CITY COUNCIL
STUDY SESSION
PROPOSED
2001-02 CAPITAL BUDGET
PROPOSED
2002-06 CAPITAL IMPROVEMENT PROGRAM
and
PROPOSED
2001-02 OPERATING BUDGET
Thursday, May
10, 2001
PRESENT: Council Members Campos, Cortesé, Dando, Diquisto, LeZotte, Reed, Shirakawa, Jr., Williams; Mayor Gonzales.
ABSENT: Council Member Chavez, Yeager
STAFF: City Manager Del Borgsdorf, City Attorney Richard Doyle, Budget Director Larry Lisenbee, Assistant Budget Director Jennifer Maguire, Principal Budget Analyst Richard Desmond, Mayor’s Budget and Policy Director Joe Guerra, Assistant City Clerk Nancy Alford, and Legislative Secretary Rachel Thrower.
PROPOSED 2001-02 CAPITAL BUDGET and 2002-06 CAPITAL IMPROVEMENT PROGRAM
Documents Filed: (1) Memorandum from Budget Director, Larry D. Lisenbee, dated May 8, 2001, attaching detailed agendas for the remaining City Capital Budget Study Sessions. (2) Hard copies of the slide presentations on City Facilities and Equipment, Environmental and Utility Services, and Aviation Services City Service Areas, 2001-02 Capital Budget and the 2002-06 Capital Improvement Program.
Discussion/Action: Mayor Gonzales called to order at 8:40 a.m. the Study Session of the City Council on the Proposed 2001-02 Capital Budget and the Proposed 2002-06 Capital Improvement Program to accept detailed presentations on the CSAs deferred from Monday, May 7, 2001– Support Services, Environmental Services, and Aviation Services.
Civic Center,
Municipal Improvements, Service Yards, Communications Capital Programs
Gary Thompson, Deputy Director of Public Works, Design and Construction Division and New Civic Center Project, presented a comprehensive overview of the four Capital Programs – Civic Center, Communications, Municipal Improvements, and Service Yards; summarized the three Desired Outcomes for each – Well Designed Facilities, Clean, Safe and Functional Facilities, and Appropriate & Available Equipment; and stated the overall CSA budget in the Capital Program totals $256 million during the five-year period. He discussed the sources of funds and provided project highlights on significant projects and each of the Programs, and stated the Administration is scheduled to present to Council on June 5, 2001 a progress report on the New Civic Center Design, the financing, information on the construction schedule en route for the 2004-05 move-in date, and delineated significant milestones occurring since the Spring of 2001. Ross Signorino spoke on the Civic Center and the intent of Measure I; and John Messina spoke in opposition to the proposed Civic Center Development.
Storm Sewer, Water Pollution Control, Water Utility System, Sanitary Sewer, and Developer Assisted Projects Capital Program
Director of Environmental Services, Carl W. Mosher, summarized activities occurring in the five Program areas, described the funding sources and uses of funds for each component of the five Programs, identified the Programs in the Developer Assisted Project areas, and described significant changes occurring in the Storm Sewer Operating Fund forecasted to influence funding levels in the years 2002-04. In response to Council Member Dando’s inquiries regarding severe flooding of the Redmond/Firefly neighborhood and whether the estimated funding is sufficient to correct the problem, and the status of repairs to the Rincon Pump Station, City Manager Borgsdorf agreed to continue discussions with the Redevelopment Agency Executive and return to Council with a report. With regards to the community of Alviso and the Storm Sewer improvements, Council Member Reed asked Staff to provide additional information on a continued source of funds dedicated to the completion of Capital improvements that prevent flooding. Referencing page 573 and the statement regarding the existence of certain areas for which a storm system has a one-year storm capacity or less, he asked Staff to provide Council with flood maps of the City showing the one-year and the three-year storm capacities.
Regarding the Flood Zones throughout the City and District 10 in particular, Council Member Dando stated the Almaden Valley area has approximately five square miles that was added to the Flood Zone by the Federal Emergency Management Agency (FEMA), and Public Works has been working on viable solutions. She asked that Staff report back to Council regarding the study conducted by the Department of Environmental Services and whether it bears any correlation to the work being done by Public Works, and whether there might be an opportunity to refine the FEMA findings.
With respect to the 60% reduction in the Storm Sewer Capital Fund and potential rate increases, Mayor Gonzales asked that Staff include in the report on rate increases the efficiencies that have been gained from Program funding.
