LTC 308-2013 Explanation for Increases in FY 2013/14 General Fund Individual Department Budgets N"O I E�
OFFICE OF THE CITY MANAGER
NO.. LTC # 308 -a 13 LETTER TO COMMISSION
TO: Mayor Matti Herrera Bower and Me bers of the ity Commission,
FROM: Jimmy L. Morales, City Manager {
DATE: September 4, 2013-
SUBJECT: EXPLANATION FOR INCREASES IN FY 2013/14 GENERAL FUND
INDIVIDUAL DEPARTMENT BUDGETS IN EXCESS OF 2 PERCENT OVER)
THE FY 2012/13 ADOPTED BUDGET r-,)
The purpose of this memorandum is to provide information on General Fund Current -
Service Level (CSL) department budget increases for FY 2013/14. In prior years the
threshold was a 2% increase net of pension and internal service costs and for this
analysis the same amount has been used. The comparison between FY 2013/14 CSL
and the FY 2012/13 adopted budget includes adjustments for increases to pension costs
and internal service increases.
Background
At the time of the July 8 Finance and Citywide Projects Committee Meeting, the City's
General Fund CSL expenditure budget was estimated at $267.3 million, an increase of
$11.05 million or 4 %, of which $5.5 million was an increase in pension costs and $1.77
million, was the increase in internal service costs. Net of increases in pension and
internal services, the increase was $3.78 million or less than 1.5 %.
At the August 21 Finance and Citywide Projects Committee Meeting, the General Fund
CSL expenditure . budget was updated to reflect changes since July 8 including
miscellaneous expenditure adjustments and the impact of union negotiations. The
miscellaneous expenditure adjustments totaled $264,000 and include items such as
updates to internal service fund charges, administration fees, distribution of pension
costs, and further refinements to salaries. Other expenditure changes include positive
impacts from union agreements totaling $4,635,000 to the General Fund.
Implementation of pension changes for current and future employees result in savings of
$5,664,000 to the General Fund as follows: Communications Workers of America (CWA)
- $120,000, International Association of Fire Fighters (IAFF) $2,152,000 and Fraternal
Order of Police (FOP) $3,392,000. CWA impacts from three percent merit eligibility,
eleven percent extension of the salary range for Lifeguard II and Lieutenants, changes to
holiday pay and increase of union time bank hour resulting in $507,000 increase in
salaries, and a $30,000 increase for reinstated shift differential. IAFF impacts result
from increase on -call supplement for Fire Investigators and PIO's, and increase
paramedic recertification pay resulting in an increase in salaries of $57,000 and increase
of $80,000 in capital and debt for take -home vehicle assignments. FOP impacts for
implementation of voluntary annual physical fitness assessment incentive resulting in an
increase in benefits of $355,000. IAFF and FOP increases are offset by $5.5 million
pension savings in the General Fund ($5.7 million citywide) resulting in a net savings of
$4.6 million.
Explanation for Increases in FY 2013/14 General Fund Individual Department Budgets in
Excess of 2 Percent over the FY 2012/13 Adopted Budget
Page 2
Prior to the inclusion of miscellaneous adjustments, the impact of union negotiations,
and the allocation of increases for internal service funds, the increase was $3.83 million
or 1.5 %. After the inclusion of miscellaneous adjustments and impact of the union
negotiations, the FY 2013/14 CSL budget increased 2.6% from the FY 2012/13 adopted
budget as compared to the 4% above.
Analysis
Attachment A shows the final CSL budget that includes transfers, internal service costs,
union agreement impacts, and pension allocations.
Transfers represent the reorganization of some functions to more transparently reflect
the reporting structure of certain positions and functions as well as reflect where - certain
expenditures are more appropriately charged
• Two community outreach officers, the Condo Ombudsman and the Special
Assistant for CIP previously charged to Code Compliance, Building, and the CIP
Office respectively, are now budgeted in my office where they have reported for
several years;
• The City's Emergency Manager, previously budgeted in Police, is now budgeted
in my office.
• The OBPI Director, previously shared with Organizational Development and
Performance Initiatives (ODPI) is now fully dedicated to OBPI since ODPI reports
directly to the Assistant City Manager.
• Citywide training, previously budgeted in the Parking Department, is now more
appropriately budgeted in Organizational Development and Performance
Initiatives ($67,000).
