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Home My WebLink About15 - Mid-Year Budget and Staffing Update with Recommendations to Revise Certain Revenue Estimates, Increase one Expenditure Appropriation, and Fund TransfersCTY OF F NEWPORT BEACH City Council Staff Report February 24, 2015 Agenda Item No. 15 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: Dave Kiff, City Manager— (949) 644 -3002, dkiff @newportbeachca.gov PREPARED BY: Terri L. Cassidy, Deputy City Manager /Human Resources Director Dan Matusiewicz, Finance Director PHONE: (949) 644 -3033 and (949) 644 -3126 TITLE: Mid -Year Budget and Staffing Update with Recommendations to Revise Certain Revenue Estimates, Increase one Expenditure Appropriation, and Fund Transfers and Adopt a Resolution Amending Resolution No. 2014 -52 (Budget Resolution) to Adjust Position Staffing ABSTRACT: On June 10, 2014 the Newport Beach City Council adopted the Fiscal Year 2014 -15 budget for the period July 1, 2014 through June 30, 2015. Included in the budget were projections for revenue and expenditures, as well as approval of all City positions and salaries. January 2015 marked the "mid- year" period for the budget and an assessment of City finances reveal the City of Newport Beach continues to be a financially secure municipality. Further, City programs and services continue to be administered effectively; however, operational needs in some departments have changed. After review of Fiscal Year 2014 -15 budget to actuals and meetings with financial consultants and departments, we ask the City Council to consider approving three budget amendments to increase certain revenue estimates, increase one expenditure appropriation, and agree to the transfer of funds. Additionally, we propose some changes to positions or salary schedules in Fire, Human Resources, Municipal Operations and Police. RECOMMENDATION: a) Approve Budget Amendment No. 15BA -030 that increases General Fund revenue estimates by $5,148,470; b) Approve Budget Amendment No. 15BA -031 that increases expenditure appropriations by $40,000 from unappropriated Assessment Fund fund balance to Account No. 7401 -9812 (Assessment District Engineering); c) Approve Budget Amendment No. 15BA -034 that transfers $2.5 million from the General Fund to the Insurance Reserve Fund and $1.0 million from the General Fund to the Compensated Absences Fund; and 15 -1 d) Adopt Resolution No. 2015 -14 , A Resolution of the City Council of the City of Newport Beach Amending the Annual Budget Resolution No. 2014 -52 and Establishing Certain Job Classifications and Adjusting Position Allocations and Salary Ranges, in the following departments: Fire, Human Resources, Municipal Operations and Police. FUNDING REQUIREMENTS: The net fiscal impact of the attached budget amendments results in a positive increase to the General Fund of approximately $1.7 million. Revenue estimates are increased $5.1 million and transfers -out of the General Fund are proposed to increase 3.5 million. The cost to staff the Human Resources Specialist 1 /II and reclassify the Human Resources Supervisor to Human Resources Manager is estimated to be $41,900. However, eliminating the Deputy Director position will save $105,805, providing an overall salary savings of $63,900 for the remainder of FY 2014 -15. DISCUSSION: Administration of the City's adopted budget is a year -round task. Finance staff regularly reviews actual revenues and expenditures and meets with financial consultants and departments to ensure revenue estimates and expenditure appropriations are accurate and current. We generally bring a mid -year budget report to Council with budget amendment recommendations to ensure the City's budget reflects the most current trends. The FY 2014 -15 budget includes approved positions and salaries based on workload and operational needs that were anticipated at the time of submission (March 2014). However, as with large organizations whose services and programs grow and change, operational needs shift and the workforce cannot remain static. Certain key projects, including the Tyler Munis enterprise resource planning system (ERP) launched in April 2014 have pushed staffing close to capacity. Additionally, as a matter of good practice, Human Resources regularly examines City operations to promote compliance with California Public Employees Retirement System (PERS) regulations, including a requirement that employee pay rates conform to published salary schedules. The recommendations included in this report take these important compliance issues into consideration. As a side note, departments submitted additional