency Over 5 Years (44,004) ReRequired Percentage Impact to Total Annual E m 4 g p Expenditures 26,5/ a OR r E Required Percentage Impact to Salary, Wages&Benefits 35.6% x a Note: The table above reflects the July 31, 2012 General Fund cash deficit, the FY 2012-13 General Fund preliminary budget('Baseline")deficit, the impact of the Pre-Pendency Plan as adjusted by the 9-Point Plan,and the projected 5 year average General Fund deficiency. 8 Pacw Pf.1fl9 2Af PENDENCY PLAN ELEMENTS—FY2012-13 and FY2013-14 `i Item FY 2013 Notes Impact Salary,Wages and Benefits Balancing Measures I.Workforce and Service $ 13,452,000 Reflects the savings from Pre-Pendency Plan less SAFER grant. Reductions 2.Police Vacancies 3,280,000 Sworn positions included in the proposed FY 2012-13 budget (Voluntary Separations) totaled 299. The Pre-Pendency Plan addressed the 18 vacancies that existed at that time, reducing the number of sworn to 281. It is anticipated there will be 268 sworn positions filled as of 12/2012 and 258 filled as of 01/2013. It C is recommended the number be set at 260. a >, v c 3.Police 13.989%Benefit 3,252,000 Reflects 50%of the normal PERS costs;the recent change to Concession state law encourages cities to implement the full cost sharing a by 2018. a, 4.Fire 13.9897%0 Benefit 1,894.000 Reflects 50%of the normal PERS costs;the recent change to N Concession state law encourages cities to im lement the full cost sharing N b 2018 y M.,.. w S.Miscellaneous 9.304% 651,000 Reflects 50%of the normal PERS costs;the recent change to ' Benefit Concession state law encourages cities to implement the full cost sharing by 2018. a T 6.Fire Overtime("OT") 921,375 Elimination of Constant Manning provisions in MOU; a r c Reduction conservative formula estimated that 35%of the Fire c Department OT costs were related to the Constant Manning -+ )CL provision. This number reflects a 35%reduction in Fire OT. c 7.OPEB Implied Subsidy 0 Reflects the reduction of the implied subsidy to existing m Phase Out retirees of roughly$800,000 to$1 Million annually beginning E L January 1,2014. Q 8.OPEB Direct Sub sid 213 750 Reflects the reduction of the direct paymentto ez±sting police Phase Out retirees to the$112 per month afforded to other retirees beginning January 1,2013. Elimination of the subsidy would result in savings of$427,000 for FY 2012-13. 9.EPMC 2,400,000 The City currently provides through an MOU a 9%salary adjustment for Police and Fire employees to cover the cost of the Employer Paid Member Contribution (EPMC) benefit. The City could eliminate the 9%contribution and require the employees receiving this benefit to pay the contribution through salary deductions. The annual savings to the City is $2.4M. 9 Packet Pg. 181 2.A.f Item FY 2013 Notes Im act Subtotal Salary,Wages& $26,064,125 Benefits Deferral of General Fund Obligations — - — 10. Defer $ 15,156,944 Reimbursement will be addressedture years. Reimbursement to Restricted and to _4 'Restricted Funds 11. CalPERS Payments 12,974,727 Reflects the deferral plus the balance of the payments due less Employee and payable and not paid. Assumes repayment at some c Withholding R 0 g ) future date to be negotiated with creditor and assumes a resumption of payments in FY 2013-14. >, 12. Paid Time Off 3,453,175 Vacation sick leave holiday and concession leave time ac Payments accruals• c m 13. Pension Bond 3,374,465 Reflects deferral of principal and interest. Payments m M 14. Reamortize CaIPERS Discussion with CaIPERS actuarial staff are underway, would �+ Liability over 30 yrs realize value of$1.3 million per year starting Fiscal Year 2014. FRevenue Fresh Start) v� W Deferrals $34,959,311 _ m d Related Balancing. Real Pr $ Increase to$5 per$1,000 transferred; projected$3 million a Transfe annually in future years. 2. Transient Increase from 10%to 12%projected$800,000 annually in E Occupancy Tax future years. 3. Utility User Tax Increase from 7.759/1 to 9.5� o'ected 5 . i a annually in future years 4. 911 Projected $6.7 million annually in future years. Communications Fee Subtotal Revenue $ - Projection model assumes about$5.1 million in new revenue in future years(33%of total revenues). Total Balancing Measures $61,023,436 10 Packet Pg. 182 2.A.f General Fund Cash Projection FY 2013 Base Year 2014 Projection inflows/Outflow Source:Preliminary and Pre-Pendency Projections Property Tax $ 27,267,362 $ 27,812,709 Sales Tax 28,221,871 29,068,527 Measure 5,809,910 5,984,207 Franchise Fees 3,376,300 3,470,153 Transient occupancy tax 2,600,000 2,639,000 Utility users tax 22,500,000 22,459,826 Business registration 6,450,000 6,666,745 Fee&Permits 9,890,300 10,384,815 Fines,Enforcement, Restitution 2,104,300 2,104,300 Use of Money and Property 733,000 366,500 Intergovernmental(Grants,Other Govts) 6,086,300 2,373,657 a Miscellaneous 1,501,100 1,062,028 Credits/Grant Offset(Acct#5910) 3,883,722 1,941,861 Total Annual Inflows 120,424,165 116,334,328 m CL Salaries 75,753,606 75,753,606 n Overtime 8,445,590 8,445,590 N Retiree Health Payments 6,658,000 6,824,450 0 PERS Payments 21,203,234 21,501,555 N Health Insurance 6,581,520 6,746,058 W Other benefit payments K P Y 4,866,137 4,866,137 Subtotal Salaries&Benefits 123,508,087 124,137,396 r m a Operations&Maintenance 5,695,842 5,866,717 v Contractual Services 6,345,020 6,535,371 d n Internal Service Fund Charges 21,190,098 21,825,801 m Equipment 2,314,380 a Debt Service 5,183,130 5,187,543 d Other/Claims/Liabilities 2,000,000 - 2E (_ SubTotal O&M,ISF,Eq,D/s 42,728,470 39,415,432 v A Total Expenditures-Outflows 166,236,557 163,552,828 Q Net Revenues/Deficit Before Transfers (45,812,392) (47,218,499) Transfers In 7,932,600 9,759,263 Transfers Out (3,102,958) (3,481,519) Net Transfers 4,829,642 6,277,744 Net Cash Excess Requirement) $ (40,982,750) $ (40,940,755) Beginning Cash $ (18,946,180) $ (29,745,250) Ending Cash $ (59,928,930) $ (70,686,005) Packet Pg. 183 o 0 o m m N y o 1n o 0 0 o n [.2 d ri .+ ni m m m m d A m N C'I O N Y N O N N W c � 0 5 C n � � E a G o L m U L — O n C o x a a N d E A o 2 e D r N LL o C w E _ c m m °_' w q L 8 E c q co 3 a N t .°-' �, w a "' o N w E a i « s g c E a u v w m a ` N y E Packet Pg.TH