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Home My WebLink About2012/05/24 Item 1 Proposed Budget FY 2012/2013 ìêíìíé÷ø úçøõ÷è À öã ÐÎÑÐÑÍÛÜ ÞËÜÙÛÌ Ú×ÍÝßÔ ÇÛßÎ îðïîóïí ÝØÛÎÇÔ ÝÑÈ ÓßÇÑÎ ÐßÌÎ×Ý×ß ßÙË×ÔßÎ ÐßÓÛÔß ÞÛÒÍÑËÍÍßÒ ÍÌÛÊÛ ÝßÍÌßÒÛÜß ÎËÜÇ ÎßÓ×ÎÛÆ ÝÑËÒÝ×ÔÓÛÓÞÛÎ ÝÑËÒÝ×ÔÓÛÓÞÛÎ ÝÑËÒÝ×ÔÓÛÓÞÛÎ ÝÑËÒÝ×ÔÓÛÓÞÛÎ ÖßÓÛÍ Üò ÍßÒÜÑÊßÔ Ý·¬§ Ó¿²¿¹»® ÜÑÒÒß ÒÑÎÎ×Í Ý·¬§ Ý´»®µ ÙÔÛÒ Îò ÙÑÑÙ×ÒÍ Ý·¬§ ß¬¬±®²»§ · ·· ß ÜÓ×Ò×ÍÌÎßÌ×ÑÒ James D. Sandoval City Manager Scott Tulloch Assistant City Manager Gary Halbert Assistant City Manager Ü ×ÎÛÝÌÑÎÍ Michael Meacham Director of Economic Development Maria Kachadoorian Director of Finance/ Treasurer Dave Hanneman Fire Chief Kelley Bacon Director of Human Resources/ IT Services Betty Waznis Director of Library David Bejarano Chief of Police Richard Hopkins Director of Public Works Buck Martin Director of Recreation ··· ·ª ÑÎÙßÒ×ÆßÌ×ÑÒ ÝØßÎÌ CITIZENS OF CHULA VISTA Mayor Citizen Advisory Citizen Advisory City Council Commissions Boards City Manager City Attorney City Clerk Assistant City Assistant City Manager Manager PoliceHuman Library Planning & Resources Building Fire Information & Recreation Development Technology Svcs Services Administration Public Works Animal Care Housing FacilityAuthority Successor Agency to the Redevelopment Agency Finance ª ª· ÌßÞÔÛ ÑÚ ÝÑÒÌÛÒÌÍ BUDGET MESSAGE 1 Letter from the City Manager 3 Budget Process 9 Economic Overview 11 All Funds Summary 15 Summary of Staffing Changes 25 GENERAL FUND SUMMARY 35 General Fund Expenditure Summary 37 General Fund Revenue Summary 47 Department Summary Reports 59 DEVELOPMENT SERVICES FUND 77 SUCCESSOR AGENCY, REDEVELOPMENT, & HOUSING FUNDS 87 Successor Agency and Redevelopment Agency Funds 89 Housing Authority Funds 103 SEWER FUNDS 107 TRANSIT FUNDS 119 FLEET FUND 127 CAPITAL PROJECT FUNDS 135 DEBT SERVICE FUNDS 149 OTHER FUNDS 157 ª·· CAPITAL IMPROVEMENT PROGRAM (CIP) 189 Capital Improvement Program Summary 191 Capital Improvement Projects Summary 193 SUMMARY TABLES 197 Fund Appropriations by Department and Expenditure Category 199 Schedule of Revenues 205 Fund Balance Projections 221 Schedule of Inter-fund Transfers 231 Authorized Positions by Department 239 APPENDIX 251 Fiscal Policies 253 Investment Policies 257 Debt Administration 271 Gann Appropriation Limit 277 Legal Debt Margin 279 Accounting Systems and Budgetary Control 281 List of Acronyms 285 Glossary 289 Chula Vista at a Glance 295 ª··· ÜÑÝËÓÛÒÌÙË×ÜÛ Ì he budget document is organized in a manner to facilitate a general understanding of the City?s fiscal status, to present management?s assessment of major issues and, finally, to present the plan for allocating resources to address those issues during the coming fiscal year. The budget document is organized as follows: Budget Message, General Fund Summary, Other Funds, Capital Improvement Program, Summary Tables, and Appendix. BM UDGET ESSAGE This section provides an executive summary of the City?s all funds budget, outlines major fiscal issues confronting the City, summarizes the region?s economic outlook, and highlights significant budgetary changes for fiscal year 2012-13. It also highlights the sources and uses of funds and provides information on the General Fund reserves. A summary of staffing changes is provided at the end of this section. GF ENERAL UND The General Fund budget funds the day-to-day operations of most city services. This section of the document provides an overview of General Fund revenues and expenditures, staffing changes, and budgetary trends. This section is followed by Department Summary reports that include departmental mission statements and operating budgets for each General Fund department. OF THER UNDS In order to facilitate understanding of the different funding sources, this portion of the document has been organized into the following categories: Development Services Fund, Redevelopment, Successor Agency to the Redevelopment Agency, and Housing funds, Sewer Funds, Transit Funds, Fleet Fund, Capital Project Funds, Debt Service Funds, and Other Funds. Detailed descriptions, funding and staffing levels are provided for each fund. Due to various legal restrictions these funds ·¨ are limited in their uses and generally cannot be applied to fund day-to-day operations such as Police and Fire services. CIP APITAL MPROVEMENT ROGRAM This section provides an overview of the City?s Capital Improvement Program for the coming fiscal year. The Capital Improvement Program accounts for the acquisition, rehabilitation, or construction of major capital facilities, infrastructure, or equipment. More detailed information about each capital project, including project area maps, project status, expenditures to date, current year appropriations, and future funding, can be found in the Capital Improvement Program budget document. STA UMMARY ABLES AND PPENDIX The summary tables provide a quick way to view budget allocations by department (or fund) and expenditure category, revenues by fund and type, projected fund balances by fund, and Council authorized positions by department. The appendix contains supplementary information on a variety of topics including an overview of the budget development process along with relevant timelines and milestones, fiscal and investment policies, debt administration, and a glossary of finance and budget terms. ¨ ÐÎÑÐÑÍÛÜ ÞËÜÙÛÌ ÞËÜÙÛÌ ÓÛÍÍßÙÛ Ô»¬¬»® º®±³ ¬¸» Ý·¬§ Ó¿²¿¹»® Þ«¼¹»¬ Ð®±½» Û½±²±³·½ Ñª»®ª·»© ß´´ Ú«²¼ Í«³³¿®§ Í«³³¿®§ ±º Í¬¿ºº·²¹ Ý¸¿²¹» ï î ÑÚÚ×ÝÛ ÑÚ ÌØÛ Ý×ÌÇ ÓßÒßÙÛÎ M24,2012 AY HMMCC ONORABLEAYOR AND EMBERS OF THE ITYOUNCIL It is my pleasure to present the operating and capital improvement program budget for fiscal year 2012- 13 for the City of Chula Vista. The proposed budget for fiscal year 2012-13 represents the City?s financial plan for the coming year. While we are beginning to see some positive signs in the local economy, the City continues to manage its financial resources conservatively. The combination of modest revenue increases and growing expenditures and community service needs continue to challenge the City to find new and creative ways to deliver high quality services and maintain a balanced operating budget. The fiscal year 2012-13 budget required reductions in order to keep expenditures in line with anticipated revenues. While the projected General Fund deficit for fiscal year 2012-13 was moderate in comparison to recent years, the deficit was difficult to close without impacting already strained departments. With the leadership of our City