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HomeMy WebLinkAboutPRC_2008-06-19_AgendaPacketREGULAR SESSION: CITY OF A TA SCA DERO PA RKS AND RECREA TION COMMISSION AGENDA Thursday, June 19, 2008 7:00 P.M. Regular Meeting *NOTE LOCATION* Pavilion on the Lake 9315 Pismo Ave. Atascadero, California 7:00 P.M. all 4liel4107y_1 ": 07/_1Z[s]=1 ROLL CALL Chairperson: Vice -Chairperson: Commissioner: Commissioner: Commissioner: Commissioner: Commissioner: Student Representative Student Representative Jay Sechrist Barbie Butz Daniel Chacon Julie Dunn Ann Hatch Jonalee Istenes Sorrel marks Paige Buck -Moyer Vacant COMMUNITY FORUM: (This portion of the meeting is reserved for persons wanting to address the Commission on any matter not on this agenda and over which the Commission has jurisdiction. Speakers are limited to three minutes. Please state your name and address for the record before making your presentation. The Commission may take action to direct the staff to place a matter of business on a future agenda. A maximum of 30 minutes will be allowed for Community Forum, unless changed by the Commission.) APPROVAL OF AGENDA: Roll Call COMMISSION/ YOUTH REPRESENTATIVE ANNOUNCEMENTS AND REPORTS: (On their own initiative, Commission Members may make a brief announcement or a brief report on their own activities. Commission Members may ask a question for clarification, make a referral to staff or take action to have staff place a matter of business on a future agenda. The Commission may take action on items listed on the Agenda.) A. CONSENT CALENDAR: (All items on the consent calendar are considered to be routine and non -controversial by City staff and will be approved by one motion if no member of the Commission or public wishes to comment or ask questions. If comment or discussion is desired by anyone, the item will be removed from the consent calendar and will be considered in the listed sequence with an opportunity for any member of the public to address the Commission concerning the item before action is taken.) None. �i�i/_1�I,Lrl=h�ihl��i:7�l�l.ii•� 1. Fish Habitat Presentation (California Department of Fish and Game) ■ Fiscal Impact: None. ■ Recommendation: Informational Item Only. No Action Required. [Public Works] 2. Proposed Ban of Tobacco -Use in Outdoor Recreation Areas, Parks and the Charles Paddock Zoo ■ Fiscal Impact: Approximately $1,200 for signage and education materials. The Tobacco Control Program can help with some of these initial costs. ■ Recommendation: Commission review the policy issues, receive public comment and recommend regulation of smoking in outdoor recreation areas to the City Council. [Community Services] 3. Mid -Year and Mid -Cycle Budget Revisions ■ Fiscal Impact: None. ■ Recommendation: Informational Item Only. [Administrative Services] C. COMMITTEE & LIAISON REPORTS: (The following represent standing committees. Informative status reports will be given, as felt necessary.): 1. Atascadero Youth Task Force — NO MEETING IN JULY. Next meeting 08/07/08 at 7:15 a.m., Atascadero Junior High School Library. D. STAFF COMMENTS/ ANNOUNCEMENTS: 1. Mark Your Calendar: ■ Free Swim Day — Saturday, June 21St at Atascadero High School Pool. ■ Atascadero Wine Festival — Saturday, June 21St at Atascadero Lake Park from 11:30am — 4:00pm. ■ Summer Concert Series (The Shamblers) - Saturday, June 28th at Atascadero Lake Park from 6:30 — 8:30pm. ■ Summer Concert Series (Big Daddy's Rhythm & Blues Band) - Saturday, July 5th at Atascadero Lake Park. ■ Ice Cream Zoofari — Saturday, July 12th at the Charles Paddock Zoo. 2. Colony Park Community Center Update 3. Parks Project Update E. ADJOURNMENT: THE NEXT REGULAR PARKS AND RECREATION COMMISSION MEETING IS TENTATIVELY SCHEDULED FOR JULY 17, 2008, AT 7:00 P.M. I, Shannon Sims, Administrative Assistant of the City of Atascadero, declare under the penalty of perjury that the foregoing agenda for the June 19, 2008 Regular Session of the Atascadero Parks and Recreation Commission was posted on Friday, June 13, 2008 at Atascadero City Hall, 6907 EI Camino Real, Atascadero, CA 93422 and was available for public review in the Customer Service Center at that location. Signed this 13th day of June, 2008 at Atascadero, California. Shannon Sims, Administrative Assistant City of Atascadero City of Atascadero WELCOME TO THE ATASCADER0 PARKS AND RECREATION COMMISSION MEETING The Parks and Recreation Commission meet in regular session on the third Thursday of each month at 7:00 p.m., in the Atascadero City Hall, located at 6907 El Camino Real, Atascadero. The Parks and Recreation Commission consider matters in the order of the printed Agenda. Copies of the staff reports or other documentation relating to each item of business referred to on the Agenda are on file in the Community Services Department and are available for public inspection during City Hall Annex, 6907 El Camino Real, during business hours at the Central Receptionist counter and on our website; www.atascadero.org. An agenda packet is also available for public review at the Atascadero Library, 6850 Morro Road. All documents submitted by the public during Parks and Recreation Commission meetings that are either read into the record or referred to in their statement will be noted in the minutes and available for review in the Community Services Department. In compliance with the Americans with Disabilities Act, if you need special assistance to participate in a City meeting or other services offered by this City, please contact the Community Services Department at (805) 461- 5000. Notification of at least 48 hours prior to the meeting or time when services are needed, will assist the City staff in assuring that reasonable arrangements can be made to provide accessibility to the meeting or service. TO SPEAK ON AGENDA ITEMS Members of the audience may speak on any item on the agenda. The Parks and Recreation Chairperson will identify the subject, staff will give their report, and the Commission will ask questions of staff. The Chairperson will announce when the public comment period is open and