AVIATION SERVICES
Director of Aviation, Ralph G. Tonseth, introduced Deputy Director William Potter, Team Leader for the CSA, and David J. Clarke, Principal Division Manager, Public Works, representing the primary partners. He stated the Vision for both the Capital and Operating Budgets accomplish five points, four of which translate into goals that provide the best service to the Airport’s customers, community, business partners, and City employees. He reviewed the principles outlined in the Vision Statement, and from the Vision Statement extracted four Desired Outcomes, which are embodied in the Report. Using a slide presentation, he stated the San José International Airport’s Proposed 2002-06 Capital Improvement Program includes 48 projects, totaling $218 million, and an additional 63 projects, totaling $384 million; however, the Plan does not include the major components of the Master Plan Improvements, the recently proposed Terminal Concept Plan, which will be presented to Council upon completion of the review of the Plan with key County stakeholders. He reviewed the remaining Outcomes and related budgeted projects and for Unbudgeted Projects stated separate Council approval of the Airport Master Plan Improvements will be submitted later in the calendar year. For the Fifth Outcome, “Businesses Consider the Airport as a Partner in Supporting the Successes of the Regional Economy”, he stated there are no Capital Projects, as they are contained in the proposed Operating Budget.
He described each of the five funding sources – Federal Grants or Airport Improvement Program (AIP) Grants, Passenger Facility Charges, Airline Rates & Charges, Bond Proceeds, and Rental Car Facility/Transportation Fees – and discussed the Operational and Economic Environment taking place at San José International Airport from 1995 to 2000, and displayed graphics of the paving activities at Runway 30R, photographs of the Federal Inspection Service Facility under construction and completed, and an aerial photograph of arterials in various phases of development leading to and from the Airport. He stated the Proposed CIP continues planning of the Airport’s terminal, roadway and parking systems, while at the same time implementing grade separations and other traffic mitigation projects associated with the ATRA Ordinance. Outside of the terminal and roadway areas, he described multiple projects programmed to upgrade airfield infrastructure, including the reconstruction of Runway 30L, and funding for acoustical testing to include all available dwellings in the 60 to 65 CNEL. He stated treatment funding has been allocated for four eligible schools and remaining dwellings within the 65 CNEL that had not previously participated in the ACT Program. Undertaken in the context of increasing activity, he stated the combination of infrastructure expansions pose one of the Airport’s greatest challenges and is addressed by the planning and construction projects in the Proposed CIP.
Mayor Gonzales acknowledged the extraordinary effort of the many employees who made direct contributions to the preparation and production of the Budgets; after which, Council recessed at 10:30 a.m.
PROPOSED 2001-02
OPERATING BUDGET
Following a 20-minute recess, the City Council resumed in session at 10: 50 a.m., Council Chambers, City Hall.
PRESENT: Council Members Campos, Cortesé, Dando, Diquisto, LeZotte, Reed, Shirakawa, Jr., Williams; Mayor Gonzales.
ABSENT: Council Member Chavez, Yeager
STAFF: City Manager Del Borgsdorf, City Attorney Richard Doyle, Budget Director Larry Lisenbee, Assistant Budget Director Jennifer Maguire, Mayor’s Budget and Policy Director Joe Guerra, Mayor’s Budget Office Assistant Jennifer Galliart, Assistant City Clerk Nancy Alford, and Legislative Secretary Rachel Thrower.
Documents Filed: (1) Binder containing the Proposed 2001-2002 Operating Budget from the Office of the City Manger, Del D. Borgsdorf. (2) Proposed 2001-2001 Operating Budget Agenda for Council Study Session on Thursday, May 10, 2001. (3) Hard copies of the Staff presentation on the 2001-02 Proposed Operating Budget.
Referencing the Operating Budget Document Guide, City Manager, Del D. Borgsdorf, summarized the economic condition of the City of San José and the strong economic performance during the last several years, which has translated on the revenue side into the strongest financial performance in the City’s history; on the other hand, the most significant challenge in developing the Proposed 2001-02 Budget has been to project how the economic downturn will impact revenues in the City’s economically sensitive revenue categories. To reflect the anticipated economic slowdown, he pointed out significant aspects of the revenue estimates that have been reduced for several of the General Fund’s economically sensitive revenue categories.
In crafting the comprehensive budget plan, he stated decisions were guided by the priorities of meeting neighborhood needs and delivering on capital project commitments, and highly ranked projects that strengthen the City’s Strong Neighborhoods Initiative, while at the same time limiting additions to the ongoing operating budget in the face of a changing economic future. He stated the proposed budget, consistent with Council’s commitments, is concentrated in three areas: Enhancement of essential service delivery components; relative importance to investments that enhance operational efficiency; and balancing the importance of fiscal integrity with service delivery and flexibility. He stated the City’s long-term financial strategies have resulted in San José being awarded the highest credit rating of California’s largest cities, AA+, which is a direct indicator of the City’s financial strength. He emphasized the importance for the City to continue with the recruitment and retention process for mission-critical and hard to recruit positions, while balancing how the additional expenditures and resources are added to the payroll. Given the level of management challenges predicted for future revenue performance, he stated it is essential the City remain fiscally conservative over the coming year.