Council, the cooperation of the City?s bargaining groups, and the dedication of our employees the General Fund operating budget presented in this document is balanced and continues to provide core services to the community. CSFF REATING A TRONGERINANCIALUTURE In January 2012, staff presented the Fiscal Recovery and Progress Plan: Fiscal Years 2013 to 2017 to the City Council. The Fiscal Recovery and Progress Plan is meant to provide an overview of the City?s financial condition and highlight some of the major challenges the City will need to address in the coming years in order to continue on a path to financial resiliency. Over the past few years, the City of Chula Vista has taken steps to avoid deficit spending through a variety of cost saving measures including the reduction or elimination of programs, pension reform, hiring freezes, reductions in staffing levels, and administrative freezes on discretionary spending. These actions were difficult and required the collaborative efforts of the City Council and City employees in order to implement these reductions and to continue providing quality city services. Following are some of the most significant changes/accomplishments that we have implemented through these very difficult times. í Created second tier retirement benefits for new hires resulting in reduced pension costs All employees pay 100% of their share of pension costs Eliminated retiree health care subsidy for new hires Bargaining units agreed to eliminate or defer contractually scheduled raises From fiscal year 2007 to 2012, executive positions were reduced by 38% General Fund reserves have increased slightly over the past three years; progress is being made towards meeting the revised City Council Policy of 15% operating reserve levels. The City Council also approved the establishment of two new reserve categories ? Economic Contingency Reserve and Catastrophic Event Reserve, with the goal of adding additional security to the General Fund. Funding for these reserves will occur over a longer time period. Maintained a favorable bond rating (A-Stable Outlook) during the recent economic downturn Issued the final payment related to the 1996 Pension Obligation Bonds reducing the General Fund debt ratio to 2.8% of the operating budget Partnered with Goodrich Aerostructures to implement Continuous Improvement principles in the City with the goal of providing public services in the most efficient and cost effective manner The Fiscal Health Plan, endorsed by the City Council in January 2009, assisted the City in maintaining a balanced budget during a time the City was experiencing a severe economic decline. The goal of the plan was to stabilize City finances and position the City for a stronger economic future. The Fiscal Health Plan was further developed and incorporated into the Fiscal Recovery and Progress Plan. In the coming year, the City will continue to focus on moving towards long-term financial resiliency. To that end, staff will begin work on developing the City?s first Long-Term Financial Plan which will help the City achieve its financial and operational goals. The Long-Term Financial Plan will build upon the Fiscal Recovery and Progress Plan. ì BD UDGETEVELOPMENT As part of the development of the Fiscal Recovery and Progress Plan, the Five Year Financial Forecast for fiscal years 2012-13 to 2016-17 was developed. In preparing a balanced General Fund operating fund for fiscal year 2012-13, staff focused on the following budget development goals: Maintain the service levels established in Council?s 2011-12 budget Fund the highest level of municipal services possible based on available resources Make significant progress on key programs and projects Continue stabilizing Chula Vista?s financial base Continue to improve efficiency and effectiveness of government services through the implementation of Continuous Improvement principles Despite continued fiscal constraints, the fiscal year 2013 budget provides for substantively the same City services and resources as the fiscal year 2012 Council adopted budget. The General Fund operating budget presented in this document is balanced and continues to provide core services to the community. CGF ITYWIDEOALS AND THE UTURE Our City continues to look forward as it manages its way through the challenges that have resulted from the global recession. The City continues to make progress towards long-term financial resiliency and recognizes that economic development will be a key component in Chula Vista?s financial security. Economic development efforts will help us create a stronger local economy and allow the City to continue to provide quality services and address issues identified in the Fiscal Recovery and Progress Plan. During fiscal year 2011-12, the City Council held a goal setting workshop. At the workshop the City Council recognized the importance of strengthening City revenues in order to support the City?s long term financial and operational goals. To that end, the City Council chose to focus on developing two revenue focused goals to guide future decision making. These goals are: Maintain and increase existing revenues ë Raise new revenues In the coming year the City will continue with the implementation of its three pronged approach to economic development: Advance key projects including Bayfront, Millenia, and University and Research Park Identify and recruit new industries to Chula Vista Increase revenues by focusing on programs that improve local sales tax capture, and foster business to business transactions within city limits In the coming fiscal year we anticipate that our local economy will continue to recover at a modest pace. The City of Chula Vista has been financially challenged the last few years and there are many competing priorities as City revenues begin to grow. The development of the Fiscal Recovery and Progress Plan, and the future development of the Long Term Financial Plan will help keep the City focused on creating a financially resilient organization. I strongly believe that the City of Chula Vista has a bright future. We continue to take steps to strengthen our finances and have a number of unique projects that will help solidify the City?s economic base. A CKNOWLEDGEMENT I would like to thank City staff for their continued hard work and dedication in serving our community. I am grateful that through their efforts we have continued to provide quality services to our community through these difficult times. I am confident, that by