will request anyone interested to address the Commission regarding the matter being considered to step up to the lectern. If you wish to speak for, against or comment in any way: • You must approach the lectern and be recognized by the Chairperson • Give your name and address (not required) • Make your statement • All comments should be made to the Chairperson and Commission • All comments limited to 3 minutes (unless changed by the Commission) • No one may speak for a second time until everyone wishing to speak has had an opportunity to do so, and no one may speak more than twice on any item. The Chairperson will announce when the public comment period is closed, and thereafter, no further public comments will be heard by the Commission. TO SPEAK ON SUBJECTS NOT LISTED ON THE AGENDA Under Agenda item, "COMMUNITY FORUM", the Chairperson will call for anyone from the audience having business with the Parks and Recreation Commission to: Please approach the lectern and be recognized Give your name and address (not required) State the nature of your business This is the time items not on the Agenda may be brought to the Commission's attention. A maximum of 30 minutes will be allowed for Community Forum (unless changed by the Commission). TO HAVE ITEMS PLACED ON AGENDA All business matters to appear on the Agenda must be in the Office of the Community Services Department 14 days preceding the Parks and Recreation Commission meeting. Should you have a matter you wish to bring before the Commission, please mail or bring a written communication to the Community Services Department at City Hall prior to the deadline. PUBLIC NOTICE ADDENDUM TO ATASCADERO PARKS AND RECREATION COMMISSION AGENDA THE FOLLOWING LOCATION CHANGE IS HEREBY ADDED TO THE PARKS AND RECREATION COMMISSION AGENDA FOR June 19, 2008 "Location Change" Pavilion on the Lake 9315 Pismo Ave. Atascadero, CA I, Shannon Sims, Administrative Assistant of the City of Atascadero, declare under the penalty of perjury that the foregoing addendum to the agenda for the June 19, 2008 Regular Session of the Atascadero Parks and Recreation Commission was posted on Monday, June 16, 2008 at Atascadero City Hall, 6907 EI Camino Real, Atascadero, CA 93422 and was available for public review in the Customer Service Center at that location. Shannon Sims, Administrative Assistant City of Atascadero ITEM NUMBER: B - 1 DAT E: 06/19/08 Atascadero Parks and Recreation Commission Staff Report — Public Works Department Fish Habitat Presentation (California Department of Fish and Game) RECOMMENDATION: Informational Item Only. No Action Required. DISCUSSION: Background: On Thursday, May 22, 2008, the California Department of Fish and Game, conducted a fish sampling project in Atascadero Lake to check for invasive fish species. This fish sampling project used an electro -fishing process which involved the use of low -amperage electricity to stun fish before they were caught. This is a common scientific survey method used to sample fish populations to determine abundance, density, and species composition. Electro -fishing typically results in no permanent harm to the fish and they return to their natural state in as little as 2 minutes after being stunned. The results and a detailed description of the fish sampling project at Atascadero Lake are outlined in the attached document from Althouse and Meade. Mike Hill, Fisheries Biologist with the California Department of Fish and Game, will discuss this project and provide a presentation on options for improving fish habitat in Atascadero Lake. LynneDee Althouse, with Althouse and Meade, will also be present to discuss the progress of the floating wetland project. FISCAL IMPACT: None. ATTACHMENTS: Attachment #1: Atascadero Lake Electro -fishing Results ITEM NUMBER: B - 2 DAT E: 06/19/08 Atascadero Parks & Recreation Commission Staff Report — Community Services Department Proposed Ban of Tobacco -Use in Outdoor Recreation Areas, Parks and the Charles Paddock Zoo RECOMMENDATION: Commission review the policy issues, receive public comment and recommend regulation of smoking in outdoor recreation areas to the City Council. DISCUSSION: Background: Smoking is currently prohibited in playground areas per State law, and at all elementary and secondary school properties. The proposed regulations would preclude smoking and tobacco products, and extend them to the Zoo and City parks and recreational areas. These areas would include the following: - Atascadero Lake Park - Colony Park - Paloma Creek Park - Sunken Gardens - Apple Valley Park - Stadium Park - Charles Paddock Zoo - City owned recreational trails The proposed smoking ban and prohibition of tobacco products is based upon 1) the dangers of secondhand smoke, 2) efforts to reduce youth smoking by creating a community where smoking is not an accepted "norm", 3) reducing tobacco litter in parks, 4) community support for smoke free recreation areas, and 5) smoking is counter-productive to the health benefits associated with outdoor recreation and use of public parks, 6) second hand smoke is also harmful to the Zoo's animals, particularly birds, and the prohibition of smoking in the Zoo will protect both animal and human health, 7) there is no constitutional right to smoke- individuals of all ages have the right to breathe clean air, 8) individuals with respiratory impairment, such as COPD or asthma, are protected under the American's with Disabilities Act (ADA) and have the right to access "public accommodation," such as parks, 8) the Children's Outdoor Bill of Rights, lists "play in a safe place-" unless we remove tobacco from our parks they can not be considered a safe place to play. Some facts about the need for smoke-free outdoor areas: - There is no safe level of second hand smoke. - California Air Resource Board (CARB) declared secondhand smoke a toxic air contami na nt. - 35,000 deaths resulting from heart disease each year in non-smokers. - An increased number of asthma cases due to secondhand smoke. - Research shows adult smoking influences youth behavior, bans reduce youth