requests that I did not approve for placement on the Council's agenda tonight. Proposed Budget Amendments Budget Amendment 15BA -030, Revenue Estimate Increases As a result of favorable economic trends, the General Fund's top three revenue sources (Property Tax, Sales Tax, and Transient Occupancy Taxes) and other revenue categories are performing better than projected in FY 2014 -15 and are expected to continue their climb into positive territory in FY 2015 -16. Staffs review of the Fiscal Year 2014 -15 revenue ledger at mid -year resulted in the following recommended General Fund revenue increases that total $5.3 million: Property Taxes — Property taxes are currently exceeding the 5 -year collection trend. Assessed valuation is up 5.7% from the prior years and sales prices are just below the all -time high in 2007. We estimate that property taxes will come in $1.4 million above the budget. 4000 Secured Property Tax $ 430,000 4002 Property Tax — In Lieu of VLF $ 382,000 4021 RDA Residual $ 550.000 $ 1,362,000 15 -2 Sales Taxes — The City is experiencing increased sales activity across all major industry groups. Receipts for Newport Beach's July through September 2014 sales were 10.9% higher than the same quarter one year ago. Actual sales activity was up 9.3% when reporting aberrations were factored out. The city experienced a strong sales quarter for new motor vehicle dealers, boats /motorcycles, auto leases, and several categories of business and industry. We estimate that sales taxes will come in just over $1.0 million above the budget. 4400 City Sales and Use Tax $ 1,350,000 4001 Property Tax — In Lieu of Sales Tax $ (282.423) $ 1,067,577 Transient Occupancy Taxes — Transient occupancy tax receipts continue to increase thanks largely to the sustained climb in travel and tourism to the region. We certainly thank the destination marketing efforts of our partners at Visit Newport Beach for some of this climb. Major hoteliers report that they are at or near full capacity and can command higher room rates. We estimate that transient occupancy taxes will come in just over $1.0 million above the budget. 4405 UTOT - Commercial $ 1,300,000 4408 Visitor's Bureau - Commercial $ (234,000) $ 1,066,000 Building Permits /Fees — Construction activity and associated permit and plan check revenues are increasing. We estimate that building permits and fees will come in $1.4 million above the original budget. 4610 Building Permits $ 860,000 4612 Electrical Permits $ 100,000 4614 Grading Permits $ 130,000 4616 Plumbing Permits $ 105,000 5002 Plan Checking Fees $ 65,000 5003 Zoning and Plan Review Fees $ 35,000 5004 Plan Check Fees - Grading $ 128.700 $ 1,423,700 Remember that building permits and fees are tied to the cost of providing the service, so upticks in revenue traditionally correspond to upticks in workload, whether that be by contract planners and plan check engineers or by in -house staff. Other Revenue — Other revenue including reimbursements from the State and parking are increasing. We estimate that these revenues will come in $299,193 above the budget. 4812 Mandated Cost Reimbursement $ 109,193 5570 CdM Parking Lot $ 120.000 $ 229,193 The total amount of increased General Fund revenue anticipated in Fiscal Year 2014 -15 may be closer to $5.5 million; however, the other increases are significantly smaller by account and the budget will not be updated at this time. Fiscal -year end reports will include those revenues. Budget Amendment 15BA -031, Expenditure Appropriation Increase There is one program expenditure increase for which staff is requesting Council authorization. The Public Works Department is requesting an Assessment District Fund expenditure appropriation in the amount of $40,000 to fund preliminary work required in advance of the establishment of new assessment districts. These costs will be reimbursed to the City by the district(s) if they are formed at the final public hearings. However, the funds will not be recovered if the district(s) are not formed. 