working together we will continue to build on the steps we have taken towards strengthening our financial position. The fiscal year 2012-13 Proposed Budget represents the continued commitment of the City Council, Executives, and all City employees to maintain and improve City services. I would like to recognize the Finance Department for their work in preparing the budget. I would also like to thank the Executive team and their staff for their cooperation as we worked towards our goal of developing a budget that is fiscally sound and that remains responsive to the needs of our community. ê Respectfully submitted, James D. Sandoval City Manager é è ÞËÜÙÛÌÐÎÑÝÛÍÍ The fiscal year 2012-13 budget process began in January BUDGET CALENDAR with presentation of the City?s first Fiscal Recovery and th January 12: Fiscal Recovery and Progress Plan. The Fiscal Recovery and Progress Plan Progress Plan and updated Five Year Financial Forecast presentation to City provides an overview of the City?s financial condition and Council highlights some of the major challenges the City will need January ? April: Draft proposed budget to address in the coming years in order to continue on a April: Finalize budget balancing measures path to financial resiliency. Updating the Fiscal Recovery and Progress Plan will become the starting point for future th April17: Presented updated General Fund budget to City Council budgets, in order to provide a long term financial overview th May 14: Budget public meeting/open of the issues facing the City. The Recovery Plan included house an updated Five-Year Financial Forecast for the General th May 24: Council workshop and budget Fund. Despite continued fiscal constraints, the fiscal year submitted to City Council 2013 budget provides for substantively the same City June: Public hearing and adoption of services and resources as the fiscal year 2012 Council budget adopted budget. The General Fund operating budget presented in this document is balanced and continues to provide core services to the community. At the January 2012 Council Workshop, the City?s General Fund was projected to have a deficit of $3.0 million for fiscal year 2012-13. Contributing to the projected deficit was the state takeaway of a portion of motor vehicle license fee revenue and reductions in program revenues. To a smaller degree, the exclusion of some items from prior budget balancing plan also contributed to the deficit. City departments worked from January through April to finalize the fiscal year 2012-13 Proposed Budget and draft solutions to mitigate the projected deficit. On April 17, 2012, City Council was presented with a Proposed General Fund Budget that included budget balancing measures. th On May 14, a Budget Public Meeting/Open House was held to provide an overview of the budget, answer questions, and take comments from the public. ç In late May, the City Manager transmitted the Proposed Budget for Fiscal Year 2012-13 to the City th Council for review. A Council workshop will be held on May 24 to provide an overview of the budget and answer any questions from the Council or the public. Copies of the proposed budget will be made available for public review in the Office of the City Clerk and City libraries approximately 2 weeks prior to the June public hearing. Finally, the City Council will consider the budget for adoption in June, a public hearing will be held prior to Council taking action on this item. As set forth in the City Charter, at any meeting after the adoption of the budget, the City Council may amend or supplement the budget by motion adopted by affirmative votes of at least four members. Throughout the year, the Finance Department provides Council with quarterly fiscal status reports comparing expenditure and revenue projections to budgeted amounts, highlighting any variances and recommending corrective actions as necessary. General Fund Budget Development Milestones January 12, 2012 Presentation to City Council of the Fiscal Recovery and Progress Plan and updated Five Year Financial Forecast. April 17, 2012 Presentation to City Council of the Fiscal Year 2012-13 General Fund Proposed Budget. May 14, 2012 Budget Public Meeting/Open House. May 24, 2012 As required by City Charter, the City Manager?s proposed budget is submitted to the City Council at least thirty-five days before the beginning of the fiscal year. Copies of the proposed budget are available for public review in the Office of the City Clerk and City libraries at least ten days before the public hearings, as required by City Charter. June 2012 A public hearing will be held before Council considers the adoption of the budget in order to give residents an additional opportunity to participate in the budget process. In compliance with the City Charter, a notice of these meetings will be published in the local newspaper at least ten days prior to the public hearings. Adoption of the budget requires the affirmative votes of at least three members of the Council. ïð ÛÝÑÒÑÓ×ÝÑÊÛÎÊ×ÛÉ This section of the budget document identifies and outlines economic indicators that impact some of the City?s major revenue projections. Several sources are used to forecast City revenues using national, state and local area economic trends. Sources include: the UCLA Anderson Forecast (National and State), U.S. Department of Commerce (National), California Department of Finance (State and Local), the University of San Diego Index of Leading Economic Indicators (San Diego region), and the Standard & Poor?s/Case-Shiller Home Price Indices (National and Local). In December 2007, the national economy officially entered a recession, now projected to be the worst since 1929. Although the recession has been officially over since June 2009, the affects to the national economy have been lasting, with recovery continuing at a slow pace. In its first quarterly report of 2012, UCLA Anderson Forecast senior economist David Shulman cites above normal temperatures in most of the country in January and February 2012 as a key factor in the recent improvement in the labor market. According to Shulman, the unseasonably warm winter weather drove the consumer economy. The impact of the mild winter manifested in several respects, including an unusually low number of workers being kept away from their jobs and lower home-heating bills (aided by plummeting natural gas prices, which helped offset higher gasoline prices) ? all of which acted as stimulants for the labor markets. But, Shulman