smoking up to 40%. - Tobacco litter is harmful to children, animals and the environment. - 75% of SLO County residents think outdoor recreation areas should be smoke free. Smoke-free ordinances are similar to policies prohibiting alcohol, littering or other nuisance activities in public parks. The policies are primarily self enforcing with adequate signing and community education. The ordinances are the first step to changing a culture of behavior where smoking is tolerated in parks, much like it was in restaurants years ago, but is no longer acceptable. Many California cities already have prohibitions against smoking in public recreation areas. Atascadero would be joining these cities in making a statement about the importance of the health of our youth, larger community, animals and the environment. There are also more than 16 zoological institutions in California that are smoke-free. The Parks and Recreation Commission is being asked to consider a policy which would regulate outdoor smoking and the use of tobacco products in parks and the Zoo, and recommend policy direction to the City Council.. Attached to this report are sample ordinances and draft policy for the Commission's review and comment. The Commission recommendation will be presented to the City Council for adoption. FISCAL IMPACT: Approximately $1,200 for signage and education materials. The Tobacco Control Program can help with some of these initial costs. ATTACHMENTS: A News articles, policy options, sample ordinances and lists of agencies with smoke-free areas. ITEM NUMBER: B - 3 DAT E: 06/19/08 Atascadero Parks and Recreation Commission Staff Report —Administrative Services Department M id -Year and M id -Cycle Budget Revisions RECOMMENDATION: Informational Item Only. REPORT -IN -BRIEF: Economists are all in agreement that the state is in a period of economic downturn. The predictions of how deep and how long this fiscal dip will last vary widely. Staff believes, based on well respected research and key economic indicators that the City may continue to experience a troublesome economy for the next several years at least. Analysts indicate that the State economy will slowly begin to regain strength toward the end of the next year, and Atascadero, with its location and unique economy of its own, tends to lag slightly behind current trends. The Council's effective foresight in adopting sound policy has enabled the City to maintain stability through these difficult times. For the last ten years, the Council has held tight to the fiscal strategic plan that provides for downswings in revenues by putting money aside in good times and then using some of that money during cyclical periods of economic slowdowns. While this policy inherently prevented the Council from approving some of the recreation projects the Commission has advocated, over the long run, it has allowed for stable operations and continuity in service to the community, and has provided long-term financial sustainability to the organization. Atascadero has been able to maintain status quo while the State and some neighboring cities are immediately facing severe cuts. As agencies experience these periodic cutbacks, the importance of rainy -day policies becomes more evident. Similar polices have been adopted in cities across the State and Governor Schwarzenegger has recently recommended such a policy at the State level to help solve some of California's budget concerns. During the current fiscal year, the City's expenses were budgeted in excess of the City's revenues, so some of the money saved up from previous boom years has been used to supplement operations. This is known as deficit spending, and it is a planned and integral part of the City's fiscal policy. Ups and downs in the economy have consistently appeared throughout the City's history, and deficit spending of the reserves is meant to be an effective ITEM NUMBER: B - 3 DATE: 06/19/08 short-term tool for sustainability in the tight years and is done in conjunction with a long-term financial plan. However, deficit spending is akin to withdrawing money from a personal savings account. Although the City has done a good job in funding the reserve account, if used excessively, that account will eventually run out. As of this moment, the City is in a good financial position. The General Fund essentially has $11 million in the bank, well more than needed to cover the budget deficit for this year and next. Although budgets are tight and there isn't enough money to complete all of the projects the community desires, overall services are being provided, capital projects are being completed, and City fiscal obligations are being fulfilled. Unfortunately, the City won't be in a positive financial position indefinitely. The combination of the economic downturn and other financial trends will cause the City to be on a negative fiscal trajectory. Staff currently projects that cash flow reserves will have to be tapped in the second year of the next two-year budget cycle, or 2010-2011 and that General Fund Reserves will completely run dry two years after that. Just as you wouldn't wait to apply for a personal loan until your bank account ran to zero, the City should not wait to make positive changes until its account runs to zero. Positive changes to the bottom line don't necessarily have to be drastic. They often come in the form of day-to-day policy decisions that can have lasting effects, whether it is about not implementing new programs or approving economic development of some sort. The daily decisions that are made on locally form, to a great degree, the basis of the City's bottom line. DISCUSSION: In the face of any economic downturn and negative financial questions that need to be asked and answered. "What is the current status of revenues and expenses?" "How much is there in reserves?" "How long can the City last?" "Is this downturn cyclical or permanent?" "What has been done?" "What has the City Council done?" It is important that everyone understand the answers to these questions, to make both the policy decisions and the