• The Economic Development budget has been moved from Real Estate, Housing,
and Community Development (REHCD) to Tourism, Culture, and Economic
Development (TCED) consistent with the organizational changes made earlier
this year, in addition to the transfer of the Development Coordinator position from
Communications.
It is important to note that none of these reflect an increase in overall expenditure, but
merely a transfer of expenditures between departments.
Pension increases of $5.8 million in the General Fund (and $6.6 million Citywide) are
primarily driven by the continued recognition of investment experience losses in FY
2007/08 and FY 2008/09 as well as continued decreases in the assumption for rate of
return on investments. After adjusting for the impact of Union negotiations, pension
costs are budgeted to increase by $180,000.
Attachment A also shows the latest estimate of CSL budgets for each General Fund
department prior to the adjustments for transfers (reorganizations), internal service
costs, and pension allocations. The 2 percent variance analysis nets out these
adjustments to present a clear comparison of the remaining differences between the FY
2013/14 CSL budget and the FY 2012/13 Adopted Budget.
As explained in the proposed operating millage agenda item presented to the
Commission on July 17, 2013, a significant component of the increase for all
Explanation for Increases in FY 2013/14 General Fund Individual Department Budgets in
Excess of 2 Percent over the FY 2012/13 Adopted Budget
Page 3
departments is due to increases in employee costs such as 5% step increases for
members not at the maximum of their range in the FOP and IAFF bargaining units and a
maximum of 3 percent for CWA and 2 percent merit increase for other employees. Merit
and step increases apply within existing pay ranges. Overtime increased primarily due
to Police overtime costs increasing over the FY 2012/13 budget amount that anticipated
aggressive savings in overtime, to actual needs. Also included is a ten percent (10 %)
increase in health insurance costs over the FY 2012/13 experience.
As shown in Attachment B , City Manager's Office, City Attorney, Procurement, Building
Code Compliance, Parks and Recreation, and Police have FY 2013/14 CSL budgets
equal to or more than two percent in excess of FY 2012/13 adopted budgets, prior to
adjustments for transfers. The explanation of the increases for these departments is
provided in the respective tables on the following pages.
Conclusion
The FY 2013/14 CSL budget reflects a 2.6% increase over the FY 2012/13 adopted
budget. Net of transfers between departments, pension cost increases, and allocation of
increases in internal service funds, the increase is 1.5 %. As can be seen from the
department variance details presented here, the most significant increases in the FY
2013114 CSL budget are due to Salary and Benefit increases, including Health insurance
costs based on an estimated 10 percent increase over the current Fiscal Year.
It should be noted that in some departments, operating expenses are going down as a
result of continued efforts by administration to reduce costs.
Attachments
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ATTACHMENT B
City Manager
Adopted Budget CSL Budget Variance
FY 2012/13 FY 2013/14 Over/ (Under)
Expenditures $ 2,313,000 $ 2,421,000 $ 108,000
Components
Salaries- Increase due to 2% / 3% merit on anniversary date for
Unclassified, Other, AFSME, & GSA /CWA and the reinstament of the
Assistant City Manager and Executive Office Associate positions partially
frozen during the previous fiscal year 76,873
Other Personnel Costs 1,24,7
Legislative Affairs Tracking Contract 12,000
Operating Expenses - includes increase to office, telephone and
media charges due to new staff and increase to membership /dues
and travel associated with staff certifications 15,205
Internal Service , 3,892
Capita) (1
Net $ 108,000
Procurement
Adopted Budget CSL Budget Variance
FY 2012/13 FY 2013/14 Over/ (Under)
Expenditures $ 1,063,000 $ 1,104,000 $ 41,000
Components
Salaries- Increase due to 2% / 3% merit on anniversary date for
Unclassified, Other, AFSME, GSA /CWA, offset by decreases as a result of
transition within department (26,026)
Health Insurance- Increase due to projected 10% increase over FY13
experience, offset by decrease as a result of transition within department (18,201)
Other Personnel Costs 1,940
Temporary Labor - Support in evaluating and implement improvements to