writes, ?We suspect that once the weather and the seasonal adjustment factors normalize in March and April, the economic data won?t look so ebullient.? Shulman also writes that ?the stronger employment data are not appearing to translate into stronger overall GDP growth.? He argues that part of the recent gains in employment was a response to prior growth, not expectations for future growth. ïï According to the UCLA Anderson Forecast, Real Gross Domestic Product: Percent Change after experiencing 3 percent growth in the from Preceding Period 6.0% final quarter of 2011, real GDP will slow to around a 2 percent annual growth rate for 4.0% most of 2012, with the point estimate for the 2.0% first quarter at 2.0 percent. Growth is 0.0% 2009:Q12010:Q12011:Q12012:Q1 expected to improve from that level in both -2.0% 2013 and 2014. Moreover, the looming -4.0% expiration of all of the Bush-era tax cuts and -6.0% the payroll tax cut will elevate economic -8.0% uncertainty in the second half of the year. Í±«®½»æÞ«®»¿«±ºÛ½±²±³·½ß²¿´§·ôËòÍòÜ»°¿®¬³»²¬±ºÝ±³³»®½» In the California report, UCLA Anderson Forecast senior economist Jerry Nickelsburg explores the nature of California?s persistently high unemployment rate and the gap between the state and the national unemployment rates. Nickelsburg details how the state?s unemployment rate is historically the same or slightly higher than the U.S. rate. He notes that the state?s penchant for boom-or-bust cycles creates the temptation to blame the current distance between the U.S. and California unemployment rates on an excess of construction and related sector workers, just as in the early 1990s, when there was an excess of aerospace and related sector workers. A key point in the report is that the U.S. as a whole saw a decline in its overall labor force, as discouraged workers removed themselves from actively seeking employment. In California, the same removal from the labor force did not occur, and this accounts for much of the difference in rates between the state and the nation. In 2012, the Forecast calls for slow growth in employment at about the national rate. When the economy picks up in 2013 and 2014, the drivers of the state?s economy will be technology, exports, health care, professional, scientific and business services, and education. The California forecast is for employment growth of 1.9 percent in 2012, 2.0 percent in 2013 and 2.6 percent in 2014. Payrolls will grow more slowly, at 1.3 percent, 1.9 percent and 2.5 percent, respectively. Real personal income growth is forecast 1 to be 2.4 percent in 2012, followed by 2.1 percent in 2013 and 3.2 percent in 2014. 1 UCLA Anderson Forecast, March 2012. ïî TheUUniversityoof San Dieego's San Diego Inndex of Leadingg EconomicIndicators Indexof Leadding Economic ïíð ïîë Indicattors for Sann Diego Coounty ïîð rose00.9 percent in January. The ïïë advance was led by ssharp ïïð ïðë increasess in consummer confidennce, initial claims ïðð for unemmployment insurance,and local sstock çë prices.HHelp wantedd advertising and the outtlook çð èë for the nnational economy were also up soolidly. The onlyy componennt that declined in Jannuary was buiding permis.fter stretch o six llttAaaff Sourcce: University of SSan Diego monthstthat alternatted betweenn advancing and decliningg, the Januarry 2012 USDD Index wass the third strraight monthh that exhibitted an increease in the inde. October? decline pushed the sting of alterating declies and advances in th USD xxssrrnnnnee Index to six straightt months.WWith no turning point bbeing signalled, the outtlook for thee local economyy remains uunchanged ffrom what wwas previouusly reporteed: positive but weak ggrowth 2 throughaat least the ffirst half of 2012. Thee City of Chula Vista coontinues to experiencethe impactss of the ecoonomic receession, howeever, there aare some poositive signs indicating aa modest reccovery isuunderway.AAccording too the Califorrnia Departmment of Finaance, Chulaa Vista th hass maintainedd its place ass the 14 laargest incorpporated city in the state. The total nummber of houssing units inncreased only slightly froom 79,784 in January 22011 to 80,4408 in January2012. Althoough reflecting a slight increase in tthe number of housing uunits, the vaacancy rate has remained at 4.91%. Thhe housing mmarket also continues tto show instability. Accoording P/Case-Shller Home rice Index report, San iego was ne of only tree U.S. markets to the S&&iiPPDDoohh in Februaary 2012 to sshow a monnthly increase in home vvalues. Wheen looking att prices on aa year- 3 ago basiis, however, San Diegoo prices droopped 3.9 percent. Chhanges in CChula Vista home prices vaaried greatlyy for the saame time pperiod depennding on loocation. Thhe following chart compares the median home pricces for Februuary 2011 annd February 2012 for Chhula Vista. 2 Universityy of San Diego SSchool of Busineess Administratioon, USD Index ofof Leading Econoomic Indicators, February 28, 2012. 3 Standard && Poor?s/Case-SShiller Home Prrice Indices, April 24, 2012 ïí Chula Vista Home Sales February 2012 Compared to February 2011 Median Price Percent Zip Code Locale20112012Change 91910 North $282,500 $240,000 -15.0% 91911 South $253,500 $205,000 -19.1% 91913 Eastlake $307,000 $336,500 9.6% 91914 NE $495,000 $399,000 -19.4% 91915 SE $302,000 $316,000 4.6% Source: San Diego Union Tribune, April 24, 2012 On the positive side, the City is projected to experience continued growth in Sales Tax revenue. Sales tax revenue now represents the City?s largest single revenue source. In fiscal year 2010- 11, the City experienced a 12.8% increase in Sales Tax after three years of significant reductions. Fiscal year 2011-12 is expected to continue the positive growth in Sales Tax revenue at a more modest pace, with a projected increase of 4.1% when compared to the prior year. The fiscal year 2012-13 budget reflects a conservative increase of approximately 1%. ïì ßÔÔ ÚËÒÜÍ ÍËÓÓßÎÇ The following section provides an overview of the combined all funds budget. Detailed descriptions, funding, and staffing levels are provided for each fund under the corresponding fund section in this document. This section is intended to provide a citywide overview of the proposed fiscal year 2012-13 budget. All Funds Revenue Summary The combined revenue budget for all City funds totals $259.6 million; $33.9 million represents inter- fund transfers. When compared projected revenues for the prior year, the fiscal year 2012-13 proposed budget reflects a projected