day to day decisions that affect our financial future. What is the Current Status of Revenues and Expenses? Revenues Recent changes at the State have shifted revenues from State sources to property taxes. Forty percent, or $7.6 million, of General Fund revenues now come from property related trajectory, there are a number of General Fund Revenues ITEM NUMBER: B - 3 DATE: 06/19/08 taxes, leaving the City heavily reliant on the ups and downs of property tax revenues. Sales tax was projected to come in at 21%, or almost $4 million of the $19 million General Fund pie, while development should bring $1.7 million, or 10%. News has not been favorable for these key General Fund revenues. Preliminary estimates of General Fund revenues predict a shortfall compared to budgeted figures of $970,000, or 5% of budgeted revenues. The variance is not simply a reduction across the board, but is due to multiple concurrent economic issues. Staff has analyzed each of these in great depth to fully understand the complexities and to more effectively project the future revenues and trends. Property Tax Revenues ($200,000) net decrease in revenues for fiscal year 2007-2008 ($450,000) net decrease in revenues for fiscal year 2008-2009 The real estate boom of recent years gave a boost to the City's property tax base. Property Tax revenues are earned on the base assessed value of properties. Property tax can increase only a small percentage each year, so properties that were purchased many years ago have undervalued assessments. As these properties change ownership, their values can be reset to current market rates, increasing the City's tax base. Analysis of the City's base shows that 75% of the City's properties are potentially undervalued because they were purchased prior to the big price inflations of 2005. Essentially, this means that 75% of the Property Tax base is stable and likely to increase and the other 25% of the base is possibly overinflated and has the potential to decrease. Even with aggressive reassessments to lower values, history has shown that because so much of the pie is subject only to potential increase, that an overall decrease in the property tax base is unlikely. Instead, staff expects to continue to see a slowing of the growth in this large revenue source. Although Current Secured and MVLF revenues totaling $7.7 are coming in as projected for fiscal year 2007-2008, there is a small component of property taxes that is more volatile. Supplemental Taxes and Property Transfer Taxes are directly related to the transfer of property and are thus highly sensitive to changes in the real estate market. A slow real estate market translates to significantly fewer sales and substantially less Supplemental Tax Revenues and Property Transfer Tax. Supplemental taxes are predicted to be down 58% from the previous year causing a $142,000 shortfall from budgeted revenues, and Property Transfer Taxes are down 31 % from the previous year, adding an additional $50,000 to the shortfall. Sales Tax Revenues ($450, 000) net decrease in revenues for fiscal year 2007-2008 Positive / (Negative) Variance from Budget Supplemental & Property Transfer Tax $ (200,000) Sales Tax (450,000) FEMA Administration 560,000 Development Revenues (750,000) Mutual Aid (300,000) Interest Revenues 170,000 Total Projected Revenue Shortfall $ 970,000 News has not been favorable for these key General Fund revenues. Preliminary estimates of General Fund revenues predict a shortfall compared to budgeted figures of $970,000, or 5% of budgeted revenues. The variance is not simply a reduction across the board, but is due to multiple concurrent economic issues. Staff has analyzed each of these in great depth to fully understand the complexities and to more effectively project the future revenues and trends. Property Tax Revenues ($200,000) net decrease in revenues for fiscal year 2007-2008 ($450,000) net decrease in revenues for fiscal year 2008-2009 The real estate boom of recent years gave a boost to the City's property tax base. Property Tax revenues are earned on the base assessed value of properties. Property tax can increase only a small percentage each year, so properties that were purchased many years ago have undervalued assessments. As these properties change ownership, their values can be reset to current market rates, increasing the City's tax base. Analysis of the City's base shows that 75% of the City's properties are potentially undervalued because they were purchased prior to the big price inflations of 2005. Essentially, this means that 75% of the Property Tax base is stable and likely to increase and the other 25% of the base is possibly overinflated and has the potential to decrease. Even with aggressive reassessments to lower values, history has shown that because so much of the pie is subject only to potential increase, that an overall decrease in the property tax base is unlikely. Instead, staff expects to continue to see a slowing of the growth in this large revenue source. Although Current Secured and MVLF revenues totaling $7.7 are coming in as projected for fiscal year 2007-2008, there is a small component of property taxes that is more volatile. Supplemental Taxes and Property Transfer Taxes are directly related to the transfer of property and are thus highly sensitive to changes in the real estate market. A slow real estate market translates to significantly fewer sales and substantially less Supplemental Tax Revenues and Property Transfer Tax. Supplemental taxes are predicted to be down 58% from the previous year causing a $142,000 shortfall from budgeted revenues, and Property Transfer Taxes are down 31 % from the previous year, adding an additional $50,000 to the shortfall. Sales Tax Revenues ($450, 000) net decrease in revenues for fiscal year 2007-2008 ITEM NUMBER: B - 3 DATE: 06/19/08 ($850,000) net decrease in revenues for fiscal year 2008-2009 Sales Tax Revenues, which are roughly one-fifth of the General Fund across the State, but Atascadero was particularly hard hit because its broad. In other words, a large portion