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Home My WebLink About17 - Proposed Budget Preparation Framework NEWPORT CITY OF e= NEWPORT BEACH CqC/F00.NP City Council Staff Report October 13, 2015 Agenda Item No. 17 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: Dan Matusiewicz, Finance Director - 949-644-3123, dmatusiewicz@newportbeachca.gov PREPARED BY: Steve Montano, Deputy Director PHONE: 949-644-3124 TITLE: Proposed Budget Preparation Framework ABSTRACT: During recent Finance Committee meetings, members discussed actions for bringing greater transparency and accountability during the annual budget development process. Staff believes that following a proposed Budget Preparation Framework for the development of the Fiscal Year 2016-2017 budget consisting of budget principles, and associated strategies and tactics can be a reliable vehicle for improving the City's budget process. RECOMMENDATION: Review and provide input to staff's proposed Budget Preparation Framework. FUNDING REQUIREMENTS: There is no fiscal impact related to this item. DISCUSSION: The Finance Committee expressed an interest in having greater involvement in the review of the proposed budget prior to its adoption by the City Council. During the recent committee meetings on August 13, 2015, and September 16, 2015, members discussed and generally agreed to pursue actions for bringing greater transparency and accountability during the annual budget development process. These actions include obtaining City Council review and input towards the development of budgeting principles to guide the development of the annual budget; gaining greater transparency in order to assess services, programs, and resource utilization; and having the City Manager's Office facilitate a Finance Committee review of selected City programs or functions that Proposed Budget Preparation Framework October 13, 2015 Page 2 have the potential to operate more efficiently or at lower cost if outsourced in whole or in part. To this end, staff proposes a Budget Preparation Framework that consists of goals, strategies and associated tactics as an ideal means of establishing priorities, guiding program activities, and allocating resources, included as Attachment A. Goals or budget principles represent statements that identify the broad goals that provide overall direction for the City and serve as a basis for decision-making. Strategic objectives are major accomplishments that the City seeks to achieve over a specified period of time to achieve its long term goals. Tactics identify what should be done, that is, outline the specific tasks that must be accomplished to achieve the strategic objectives. The ultimate goal of the budget preparation framework is to: • Provide the Finance Committee with greater involvement in the review of the proposed budget prior to its adoption by the City Council. • Provide greater transparency into the City's annual budget process for all stakeholders. • Increase confidence in the budget development process and secure unanimous City Council adoption of the annual budget. The Finance Committee reviewed and recommended the Budget Preparation Framework on September 16, 2015, for City Council consideration. Staff recommends that the City Council review and provide input to staff's proposed Budget Preparation Framework. ENVIRONMENTAL REVIEW: Staff recommends the City Council find 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. 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). ATTACHMENT: Attachment A - Proposed Budget Preparation Framework for Newport Beach ATTACHMENT A Proposed Budget Preparation Framework for Newport Beach 17-3 Attachment A Proposed Budget Preparation Framework for The City of Newport Beach GOALS- Our Stated Budget Principles: • Follow the Fiscal Sustainability Plan (FSP) • Five key budget principles of our "Shining City by the Bay": GA Keep the community safe. G.2 Providing the quality of and mix of services that Newport Beach residents expect in a cost effective manner. G.3 Keep Newport Beach looking great. GA Maintain a fiscally stable and sustainable city government (as articulated in the FSP). G.5 Providing government transparency to our citizenry. STRATEGIC OBJECTIVES -We want to: S.1 Attract and retain quality employees within our marketplace. (In furtherance of G.2) S.2 Be as efficient as possible, while still providing strong customer service. (G.2) S.3 Seek outsourced service provision where it makes good sense and saves resources (acknowledging that prevailing wage law changes and legacy unfunded liability costs factor in here, too). (G.2) S.3.1 Review these concepts with the Finance Committee. S.3.2 Use outside consultants to review this for us to avoid bias. S.3.3 No sacred cows, at least for discussion purposes. S.4 Use technology to improve customer service and reduce costs, but still have real persons for our residents to connect with. (G.2) S.5 Avoid the "crowd-out' — where pension and OPEB costs cause us to under-invest in roads, buildings, parks, community safety, and other community amenities. (G.3 and GA) S.6 Invest as much resources as we can in capital projects that enhance and protect community value — such as sea walls, park upgrades, transportation systems (signals, roads, bike lanes), water quality, and more. This can involve trying to reduce staffing costs to provide enough funding for capital obligations. (G.3) S.7 Maintain low or no levels of debt, and stay current on all debt obligations. (G.4) S.8 Be aggressive in addressing our pension obligations — in the short- and long-term. (G.4) 1 of 3 17-4 Attachment A Proposed Budget Preparation Framework for The City of Newport Beach S.9 Manage income properties so that they recover fair market value (FMV) and/or reflect a purposeful community benefit as an offset to FMV. (G.4) 5.10 Provide a safe and healthy environment for all community members and visitors by maintaining adequate funding for programs in Police, Fire, Lifeguard and Building Safety. (G.1) TACTICS - Preparing the Budget: T.1 Our budget will be balanced. (G.4) T.2 We will follow the Council's reserve policies, the Fiscal Sustainability Plan, our Master Plans, and the Facilities Financing Plan. (G.3 and GA) T.3 We will be conservative but practical in our revenue estimates. (G.4) T.4 We will be conservative with an eye towards past performance in our expenditure estimates. (GA) T.5 As a staff, we will be protective of all known sources of revenue — existing and potential. (G.4) T.6 Our budget will maximize, to the extent practical, our community's capital needs. (G.3) T.7 Our budget and our budget process will be clear, transparent, and as available to the public as much as possible. (G.5) T.8 We welcome anyone's questions about any aspect of the budget or the budget process. We are here to educate, answer questions, consider new ideas, listen and course-correct if need be. (G.5) T.9 Our longer-term goal is to provide budget information on a program-by-program basis, with good metrics that allow performance measurement of these programs. This requires the new ERP to be more fully implemented. (G.5) T.10 Ways to Better Involve the Public and/or the Finance Committee (FC) (G.5): T.10.1 Staff would take the FC through a series of three to four "deep dives' into specific budget divisions or programs, with explanations about the Budget Detail and salaries, benefits, contract service accounts, and more. Set aside enough time to do this without anyone feeling rushed. Have each member of the FC identify 2-3 areas of interest — or questions they want answered before they have a final discussion about the budget — and complete these to their 2of3 17-5 Attachment A Proposed Budget Preparation Framework for The City of Newport Beach general satisfaction prior to having the Council's spring 2016 budget sessions for FY 16-17. T.10.2 Provide an open public informal workshop on reading and understanding the budget documents as well as the budget preparation process (especially revenue assumptions, how new programs are analyzed). Take one program to have a "deep dive' into as an example. Cover key interest areas — PERS/OPEB, reserves, salaries and MOUS, Master Plans, more. Encourage folks to become more expert in budget issues by answering any and all questions. T.10.3 Schedule the aforementioned 3-4 outsourcing reviews each year by the FC. 3of3 17-6