net decrease of $19.6 million in revenue. The largest change in revenue is occurring in the Transfers In from Other Funds revenue category, which reflects a net reduction of $17.3 million. In fiscal year 2011-12, Redevelopment Agencies were eliminated through State action. The largest changes in the Transfers In from Other Funds category reflects the budget changes needed to reflect the elimination of the Redevelopment Agency and the establishment of the Successor Agency to the Redevelopment Agency. As part of this transition the County will take over the pass-through payments to various agencies, thus eliminating a number of the transfers previously reflected in the budget. The Successor Agency to the Redevelopment Agency will receive property tax increment revenues for enforceable obligations approved by the Oversight Board and State Department of Finance. The Transfers In from Other Funds also reflects the elimination of the transfer from the General Fund to the 1994 Pension Obligation Bond Fund of $2.7 million as the final debt service payment was made during fiscal year 2011-12. The next largest change is in the Property Tax revenue category, which reflects a decrease of $4.7 million. This decrease largely reflects the elimination of the Redevelopment Agency. The City will no longer receive Property Tax revenue that is then passed through to other agencies; the County ïë will now be responsible for these payments. As such, the revenues and expenditures related to these payments are no longer reflected in the budget. The General Fund will also experience a decrease in Property Tax revenue of approximately $553,000 based on a projected decrease to assessed values. The Other Revenue category reflects a net decrease of $2.5 million when compared to the prior year. This reduction largely reflects the elimination of the transfer in from the Economic Contingency Reserve that was used to help balance the General Fund in fiscal year 2011-12. The Economic Contingency Reserve was funded by budgetary savings that resulted from the implementation of the budget balancing plan in January 2011. The funds were used to balance fiscal year 2011-12 with the anticipation that these revenues would be offset with reduced expenditures - the final debt service payment for the pension obligations occurred on fiscal year 2011-12. This change resulted in the elimination of $3.0 million in this category; all other changes in this category resulted in a net increase of $0.5 million. The Schedule of Revenues report, included in the Summary Tables section, reflects the projected revenues for fiscal year 2012-13 at the fund and revenue type level. The following table reflects a summary of all City revenues by category. ïê Sources of Funds (All Funds Combined) Fiscal Year 2010 to Fiscal Year 2013 Revenues (In Thousands) Total Revenues Fiscal Year 2012-13 (All Funds Combined) Revenue from Other Agencies Use of Money & 18% Property Charges for 1% Services Fines, Forfeitures, 20% Penalties 1% Licenses and Permits 1% Development Impact Fees 2% Other Local Taxes 19% Other Revenue 12% Transfers In Property Taxes 13% 13% ïé All Funds Expenditure Summary The combined expenditure budget for all City funds totals $273.8 million; $33.9 million represents inter-fund transfers. This amount includes a General Fund operating budget of $123.6 million and a Capital Improvement Program (CIP) budget of $20.0 million; the remaining $96.3 million reflects the operating budget for the non-General Fund funds including Sewer, Successor Agency to the Redevelopment Agency, Development Services, Transit, and Fleet. When compared to the prior year budget, the fiscal year 2012-13 proposed budget reflects a decrease of $25.9 million. The largest change in expenditures is occurring in the Transfers Out category. As discussed in the Revenue Summary, the changes in inter-fund transfers reflect the elimination of the Redevelopment Agency. The City will no longer receive Property Tax revenue that is then passed through to other agencies; the County will now be responsible for these payments. As such, the revenues and expenditures related to these payments are no longer reflected in the budget. This category also reflects the elimination of the transfer out from the General Fund for the costs related to the 1994 Pension Obligation Bond of $2.7 million. The final debt service payment was made during fiscal year 2011-12. The Other expenses category reflects the next largest change - a net reduction of $7.9 million. This decrease reflects the elimination of the debt service payment related to the 1994 Pension Obligation Bond Fund of $2.7 million. Other reductions in this category are related to the elimination of the Redevelopment Agency. This category previously included the payments to the various agencies that received pass-through revenue. The Capital Improvement Projects (CIP) Expenditures category reflects a net decrease of $3.5 million. This expenditure category varies from year to year based on the availability of funds. The fiscal year 2012-13 budget includes funding of $2.8 million for the Orange Avenue Park that will be funded from a State grant. The following table reflects the expenditures for all funds by expense category. ïè Uses of Funds (All Funds Combined) Fiscal Year 2010 to Fiscal Year 2013 Expenditures (In Thousands) Total Budget Fiscal Year 2012-13 (All Funds Combined) Supplies and Services 21% Other Expenses 10% Capital 1% Transfers Out 12% CIP Project Expenditures 7% Personnel Services Non-CIP Project 43% Expenditures Utilities 3% 3% ïç The total number of recommended permanent positions for fiscal year 2012-13 is 928.85, of which 785.35 are included in the General Fund and 143.50 are included in various other funds. The proposed staffing represents a net increase of 4.1 positions when compared to the fiscal year 2011- 12 adopted budget. The Authorized Positions by Department report is included in the Summary Tables section of this document; it provides the proposed staffing by classification and department. A summary of the proposed staffing changes is included in the Staffing Changes section. Projected Changes in Undesignated Fund Balances The following table provides a summary by fund type of the projected revenues and expenditures for fiscal year 2012-13 and the projected impact to their respective undesignated fund balance. Undesignated fund balance represents available, expendable financial resources in a governmental fund. Undesignated fund balance