of Sales Tax Revenue comes 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% - - - Autos & Transportation • • • • • • Building & Construction Business & Industry — Food & Drugs - - - - Fuel & Service Stations General Consumer Goods Restaurants & Hotels reductions in these two sectors. Fourth quarter 2007 adjusted Sales 9.3%. Revenues, are down Sales Tax Base is not from a few retailers in sectors that have been hit hard. Since calendar year 2001, the City's top two sales tax revenue producing industries have been Building/ Construction and Autos/ Transportation. Lack of consumer confidence, the soft housing market, and ever increasing fuel and energy rates have caused Tax Revenues were down The deflation in the real estate industry has influenced the Building and Construction industry. It is one of the hardest hit sectors of the economy, dropping 11.6% from 4th quarter 2006 to 4th quarter 2007. Uncertain of future values, consumers are reluctant to invest much toward building and construction projects. Additionally, the sub -prime mortgage crisis has affected the market for home equity loans and refinancing loans, further reducing the potential for home renovation projects. Restored growth in this industry is expected to come slowly. The high fuel prices have led consumers to seek more -fuel efficient autos, leading to weakening sales in SUVs and trucks. Ford Motor Company nationwide truck and SUV sales dropped 16 percent during March 2008 versus March 2007, and Ford's nationwide sales on all products fell 12% during 2007. Our community is unfortunately not immune to this decline in sales activity. Atascadero Ford recently announced that it will be closing its doors. From its high point, this is a loss of $320,000 in Sales Tax Revenues annually. This will have a significant effect on the City's already lagging Sales Tax Revenues. The combination of the downturn in Building & Construction sales revenues, along with the closure of the Ford dealership have forced us to revise our sales tax projections downward by $450,000 in 07-08 and $851,800 in 08-09. Development Revenues ($750, 000) net decrease in revenues for fiscal year 2007-2008 ($380,000) net decrease in revenues for fiscal year 2008-2009 Development Revenues have decreased significantly during this fiscal year and last. While staff expected the drop in activity, it came in much sharper than anticipated. There are significant projects in process that staff anticipated would be completed by the end of the year; however only 16 single family residence (SFR) permits have been paid and issued in the current fiscal ITEM NUMBER: B - 3 DAT E: 06/19/08 year, compared to 267 in fiscal year 2005-2006. Although, only 16 SFR permits have been pulled this year, there is in fact, a large number of permits that have been through the plan check process and are ready to be paid and picked up. With the economy like it is, developers and home owners are reluctant to pick them up. The length of time the housing market takes to rebound varies from cycle to cycle, and is highly dependent on the financial health of the developers. Based on estimates from a variety of sources, staff anticipates that development will again begin to pick up in 2010. Mutual Aid ($300, 000) decrease in revenues for fiscal year 2007-2008 $150, 000 decrease to expenditures for fiscal year 2007-2008 The Atascadero Fire Department (AFD) has a contract with the Forestry Service that is the source of most of the revenues in this category. Because of an unusual fire season in this area of the State, the Fire Department was not able to provide the expected level of service to the Forestry Service, causing a shortfall of projected revenues of $300,000 and an offsetting expenditure savings of $150,000. Since the 2007 Fire season was atypical, a similar event is not expected to occur again in fiscal year 2008-2009. Historic City Hall FEMA and OES Administration Revenues $ 560, 000 net increase in revenues for fiscal year 2007-2008 The City received Administrative funding related to the Project Worksheet (PW) authorized by the Federal Emergency Management Agency (FEMA) on the Historic City Hall project. On large projects such as City Hall, FEMA grants 2% to the applicant agency, and the Office of Emergency Services (OES) grants 10% to the applicant agency, for administration of the grant funds. These funds are issued soon after FEMA's approval of the PW. These one-time revenues made a significant improvement to the bottom line for the current fiscal year. Expenditures With some minor exceptions, General Fund expenditures are coming in as expected. The City is a service organization. In the current fiscal year (2007-2008), 67% of the General Fund budget is dedicated to employee costs, while 30% is dedicated to operating expense. The remaining 3% is dedicated to special projects, capital purchases and debt service. Operating costs, which are expected to come in at about $5.7 million, consist of all the ongoing day to day costs other than employee costs. They include items from postage to contract services; water bills to recruitment costs; and insurance to vehicle replacement costs. While the City staff has control over some line items such as office expenses, other costs are subject to contract, the weather, or other elements that City staff has little control over. Historically, these costs increase by about 3%, or a little less than $200,000, a year. General Fund Expenditures by Function 2008-2009 Community Community Development Services c Works Lo% Other Uses 2% ITEM NUMBER: DATE: B-3 06/19/08 Half of the General Fund expenditures go toward the costs of public safety. The Community Services budget of $2.7 million includes Recreation, the Colony Park Community Center, the Pavilion and the Zoo and makes up 13% of General Fund expenditures. Staff expects that General Public Safety General Fund employee services will 50%411F Government end the year $200,000 below 16% the adjusted budget and that operating expenses will come in $500,000 under the adjusted budget. Some of the savings in this category