the City's contract management process to ensure Sunshine Law
requirements during the negotiation process, and contract compliance,
before and after award by creating a central repository of contracts to
ensure contracts and required documents such as insurance are up,to
date. Funding for support will be re- evaluated once the improvements
have been implemented. 60,000
Operating Expenses - Increase for purchase of furniture and one laptop to
be used for evalauation committee meetings and trainings; increase in
professional memberships and training, including certification as
Professional Contracts Managers (CPCM); and new subscription to a firm
to verify financial capacity and background including litigation history of
firms /proposers 19,819
Internal Services Charges - rounding 3,,468
Net $ 41,000
City Attorney
Adopted Budget CSL Budget Variance
FY 2012113 FY 2013/14 Over/ (Under)
Expenditures $ 4,318,000 $ 4,526,000 $ 208,000
Components
Salaries- Increase due to 2% / 3% merit on anniversary date for
Unclassified, Other, AFSME, & GSA / CWA 22,932
Other Personnel Costs (557)
Increased Professional Services based on unanticipated litigation,
appeals and transactional assistance requiring specialized outside
counsel 40,000
Increased Outside Legal Fees to fund collective bargaining /labor
negotiations through impasse 125,000
Operating Expenses - Increase for the replacement of office
furniture less than $500 each, increase in copier lease and
increase in table sponsorships for the City Attorney's Office which
is split with the City Manager and Mayor /Commission 16,178
Internal Services Charges 2,447
Capital 2,000
Net $ 208,000
1
Building
Adopted Budget CSL Budget Variance
FY 2012/13 FY 2013/14 Over/ (Under)
Expenditures $ 10,985,000 $ 11,413,000 $ 428,000
Components
Salaries- Increase due to 2 %/ 3% merit on anniversary date for
Unclassified, Other, AFSME, & GSA /CWA $ 174,488
Health Insurance- Increase due to projected 10% increase over FY13
experience 50,360
Temporary Labor and Professional Services - increase to address increase
in demand, offset by increased Building permit revenues 164,456
Operating Expenses - Increase for Building Board Ups of abandoned
property 35,177
Internal Services Charges = rounding 3,556
Capital (37)
Net $ 428,000
Code Compliance
Adopted Budget CSL Budget Variance
FY 2012/13 FY 2013/14 Over/ (Under)
Expenditures $ 4,647,000 $ 4,755,000 $ 108,000
- Components
Salaries- Increase due to 2% / 3% merit on anniversary date for
Unclassified, Other, AFSME, & GSA/ CWA 34,256
Overtime -for increase staffing of City special events, not reimbursable
from Resort Tax, as well as increased levels of service such as beach
detail assignments, sidewalk cafe and short -term rentals enforcement
initiatives. 62,000
Health Insurance- Increase due to projected 10% increase over FY13
experience (19,991)
Other Personnel Costs 3,047
Operating Expenses - Increase for enforcement of Lot Clearance for
abandoned property, expense is billed as cost recovery to property
owner 24,448
Internal Services Charges 4,240
Net $ 108,000
Parks & Recreation
Adopted Budget CSL Budget Variance
FY 2012/13 FY 2013/14 Over/ (Under)
Expenditures $ 28,772,000 $ 29,717,000 $ 945,000
Components
Salaries- Increase due to 2% / 3% merit on anniversary date for
Unclassified, Other, AFSME, & GSA /CWA 625,524
Health Insurance- Increase due to projected 10% increase over
FY13 experience 19,463
Other Personnel Costs (213)
Increase in Professional Services for the golf courses which
includes the living wage increase, increases in credit card /bank
fees, property and general liability insurance, etc . 290,000
Operating Expenditures 6,733
Internal Services Charges- Rounding 2,715
Debt Service - Rounding 778
Net $ 945,000
Police
Adopted Budget CSL Budget Variance
FY 2012/13 FY 2013/14 Over/ (Under)
Expenditures $ 94,963,000 $ 97,232,000 $ 2,269,000
Components
Salaries- Increase due to 2% / 3% merit on anniversary date for 1,618,363
Unclassified, Other, AFSME, & GSA /CWA ; and 5% steps for FOP & IAFF
Overtime- Increase based on FY13 projected actual 610,000
Court Overtime- Increase based on FY13 projected actual 49,300
Pension- City Contribution (3,435)
Health Insurance- Increase due to projected 10% increase over FY13
experience 187,529
Other Personnel Costs based on FY13 projected expenses, coupled with
related FY14 salary increases 3,875
Operating Expenses (208,489)
23,075
Internal Services Charges- Increase due to rounding
Capital (11,218)
Net $ 2,269,000