15 -3 Budget Amendment 15BA -034, Transfers As the result of the current year General Fund revenue uplift as described in the narrative section for Budget Amendment 15BA -030 above, the revenue surplus can, with Council approval, be transferred to other funds as proposed below: General Liability The City employs an actuary to estimate the liabilities associated with general liability and workers compensation activities. The costs typically associated with these programs include: claims administration, legal defense, insurance premiums, our self- insured retention ( "SIR" — akin to a deductible), and the establishment of appropriate loss reserves including "incurred- but -not reported" ( "IBNR ") claims. These costs are centrally managed in the City's "Insurance Reserve" fund. Departments incur an annual internal service charge to fund potential claims and risk management activities. Due to recent adverse claims experience, we recommend the City transfer an additional $2.5 million from the General Fund to the Insurance Reserve fund to our reserves. Comoensated Absences Accrued employee leave compensation is centrally managed in an internal service fund. Departments incur an annual compensated absence charge to fund the payment of this liability when leave balances are paid out to employees upon separation or during active employment. Due to outsourcing efforts, employment separation and retirements, payments to settle leave balances have been higher than our normal trend. We recommend the City transfer an additional $1.0 million from the General Fund to replenish the cash position of this fund. Proposed Staffing Adjustments Human Resources Department Recommendation: Replace the Deputy Human Resources Director position with a Human Resources Specialist 1 /II and reclassify two Human Resources Supervisor positions to Human Resources Manager. Human Resources assists the City's 11 departments in recruitment and selection, benefits administration, labor and employee relations, employee performance administration, training, development and wellness, and risk management/risk avoidance. Due to the December 2014 retirement of the Deputy Human Resources Director an opportunity exists to reorganize the department and address shifting priorities. It is recommended the Deputy Human Resources Director position be re- appropriated to Human Resources Specialist I /II to meet increasing technical workload due to Human Resources' project management role in the ERP system. As part of the department reorganization it is also proposed two Human Resources Supervisor positions be reclassified to Human Resources Manager to oversee the reconfigured Risk Management Division (benefits administration, risk management/risk avoidance, and ERP administration) and the Recruitment and Development Division (recruitment and selection activities, training and development, and employee relations /discipline). The proposed salary range for Human Resources Manager is $9,708 - $11,800 per month. Fiscal Impact: No additional funding is required. The cost to staff the Human Resources Specialist 1 /II and reclassify the Human Resources Supervisor to Human Resources Manager is estimated to be $41,900. However, eliminating the Deputy Director position will save $105,805, providing an overall salary savings of $63,900 for the remainder of FY 2014 -15. Municipal Operations Department Recommendation: Reclassify one Facilities Maintenance Crew Chief position to Facilities Maintenance Supervisor and reclassify three Electrician positions and one Irrigation Specialist position to Maintenance and Operations Specialists. 15 -4 The Municipal Operations Department (MOD) manages the City's infrastructure and maintenance services programs including maintenance of the majority of City facilities. Facilities Maintenance is a $2.8 million annual operation and includes management of full -time staff and coordination of contracts for supplemental services. MOD has been working without a Facilities Maintenance Supervisor position since 2010 and supervisory level duties have been redistributed to various management staff. This approach has proven less efficient and the department proposes the Maintenance Crew Chief position be classified as Facilities Maintenance Supervisor, with a salary of $5,404 - $7,611 per month. The proposed salary is set equal to other field supervisory positions in MOD (ie: Park Maintenance Supervisor, Street Maintenance Supervisor). In 2011 the City contracted out for certain electrical services, resulting in the elimination of three positions. Qualified incumbents were allocated to other vacant City positions, however, they retained the old "Electrician" job title. To align current work responsibilities with job classification it is recommended the City establish a broader "Maintenance and Operations Specialist" classification. Similar to Electrician, the Maintenance and Operations Specialist will be responsible for general electrical duties, but will also include broader responsibility for troubleshooting electrical /electronic instrumentation, performing equipment maintenance, and overseeing contractor work. MOD also proposes the Irrigation Specialist position be upgraded to a Maintenance and Operations