are closely linked to drops in activity levels and some are realized from a general tightening of the belt throughout the City. There are other expenses that arose during the year that will offset the $700,000 in savings. These changes add up to about $508,000. This leaves the City's expenses with an expected positive variance of $200,000 as compared to the originally adopted expenditure amount. Capital Projects Capital projects are generally budgeted out of restricted funds. Restricted funds are those that have legal limitations on what they can be used for. The City makes the most of these restricted funds by using them for capital improvement projects instead of using General Fund dollars. This allows the projects to continue to move forward even during those periods when the General Fund is tight. Some capital projects require both the capital improvement funding and the ongoing expense funding. Often, it is easier to obtain funding to construct a new amenity than it is to find the funding to maintain it. For example, the City may be able to obtain a one- time restricted funding grant to construct a walking trail around a part of the City, but the cost to keep the trail in good repair and pick up trash would have to budgeted out of General Fund operations and can be cost prohibitive. ITEM NUMBER: B - 3 DATE: 06/19/08 Project Budget Funding Source Alvord Field Enhancement Project $ 150,000 Redevelopment Agency Fund Colony Park Community Center Sidewalk Improvements 325,850 Redevelopment Agency CDBG Sidewalk Improvement Impact Fees Fund Lake Park Parking Lot Renovation 125,000 Capital Projects Fund Lake Park Restroom Access 249,720 CDBG Lake Park Sign and Frontage Renovations 270,000 Redevelopment Agency Fund Maiden Statue Restoration 220,000 Redevelopment Agency Fund Paloma Park Playground Project 225,000 Capital Projects Fund Santa Rosa Pedestrian Bride 75,000 Capital Projects Fund Shoreline Wall and Walkway Project 355,000 Redevelopment Agency Fund Zoo Entrance Improvement Project 500,000 Redevelopment Agency Fund Zoo Restroom Project 263,000 Redevelopment Agency Fund Zoo Wall and Signage $ 270,000 Redevelopment Agency Fund How Much Is There in Reserves? In its foresight, the City Council prudently adopted the financial policy to put away enough money in the good times to carry the City through the bad times. The question is how much was actually put away and how were the funds to be used? At the beginning of the fiscal year, the City had $2.2 million of undesignated reserves which are funds that have not been earmarked for any specific purpose and are available for Council discretionary spending. The City also had an additional $1.5 million set aside just for downturns such as the one the City is facing. These two reserve accounts were intended to be used first in an economic downturn. There are really little adverse consequences to using these reserves other than the need to replenish them in time for the next downturn. General Fund Reserves General Fund -undesignated $ 2,170,183 Designated for economic uncertainties 1,500,000 Designated for road projects 445,000 Designated for due from other funds 960,279 Designated for cash flow 4,500,000 Reserved for advances to other funds 1,375,175 Reserved for encumbrances & prepaids 31,225 Designated for library 52,650 $ 11.034.512 Prior to the implementation of the Road I I Program, the City also put away $0.4 million to go toward future road programs. It has been left on the books with the intent that this would be opportunity money. If an opportunity came up that needed a match or money from the City, this money could be used. In the face of an economic downturn, staff would recommend using these funds after the Undesignated and Designated for Economic Uncertainties had been depleted. The cost of using these funds is that they would be unavailable if an opportunity arose where the City could leverage them. ITEM NUMBER: B - 3 DATE: 06/19/08 The City had $1.0 million set aside in an account called Designated for Due from Other Funds. This represents amounts that the General Fund had loaned to other funds and therefore wasn't available for general expenditures. Typically, the loan arises because the other fund has a large capital project that is grant funded. This means that the City must expend the funds and request reimbursement once the funds are expended. There is usually a several month lag between when the City must pay out the funds and when the City receives the funds. The General Fund steps in during this lag and loans funds to keep the project moving. In general, the amount in the Reserve for Due to Other Funds varies greatly from year to year based on the number of large grant programs that the City has going. In an economic downturn, the City could use these funds, by having another fund such as the Wastewater Fund loan these amounts. However, there is an opportunity cost if the new loaning fund (the Wastewater Fund in this case) no longer has enough funds to do its own projects or operations. The City has $4.5 million set aside for cash flows. This is the amount of cash flow the City needs to get from the beginning of the fiscal year in July through December when the City finally receives its first Property Tax payment of the year. In a severe economic downturn, the City can use these reserves. Once the City uses these reserves to cover operations, the City would have to borrow funds in the spring of each year and pay them back once it receives its property tax in the winter. The City does have options for borrowing these funds such as participating in a TRAN (Tax Revenue Anticipation Note) or borrowing from other funds within the City. There is, however, a cost to borrowing funds: interest expense, issuance costs and lost opportunity costs are costs that the City will incur with borrowing these funds. Reserved for Advances to Other Funds makes up $1.4 million of the available General Fund Reserves. This is the amount that the General Fund has loaned to the Redevelopment Agency on a long term basis. In a financial crisis, the City could