is sometimes referred to as available reserves. As noted in the table below, most funds are anticipated to draw down reserve levels in the coming year. Summary of Net Impact to Reserves by Fund Fiscal Year 2012-13 (In Thousands) îð The net impact to reserves for all funds is a net decrease of $14.2 million; this change includes the following: The largest use of reserves is occurring in the Redevelopment, Successor Agency, and Housing category. Approximately $5.0 million in reserves are anticipated to be used in fiscal year 2012-13. Included in this category are the following funds: The Redevelopment Retirement Obligation fund includes $4.0 million for the loan to o the Landings II affordable housing project. The Long-Term Advances Fund (Redevelopment) accounts the use of inter-fund o Redevelopment loans. This fund reflects greater expenditures than revenues of approximately $0.6million. The CV Housing Authority Fund reflects the use of $0.4 million in reserves. The o use of reserves will help offset the loss of Redevelopment revenues in this fund. The next largest use of reserves is occurring in the Other Funds. In total these funds reflect a net decrease of approximately $2.5 million in reserves. Included in this category are the following funds: The Workers Compensation Fund reflects a budgeted net impact of $0.9 million. o The budget for this fund includes a contingency expense for unexpected claims. The actual impact to reserves will be determined by actual claims paid. The Public Liability Trust Fund reflects a budgeted net impact of $0.4 million. It is o anticipated that this fund will use some level of reserves. In fiscal year 2011-12, this fund is projected to experience significant expenditure savings. The reduction in the transfer in from the General Fund helped balance that fund while maintaining reserves in the Public Liability Trust Fund at levels similar to fiscal year 2011. The actual use of Public Liability Trust Fund reserves will depend on actual expenditures in this fund. The Asset Seizure Fund reflects the use of $0.4 million in reserves. The use of o reserves will fund the purchase of Police related equipment including body cameras. Asset Seizure funds are also used to fund the South Bay Community Services? Juvenile Diversion program and fleet maintenance costs of detective vehicles. îï The Environmental Services Fund reflects the use of $0.4 million in reserves. The o use of these reserves will be used to help meet the new requirements in AB 341, to achieve 75% recycling rate by 2020, through waste reduction, recycling and organics management/composting. The Gas Tax Fund reflects the use of $0.4 million in reserves. The use of these o reserve funds help offset the costs of eligible expenses in the General Fund including street maintenance, tree trimming, street sweeping, and utility costs for traffic signals. Capital Project funds will use approximately $2.4 million in reserves for various capital improvement projects. Included in this category are the Public Facility Development Impact Fee funds ? these funds will use reserves to pay debt service related to the construction of various City facilities. The Transportation DIF also reflects the use of reserves for various capital improvement projects (CIP), most notably the $929,000 for the Willow Street Bridge Widening CIP. Debt Service funds are projected to use $2.1 million in reserves. Included in this category are the following funds: The 2010 COP Refinance fund reflects the use of $1.3 million in reserves. These o funds were received as part of the 2010 COP re-finance; these funds are being used for debt service payments. The Long-Term Advances Fund accounts the use of inter-fund loans. This fund o reflects greater expenditures than anticipated revenues of approximately $550,000. The CEC Loan Repayment Fund reflects the use of $284,000 in reserves. This o fund accumulated a fund balance due to delays in the initiation of debt service payments for CEC loans. The fiscal year 2012-13 budget reflects the use of this fund balance for debt service payments. The Fleet Management fund reflects the use of $875,000 in reserves. This reflects the use of fund balance in the Equipment Replacement fund to purchase vehicles. Due to financial constraints the City has not purchased vehicles in several years (with the exception of grant funded purchases); the fiscal year 2012-13 budget includes the replacement of various vehicles that have reached critical status. îî The General Fund reflects the use of $514,000 in reserves. These funds will be used to fund the Bonita/Long Canyon repair capital improvement project that was approved by Council during fiscal year 2011-12. The operating fund for the General Fund is balanced and does not rely on the use of reserve funds. General Fund Reserves In November 2009, the City Council approved a resolution updating the City?s General Fund Reserve Policy. The new reserve policy: Provides updated guidelines for the use of reserves Sets a new long-term goal for a higher General Fund Reserve level, from 8% to 15% Includes the establishment of two new reserve funds - the Economic Contingency Reserve and the Catastrophic Event Reserve The new policy will take several years to implement but once fully implemented the new General Fund Reserve policy will require higher reserve levels, which will help mitigate the negative impact on revenues from economic fluctuations, position the City to withstand State revenue takeaways, and provide a resource to fund unforeseen expenditure requirements. The Third Quarter Financial Report indicates that the General Fund reserves will decrease slightly to $11.5 million. This decrease reflects the mid-year appropriation of funds for the first phase of the Bonita/Long Canyon repair capital improvement project. The funding for the second phase of this project is included in the fiscal year 2012-13 proposed budget. It is important to recognize that reserve levels have not only stabilized but have increased slightly as the City has implemented significant budget reduction measures to mitigate the negative impacts to General Fund reserves over the last several years. Budget reduction measures have included a reduction in City services and programs, reduced staffing, and the implementation of an administrative freeze on all non-essential expenditures. The following chart depicts the General Fund reserves since fiscal year 2008-09. îí Generaal Fund Reeserves Fiscaal Year 20088-09 to Fisccal Year 2011-12 