Specialist due to the expansion of the City's irrigation system to a centralized electronic control model, requiring greater knowledge of computer technology. The recommended salary for Maintenance and Operations Specialist is equal to the current rate for Electrician, which is $4,671 to $6,578 per month. Fiscal Impact: No additional funding is required. The cost to reclassify Facilities Crew Chief to Supervisor and upgrade Irrigation Specialist to Maintenance and Operations Specialist is estimated to be $4,100 for the remainder of FY 2014 -15. The department is able to absorb the increase with the existing budget. Public Safety Chiefs (Police /Fire) On January 1, 2015, management employees (unrepresented) received a 1.5% cost -of- living adjustment (COLA). The Fire Chief and Police Chief were eligible for the COLA but did not receive the adjustment because it would raise their pay beyond the maximum of the published salary range. PERS requires that employee pay must be within the published salary schedules and including pay minimums and maximums for every position. The City of Newport Beach complies with that requirement and posts all salaries on the Human Resources website. I recommend that the salary ranges for Fire Chief and Police Chief each be increased by 1.5% to comply with PERS. The proposed adjustment is reflected in the attached resolution. Bargaining Units City staff consulted with representatives from the respective bargaining units, where applicable, and they concur with the recommendations. If City Council adopts the attached resolution (Attachment B) to amend Resolution No. 2014 -52 to revise certain position allocations, Human Resources and Finance Department staff will work to implement changes. ENVIRONMENTAL REVIEW: This action is not subject to the California Environmental Quality Act ( "CEQA ") pursuant to Sections 15060 (c)(2) (the activity will not result in a direct or reasonably foreseeable indirect physical change in the environment) and 15060(c)(3) (the activity is not a project as defined in Section 15378)of the CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3, because it has no potential for resulting in physical change to the environment, directly or indirectly. 15 -5 NOTICING: The agenda item has been noticed according to the Brown Act (72 hours in advance of the meeting at which the City Council considers the item). ATTACHMENTS: Description Attachment A - Budget Amendments Attachment B - Resolution 15 -6 ATTACHMENT A City of Newport Beach BUDGET AMENDMENT 2014 -15 EFFECT ON BUDGETARY FUND BALANCE: Fund /Division Account increase Revenue Estimates 4000 9010 Increase Expenditure Appropriations 9010 4021 Transfer Budget Appropriations SOURCE: 9010 4405 from existing budget appropriations X from additional estimated revenues 4612 from unappropriated fund balance EXPLANATION: This budget amendment is requested to provide for the following: To increase General Fund revenue estimates following mid -year review. ACCOUNTING ENTRY: BUDGETARY FUND BALANCE Fund Account 010 3605 REVENUE ESTIMATES (3601) $430,000.00 Fund /Division Account 9010 4000 9010 4002 9010 4021 9010 4400 9010 4405 2900 4610 2900 4612 2900 4614 2900 4616 2900 5002 2700 5003 2900 5004 1820 4812 2365 5570 9010 4001 9010 4408 EXPENDITURE APPROPRIATIONS (3603) Signed: W Signed: Signed: Division Number Account Number NO. BA- 15BA -030 AMOUNT: $s,tae,a7o.00 �X Increase in Budgetary Fund Balance Decrease in Budgetary Fund Balance No effect on Budgetary Fund Balance Amount Description Debit Credit General Fund - Fund Balance $516,423.00 $5,664,893 General Fund - Secured Property Tax $430,000.00 General Fund - Property Tax In Lieu of VLF $382,000.00 General Fund - RDA Residual $550,000.00 General Fund - City Sales and Use Tax $1,350,000.00 General Fund - UTOT Commercial $1,300,000.00 Building - Building Permits $860,000.00 Building - Electrical Permits $100,000.00 Building - Grading Permits $130,000.00 Building - Plumbing Permits $105,000.00 Plan Check Fees $65,000.00 Zoning 8 Plan Review Fees $35,000.00 Plan Check Fees Grading $128,700.00 General Fund - Mandated Cost Reimburseme $109.193.00 General Fund - ChM Parking Lot $120,000.00 General Fund - Prop Tax In Lieu of Sales Tax General Fund - Visitor's Bureau Commercial Description Approval: Finance Director City Manager City Council Approval: City Clerk Autmark $282,423.00 $234,000.00 -1l -1.c Date 2.