use the reserves to fund City operations. This would mean that the General Fund would lose a lucrative source of interest revenue and the Redevelopment Agency could potentially have to cut projects in order to pay off this debt. In addition to this, the Redevelopment Agency would have to find another source for its revolving debt of approximately $500,000. As important as it is to understand the General Fund Reserves and the ramifications and costs of dipping into each of the reserve accounts, it is just as important to understand which other accounts there might be within the City that are legally accessible to the General Fund in order to meet its operational needs. There are two other sources of potential funds that could be considered. The first is the CCCSIF workers compensation fund balance and the other is the internal service account replacement funds. As of January of this year, there is currently an estimated surplus of $.8 million in the City's CCCSIF Workers Compensation Fund. Once a year, the City may be either required to make a deposit to the fund if the City's balance is negative, or may be given the opportunity to request a refund if the balance is positive. In accordance with the City's conservative fiscal policy, the City has not requested a refund of the balance when given the opportunity. Similar to the City's fiscal policy, this allowed the surplus in the fund to be used to cover years where changes in the workers compensation claims caused large deficits in the fund. This practice has smoothed out the City's workers compensation costs. ITEM NUMBER: B - 3 DATE: 06/19/08 The City also has amounts set aside for replacement of vehicles, equipment, buildings and technology. The City has the legal right to transfer these funds back to the General Fund; however, it is not necessarily prudent to do so. These are akin to a college savings account for a child. Every year, money is put into the savings account so the child can attend college once he graduates from high school. A parent may suspend annual contributions in fiscally hard times and may also dip into the college funds, using them for house payments or other items if the need becomes critical. Once the fund is dipped into, it becomes Estimated Internal Service Replacement Funds doubly burdensome as the family June 30, 2009 tries to both replace what they withdrew, and also tries to Building Replacement Funds $ 2.7 million maintain their annual funding level In order to have enough for the Technology Replacement Funds 0.8 million child to go to college at age 18. Vehicles & Equipment Replacement Funds 1.9 million Similarly, the City puts away $ 5.4 million amounts annually so that as vehicles, computers, software and buildings become old and no longer function, the City has funds to replace them. These funds are legally available to transfer back to the General Fund; however, it does not change the time frame that roofs will have to be replaced or software will no longer be supportable. How Long Can the City Last? Now that it is known how much the City has in reserves and other available funds, the question becomes, "How long can the City last?" There are no definitive answers that one can give to that question, as this involves predicting the future and the only known when predicting the future is that the prediction will be wrong. What staff can do is project out the future revenues and expenses based on best estimate of what changes will occur in the future and what decisions will be made as that future unfolds. Just by projecting out the future and disclosing the information, we in fact hope to, and have the ability to, change that future. Based on current projections, it appears that the City will have used up its Undesignated Reserves, its Reserves for Economic Uncertainties and its Road Program Reserves by June of 2010. The City will have to borrow funds in 2010-2011 and into the future to meet its cash flow needs, but will still be in the black overall. Without alterations to our current course, staff projects that by 2013-2014, General Fund reserves will have completely dried up and budgeted expenses will still outweigh budgeted revenues. Is This Downturn Cyclical or Permanent? It is clear that the slowing of Property Tax growth and the drastic decreases in Supplemental Property Taxes and Property Transfer Tax are cyclical trends. These revenues trend with the California boom or bust real estate market and history has shown that California real estate may rise and fall, but that there will continue to be a strong upward trend. There is no reason to believe that this historical pattern is going to change with this downturn. Development has both a cyclical component and a permanent component. Certainly the most visible portion of development revenue trends is the cyclical portion. As the real estate market slows, developers are understandably reluctant to develop properties that will not sell in the slow market. Thus revenues from building permits, plan checking and other development fees slow to a halt. As the real estate market recovers, this trend turns around. The less visible component of development revenues has to $300 $250 $200 $150 $100 $50 Sales Tax Per Capita Comparison .Is, Arascaaero, 5145.66 ,,..1,.• f)5.'��. h. '0.'�A 00-`�155."Z."°N.• ti. °°,�.