Budget Director, Larry D. Lisenbee, stated the Proposed Budget consists of approximately 60 funds and totals $2.4 billion, an 18% increase over the Adopted 2000-01 Budget, and additional funding by City Service Areas totaling $55 million. Regarding the staffing positions as referenced by the City Manager, he stated 290 positions are proposed among the City Service Areas, as illustrated in the chart, with the largest number of positions assigned to the Recreation and Cultural CSA because of the new Animal Services Program. Regarding the revised General Fund forecast base budget, he stated the beginning surplus amount as prepared in the February forecast totaled $9 million; since that time and because of slower growth rates, the forecast has been revised to reflect the downward revenue trends, particularly in four key revenue estimates – Sales Tax, Property Tax, Transient Occupancy Tax, and money and property funds – which is predicted to be worse than originally anticipated for next year. Using the chart of the total General Fund Sources, he stated Sales Tax, at 21%, is the largest revenue source for the City of San José and reflects the largest downward revision, being reduced from $158 million in the February Forecast to $154 million in the Proposed Budget. Noting the overall assumptions in the major revenue sources, he stated General Sales Tax would decline by 6% in 2001-02; for Secured Property Tax, an assumption of 8% growth in 2001-02; and Unsecured Property Tax estimate is based on an assumption that flat growth would be realized in 2001-02. He stated the Motor Vehicle In-Lieu Fees from the State reflect Statewide licensing fees, assumption of 4% growth in 2001-02, and can be used as a buffer during economic slowdowns, therefore, easing the impact of drop-offs in economically sensitive categories. Continuing with the overview of the assumptions for major revenue sources, he stated the Proposed Budget factors in only the 10% rate increase approved by the Public Utilities Commission (PUC) in March, 2001 for Electricity Utility Taxes; it does not factor in the impact of the rate increases that have not been finalized; conversely, it is not factored in on the expenditure side of Additional Expenses that the City will have both in revenues and expenses; as the information becomes available, the Budget will be adjusted accordingly. He stated the Gas Utility Taxes estimates have been reduced predicated on the assumption gas prices will normalize over the next year. Regarding the Development-Related Fees, he stated the estimate assumes activity will drop-off from the extremely high levels experienced in 2000-01 downward to 10%.
In terms of the balancing strategy that was used in the General Fund, he stated the Proposed Budget reflects the addition of approximately $40 million, with $14 million for ongoing expenditures, and identified the source of funds to meet the funding requirements for each of the key investment proposals. With regards to the “Summary of Key Investment Proposals, he presented a cursory overview of some of the proposals and level of funding, noting those identified with an asterisk as key proposals developed as part of the Mayor’s Message, and discussed future concerns and opportunities affecting this year’s budgetary decision-making and unpredictable impacts on the City’s economy as a result of the energy crisis, State of the economy and State funding demands imposed on local jurisdictions, and future operations and maintenance costs for Capital projects.
As Team Leader, Mark Linder, Director of Parks, Recreation and Neighborhood Services, stated the City Service Area is comprised of primary partners Convention, Arts and Entertainment, Library, Parks, Recreation and Neighborhood Services, and the Parks Maintenance Division of General Services. Joining Mark Linder in the presentation was Library Director Jane Light, and Director of Conventions, Arts and Entertainment, Nancy Johnson. In summary, the Team presented the CSA’a Proposed 2001-02 Operating Budget, outlined the Vision, described Community Outcomes and how they are supported by the current base budget, presented the five-year goals and investment strategies to achieve the goals, and highlighted priorities for Fiscal Year 2001-02 in each of the Core Service areas. Mark Linder stated the Five-Year Goals are delineated in the Business Plan and the City Service Area information is contained in the Operating Budget beginning at page VI-43 through page VI-59. In addition, the Team presented specific proposals for the Fiscal Year, highlighted continuous improvement efforts of what has been done with current resources, and described actions taken not requiring additional budget proposals in the fiscal year.
Referencing Outcome #5 – Seniors and persons with disabilities leading healthy and independent lives, Council Member Reed suggested Staff establish partnerships with Community Based Organizations (CBOs), consider the level of diversity of the partners involved, and be creative in the outreach efforts to include all seniors.
Regarding Homework Centers, Council Member Diquisto pointed out the borderline location of certain San José schools, and queried Staff on the prospect for collaborative efforts with Campbell and Los Gatos to provide homework centers.
Referencing page 383, Item #3 – Parks Restroom Cleaning and Lockdown – Mayor Gonzales asked Staff to provide additional information regarding the maintenance staffing for new parks and facilities as it relates to current staffing level, and to submit the response in the appropriate budget document.
Regarding Item #6 on page 384, Mayor Gonzales stated the program outreach efforts for the City’s Rental Dispute Program should be expanded, given the level of response to the Program, and that Staff should be looking to enhance the services and how that can be achieved. He asked Staff to provide the Mayor’s Office with additional information on the rationale for and the recommendation to reduce the service.
The meeting was adjourned at 12:20 p.m.
Nancy Alford, Assistant City Clerk