—It-IS Date Date 15 -7 City of Newport Beach NO. BA- 15BA -031 BUDGET AMENDMENT 2014 -15 EFFECT ON BUDGETARY FUND BALANCE: Increase Revenue Estimates Increase Expenditure Appropriations Transfer Budget Appropriations SOURCE: from existing budget appropriations from additional estimated revenues PX from unappropriated fund balance EXPLANATION: This budget amendment is requested to provide for the following: AMOUNT: $40,000.00 Increase in Budgetary Fund Balance X Decrease in Budgetary Fund Balance No effect on Budgetary Fund Balance To increase expenditure appropriations to fund preliminary work required in advance of the establishment of new assessment districts. Should the district(s) not be formed, the General Fund will need to cover these expenditures. ACCOUNTING ENTRY: BUDGETARY FUND BALANCE Amount Fund Account Description Debit Credit 400 3605 Assessment District Fund - Fund Balance $40,000.00 REVENUE ESTIMATES (3601) Fund /Division Account EXPENDITURE APPROPRIATIONS (3603) Description Description Division Number 7401 Assessment District Capital Project Account Number 9812 Assessment District Engineering Division Number Account Number Automatic Signed: Financlal Approval: Finance Director Signed: Administra rve Approval: City Manager Signed: City Council Approval: City Clerk $40,000.00 -9, - )1 -i_S Date 2—M-1113, Dale Date 15 -8 City of Newport Beach NO. BA- 15BA -034 BUDGET AMENDMENT 2014 -15 AMOUNT:1 $3,500,000.00 EFFECT ON BUDGETARY FUND BALANCE: Increase Revenue Estimates X Increase Expenditure Appropriations Transfer Budget Appropriations SOURCE: from existing budget appropriations from additional estimated revenues X from unappropriated fund balance EXPLANATION: This budget amendment is requested to provide for the following: Increase in Budgetary Fund Balance X Decrease in Budgetary Fund Balance No effect on Budgetary Fund Balance To increase revenue estimates and expenditure appropriations to transfer General Fund surplus to the General Liability and Compensated Absences funds to provide for the estimated required annual cash flow. ACCOUNTING ENTRY: BUDGETARY FUND BALANCE Amount Fund Account Description Debit Credit 010 3605 General Fund - Fund Balance $3,500,000.00 ' 605 3605 General Liability Fund - Fund Balance $2,500,000.00 620 3605 Compensated Absences Fund - Fund Balance $1,000,000.00 REVENUE ESTIMATES (3601) Fund /Division Account Description 9605 6000 General Liability Fund - Transfers In $2,500,000.00 9620 6000 Compensated Absence Fund - Transfers In $1,000,000.00 EXPENDITURE APPROPRIATIONS (3603) Description Division Number 9010 General Fund - Non Departmental Account Number 9900 Transfer Out Signed: Signed: Signed: Finance Director City City Council Approval: City Clerk Automatic $3,500,000.00 Date Z -1(i> 19 Dale Date 15 -9 ATTACHMENT B RESOLUTION NO. 2015 - A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF NEWPORT BEACH AMENDING THE ANNUAL BUDGET RESOLUTION NO. 2014 -52 AND ESTABLISHING CERTAIN JOB CLASSIFICATIONS AND ADJUSTING POSITION ALLOCATIONS AND SALARY RANGES WHEREAS, the City Council of the City of Newport Beach previously adopted Resolution No. 2014 -52 to approve the FY2014 -15 budget and establish staffing allocations and salaries for the FY2014 -15 fiscal year; and WHEREAS, the City Council has determined that additional job classifications, staffing allocations and salary range adjustments are to be included in the FY2014 -15 budget; WHEREAS, the City Council of the City of Newport Beach desires to amend Resolution No. 2014 -52 and establish new job classifications and adjust staffing allocations and salary ranges for certain positions; NOW, THEREFORE, the City Council of the City of Newport Beach does RESOLVE as follows: Section 1. The following job classifications and salary ranges shall be established: A. Human Resources Manager at $9,708.40 to $11,800.53 per month and designated within the Key & Management group; B. Facilities Maintenance Supervisor at $5,404.53 to $7,611.07 per month and designated within the Newport Beach Employees League; and C. Maintenance and Operations Specialist at $4,671.33 to $6,578.00 per month and designated within the Newport Beach Employees League. Section 2. The following changes to position allocation shall be incorporated: A. One Deputy Human Resources Director position in the Human Resources Department shall be eliminated; and B. One Human Resources Specialist 1 /11 position in the Human Resources Department shall be added. Section 3. The salary range for the Fire Chief shall be increased by 1.5% to $12,672.16 to $19,005.63 per month, and the salary range for the Police Chief shall be increased by 1.5% to $12,832.31 to $19,245.00 per month. 15 -10 Section 4. The effective date of this change shall be February 24, 2015. Adopted this day of 2015. m ATTEST: City Clerk Mayor of the City of Newport Beach 15 -11