• °p,. °h. °�. ti°�tiC�ti°�ti tiCP ti 1 tiC ti� tiC ITEM NUMBER: B - 3 DATE: 06/19/08 6 Year Projection Revenues, Expenses and Fund Balance Actual Estimated Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013 Revenues $ 18,991,391 $ 18,069,000 $ 18,559,220 $ 18,445,950 $ 19,109,780 $20,077,670 $21,024,760 Expenses (18,591,145) (19,370,510) (20,537,720) (20,918,610) (21,262,740) (21,685,310) (22,105,940) Net Income 400,246 (1,301,510) (1,978,500) (2,472,660) (2,152,960) (1,607,640) (1,081,180) , Fund Balance at Beginning of Year 10,634,266 11,034,512 9,733,002 7,754,502 5,281,842 3,128,882 1,521,242 Fund Balance at End of Year $11,034,512 $ 9,733,002 $ 7,754,502 $ 5,281,842 $ 3,128,882 $ 1,521,242 $ 440,062 Composition of Fund Balance at Year End General Fund - undesignated $ 2,201,408 $ 899,898 $ - $ - $ - $ - $ - Designated for economic uncertainties 1,500,000 1,500,000 421,398 - - - - Designated for road projects 445,000 445,000 445,000 - - - - Desingated for due from other funds 960,279 960,279 960,279 - - - - Designated for cash flow 4,500,000 4,500,000 4,500,000 3,854,017 1,701,057 93,417 - Reserveforadvancestootherfunds 1,375,175 1,375,175 1,375,175 1,375,175 1,375,175 1,375,175 387,412 Designated for library 52,650 52,650 52,650 52,650 52,650 52,650 52,650 $11,034,512 $ 9,733,002 $ 7,754,502 $ 5,281,842 $ 3,128,882 $ 1,521,242 $ 440,062 Is This Downturn Cyclical or Permanent? It is clear that the slowing of Property Tax growth and the drastic decreases in Supplemental Property Taxes and Property Transfer Tax are cyclical trends. These revenues trend with the California boom or bust real estate market and history has shown that California real estate may rise and fall, but that there will continue to be a strong upward trend. There is no reason to believe that this historical pattern is going to change with this downturn. Development has both a cyclical component and a permanent component. Certainly the most visible portion of development revenue trends is the cyclical portion. As the real estate market slows, developers are understandably reluctant to develop properties that will not sell in the slow market. Thus revenues from building permits, plan checking and other development fees slow to a halt. As the real estate market recovers, this trend turns around. The less visible component of development revenues has to $300 $250 $200 $150 $100 $50 Sales Tax Per Capita Comparison .Is, Arascaaero, 5145.66 ,,..1,.• f)5.'��. h. '0.'�A 00-`�155."Z."°N.• ti. °°,�.• °p,. °h. °�. ti°�tiC�ti°�ti tiCP ti 1 tiC ti� tiC ITEM NUMBER: B - 3 DAT E: 06/19/08 do with the long-term development of a community. As a City heads closer and closer to build out, there is less and less land that is available for development and as the City eventually reaches build out, development will slow to just rehabilitation / re -use projects. The City will continue to experience upswings and downswings in development activity with a general downward trend. The downward trend for Sales Tax is more difficult to analyze and has the most potential for change. There are certainly cyclical factors at work such as the downturn in building and construction materials sales; however, there may be a more permanent factor as well. Losses of the top 25 sales tax generators such as Atascadero Ford, Obispo Pacific and Central Coast Mitsubishi cause a significant loss of City revenues that may not return. Compounding the loss of revenues from the closure of large retail outlets in the City are internet sales and retail outlets in neighboring cities, which continue to draw revenues out of Atascadero. The City's sales tax consultants have advised that if a Lowe's opens in Paso Robles, similar outlets in Atascadero should expect a decrease of 20% or more. All of these items taken in combination lead staff to believe that perhaps this downturn in the Sales Tax Revenue is not just cyclical in nature, but is instead of a more permanent nature, as Atascadero's place in the local economy is redefined. What Has Been Done? The conservative fiscal policy has prepared the City for a few years of economic downturn. The City is okay for now, successfully paying its bills and fulfilling financial obligations. While these are signs of effective financial management, they are unfortunately also signs that, without closer observation, can lull a person into false security. There are in effect two methods for changing the financial outlook of the City. Either revenues can be raised or expenditures can be reduced. Staff has taken the following steps, working on both sides of this equation: • Reduce Operating Expenses • Provide Education and Communication • Monitor and Increase Fees • Pursue Economic Development • Identify Potential Program Cuts and Service Level Reductions • Analyze Fund Balance in CCCSIF Workers Comp Account • Examine Suspension of Annual Replacement Reserves Funding • Examine Suspension of Annual Roads Contribution Funding • Enact Hiring Chill • Operations Monitoring What Has the City Council Done? Staff is closely monitoring the situation and as seen above, has accomplished much toward improving the City's financial condition. Last month, Staff proposed some key recommendations to the Council. Most of these are generalized recommendations that the Council may consider and use as a basis of a new way of thinking about the future. • Budget Adjustments Council adopted the budget adjustments as proposed in the staff report. ITEM NUMBER: B - 3 DAT E: 06/19/08 • Endorsement of Staff Actions Taken Council supported the actions taken by staff to adjust the financial outlook of the City. • Revenue Enhancement Council agreed to aggressively pursue revenue enhancement options. • No New or Expanded Programs Council instituted a policy of no new or expanded programs. • Maintain Regular Daily Operations Council upheld the current adopted budget obligations. SUMMARY: The City Council's strategic fiscal policy has bought the City time to create a new strategic plan to try to mitigate the fiscal challenges facing our community. The City has been able to limp along this fiscal year, but will experience even more severe financial environments in the immediate future if the City stays on its current charted course of revenues and expenditures. Staff has enacted measures to reduce expenditures and increase revenues where possible, closing the deficit gap. Council has enacted a policy to disallow any new or expanded programs and service levels and can diligently search for long-term solutions. The future brings challenges, no doubt, but, working conservatively together, the Council, the Commissions, the staff and the public can explore and utilize the many options and tools available to find the solutions that will yield a community we can all be proud of. FISCAL IMPACT: This report is for informational purposes only.