îì ÍËÓÓßÎÇÑÚÍÌßÚÚ×ÒÙÝØßÒÙÛÍ The fiscal year 2012-13 budget includes 928.85 positions for all funds. This is a net increase of 4.10 positions when compared to the fiscal year 2011-12 adopted budget that included 924.75 authorized positions. The summary of staffing changes is divided into two sections ? the staffing changes that have already been approved by Council during fiscal year 2011-12 and changes made as part of the development of the fiscal year 2012-13 budget. PCADFY2011-12 OSITIONHANGES UTHORIZED URINGISCAL EAR During fiscal year 2011-12, Council approved the addition of one grant funded position to the Police Department and the transfer of the positions formerly assigned to the Redevelopment Agency to the newly established Successor Agency to the Redevelopment Agency. The following table summarizes the position changes Council authorized during fiscal year 2011-12. Summary of Fiscal Year 2011-12 Staffing Changes (Approved by City Council) Department/FundProgram PositionFTE Police (1.0) Crime Lab Evidence Control Assistant 1.0 Assistant Director of -1.0 Redevelopment and Housing Redevelopment Agency Redevelopment Project Coordinator II -2.0 (-4.0) Senior Administrative -1.0 Secretary Assistant Director of 1.0 Successor Agency to the Successor Agency to Redevelopment and Housing Redevelopment Agency Redevelopment 2.0 (4.0) Project Coordinator II îë Department/FundProgram PositionFTE Senior Administrative 1.0 Secretary Total Citywide 1.0 FY2012-13C ISCALEAR HANGES The fiscal year 2012-13 budget largely reflects a carryover of the services and programs funded in the fiscal year 2011-12 Council adopted budget. Unlike recent budgets, major service and personnel reductions were not necessary in order to balance the budget. In total, the proposed changes result in a net increase of 3.10 FTE. These changes include the following new positions: 1.5 new positions to the Animal Care Facility. The addition of 1.0 Veterinarian (Permitted) is offset by increased revenues and a decrease in the hourly staffing budget. This position was previously staffed on an hourly basis but for improved operational efficiency it is recommended that this position be added as permanent, benefitted position. The Animal Care Facility budget also reflects the addition of a 0.5 Animal Adoption Counselor. 2.0 Peace Officer in the Police Department. The addition of these positions will allow the Police Department to reinstate the Advance Hire program, which will better position the department to address retirements expected to occur in fiscal year 2013-14. 1.0 Fire Inspector I in the Fire Department. The proposed Fire Inspector/Investigator I will perform all General Use Certificate inspections and manage the Fire Company inspection program. This position is fully revenue offset. 2.0 new positions in the Public Works Department. The Public Works department recommended the addition of 1.0 Associate Engineer to the Traffic Engineering program. The addition of this position is partially offset by the elimination of a vacant 0.5 Signal Systems Engineer II position and by new staff time reimbursement revenues. The department also requested the addition of a Conservation Specialist to the Environmental Services program; this position is fully revenue offset through SDG&E partnership funds. 1.0 new Recycling Specialist added to the Environmental Services Fund. The addition of this position will facilitate the City?s ability to meet new State requirements regarding solid waste diversion. This position is funded by AB939 fee revenues. îê In addition to these positions the proposed budget also reflects the elimination of 4.0 positions. Of these positions 3.5 were funded by grant funds that have now expired. A vacant part-time position was eliminated from the Development Services Fund. During the development of the fiscal year 2012-13 budget, departments worked with the Human Resources Department to review positions that are working out of class due to changing job duties resulting from the various budget reductions and reorganizations that have occurred over the last several years. Departments worked with Human Resources to determine the appropriate classification and compensation for these reclassification requests. The proposed staffing changes are recommended based on changes to workload and scope of responsibility. Since 2007, citywide staffing has been reduced by 339.0 FTE, a decrease of 27%. As positions have been eliminated there has been some amount of shifts in duties as critical tasks have been reassigned to lower level staff. Finally, the proposed budget reflects the transfer of various positions between funds. These transfers are recommended to better align the positions with their respective funding sources. The transfers are reflected in a separate table. The following table summarizes the changes reflected in the fiscal year 2012-13 proposed budget. Summary of Fiscal Year 2012-13 Staffing Changes Department/FundProgram PositionFTE Administration (no Administrative Technician -1.0 Communications ? net change in reclassification Public Information Specialist 1.0 staffing) Information Technology Support -1.0 Manager Information Technology Manager 1.0 Information Technology Human Resources Services ? Information Technology Support and Information -1.0 reclassifications Specialist Technology Senior Information Technology Services (no net 1.0 Support Specialist change in staffing) Human Resources Human Resources Analyst -1.0 Operations - Senior Human Resources Analyst 1.0 reclassification îé Department/FundProgram PositionFTE Accounting Assistant -1.0 Accounting Technician 1.0 Finance (no net Revenue and Recovery change in staffing) - reclassifications Accounting Technician -1.0 Collections Supervisor 1.0 Animal Adoption Counselor 0.5 Animal Care Animal Care Facility Facility (1.5) Veterinarian (Permitted) 1.0 Community Patrol Peace Officer 2.0 Police (2.0) Evidence Control Assistant -1.0 Crime Lab - reclassification Automated Fingerprint Technician 1.0 Fire (1.0) Fire Prevention Fire Inspector/investigator I 1.0 Associate Engineer 1.0 Traffic Engineering Signal Systems Engineer II -0.5 Public Works (1.5) Conservation and Conservation Specialist I 1.0 Environmental Services Administrative Secretary -1.0 Library Administration - reclassification Administrative Analyst II 1.0 Library (0.1) Librarian II -0.15 Branch Operations Library Associate 0.25 CBAG Deputy Director 1.0 Police Grants California Border CBAG Director of SD LECC -1.0 Fund (-1.0) Alliance Group (CBAG) CBAG Analyst -1.0 Legal Assistant -0.5 Neighborhood Prosecution Grant Deputy City Attorney II -1.0 ARRA (-2.5) Southwest Border Public Safety Analyst -1.0 Narcotics Grant Environmental Environmental Services Recycling Specialist 1.0 Services (1.0) Development Services Fund Land Development Landscape Architect -0.5 (0.5) Total Citywide 3.10 îè In addition to the staffing changes summarized above there were also a number of staffing transfers to reflect a realignment of departmental functions. These changes are summarized on the table below. Summary of Program/Position Transfers FromToPositionFTE Police Department (1.0) Police Agent 1.0 ARRA Fund (-2.0) Police Grants Fund Police Agent 1.0 (1.0) Assistant Director of Redevelopment and Housing (to be Successor Agency 1.0 retitled Assistant Director of to the Development Services Development Services) Redevelopment (General Fund) (2.0) Agency (-2.0) Senior Administrative Secretary 1.0 Administration (1.0) Senior Administrative Secretary 1.0 Development Senior Secretary 1.0 Services (General Development Services Development Services Counter Fund) (-3.0) Fund (2.0) 1.0 Manager îç SFP UMMARY OF ROZENOSITIONS In fiscal year 2011-12 there were a number of positions that were frozen in order to help balance the budget. Due to the continued fiscal constraints, these positions were again not funded in fiscal year 2012-13. As funding becomes available the status of these positions will be reevaluated; recommended funding changes will brought to Council for consideration during fiscal year 2012-13 should funding become available. In total 20.0 FTE positions are frozen, these positions are summarized on the following table - no changes were made from the prior year. Summary of Fiscal Year 2012-13 Frozen Positions Department/FundProgram PositionFTE City Attorney City Attorney Law Office Manager 1.0 Administration Fire Division Chief 1.0 Fire Fire Training Fire Engineer 1.0 Police Administration Police Captain 1.0 Community Patrol Peace Officer 9.0 Police Service Dogs Peace Officer 1.0 Street Crime/Gang Peace Officer 2.0 Police Suppression City Jail Detention Facility Manager 1.0 Police Dispatch 2.0 Police Dispatch Police Communications Systems 1.0 Manager íð SSCDBU UMMARY OF TAFFINGHANGES BY EPARTMENT AND ARGAININGNIT The following tables summarize the staffing changes occurring between the fiscal year 2011-12 and 2012-13 proposed budgets, by bargaining unit and by department. Summary of Staffing Changes by Bargaining Unit FY 2011-12 FY 2012-13 FY 2012-13 FY 2011-12 Mid Bargaining UnitAdopted Proposed Proposed % Change Year Changes ChangesStaffing Staffing Confidential31.50- -1.5030.00-4.8% Professionals52.00- -0.5051.50-1.0% City Council5.00- - 5.000.0% Executives15.00- - 15.000.0% Mid Managers41.00- - 41.000.0% Chula Vista Employee?s 374.251.00 0.10375.350.3% Association Western Council of 26.00- 1.0027.003.8% Engineers Senior Managers31.00- 1.0032.003.2% International Association of 124.00- 1.00125.000.8% Firefighters Police Officer?s Association225.00- 2.00227.000.9% Total924.751.003.10928.850.1% Note: The total for Mid Managers and Professionals reflects both represented and non-represented employees in these groups. Chula Vista Mid Managers/Professionals Association represents most mid managers and professionals. íï Summary of Staffing Changes by Department FY 11-12 FY 12-13 FY 12-13 FY 11-12 Mid Department/ FundAdopted Proposed Proposed % Change Year Changes StaffingChangesStaffing General Fund Development Services-GF 21.50 - (1.00) 20.50 -4.7% City Council 14.00 - 14.00 - City Clerk 5.00 - 5.00 - City Attorney 12.00 - 12.00 - Information Technology Services18.00 - 18.00 - Human Resources 15.00 - 15.00 - Finance 26.00 - 26.00 - Recreation 17.00 - - 17.00 - Library 21.00 0.10 21.10 0.5% Fire 134.00 - 1.00 135.00 0.7% Public Works 160.50 - 1.50 162.00 0.9% Police 306.50 1.00 3.00 310.50 1.3% Animal Care Facility 17.75 - 1.50 19.25 8.5% Administration 9.00 - 1.00 10.00 11.1% General Fund Total777.25 1.00 7.10 785.35 1.0% Other Funds ARRA 4.50 - (4.50) - -100.0% Redevelopment4.00 (4.00) - - -100.0% Transit 1.00 - - 1.00 - Successor Agency to RDA- 4.00 (2.00) 2.00 - Fleet Management 8.00 - - 8.00 - CV Housing 7.00 - - 7.00 - Sewer 46.00 - - 46.00 - Police Grants Fund 34.00 - - 34.00 - Development Services 39.00 - 1.50 40.50 3.85% Environmental Services 4.00 - 1.00 5.00 25.00% Other Funds Total147.50 - (4.00) 143.50 -2.71% CITYWIDE TOTAL924.75 1.00 3.10 928.85 0.44% íî íí íì ÐÎÑÐÑÍÛÜ ÞËÜÙÛÌ ÙÛÒÛÎßÔ ÚËÒÜ ÍËÓÓßÎÇ Ù»²»®¿´ Ú«²¼ Û¨°»²¼·¬«®» Í«³³¿®§ Ù»²»®¿´ Ú«²¼ Î»ª»²«» Í«³³¿®§ Ü»°¿®¬³»²¬ Í«³³¿®§ Î»°±®¬ íë íê ÙÛÒÛÎßÔÚËÒÜÛÈÐÛÒÜ×ÌËÎÛÍËÓÓßÎÇ The General Fund Proposed Operating Budget for fiscal year 2012-13 totals $123.6 million, which reflects a decrease of $3.7 million (2.9%) when compared to the projected expenditures for fiscal year 2011-12 and $3.9 million (3.0%) decrease when compared to the fiscal year 2010-11 actual expenditures. The General Fund CIP Proposed Budget for fiscal year 2012-13 is $1.1 million, bringing the total General Fund Proposed Budget to $124.7 million. The General Fund Operating Budget for fiscal year 2012-13 is balanced at $123.6 million; however, total General Fund expenditures exceed revenues by $0.5 million due to the allocation for the Bonita/Long Canyon capital improvement project. In March 2012, City Council approved an appropriation to the Bonita/Long Canyon CIP project. The $0.5 million included in the fiscal year 2012-13 Proposed Budget is for the remaining environmental and improvement costs. These costs are anticipated to be funded from General Fund reserves. While the City is beginning to see some positive signs in the local economy, the City continues to be challenged to keep expenditures in line with anticipated revenues. The fiscal year 2012-13 proposed budget reflects a number of adjustments in order to balance the General Fund operating budget ? no reductions in service levels are anticipated from these changes. A comparison of the fiscal year 2012-13 proposed budget, the fiscal year 2011-12 projected expenditures, and the fiscal year 2010-11 actual expenditures are summarized in the following table. íé General Fund Expenditure Summary In Thousands (000) Major expenditure changes are reflected in the following categories: Transfers Out ? This category reflects the largest change when compared to the prior year, a decrease of $6.5 million. This decrease reflects the following: ? Final payment of 1994 Pension Obligation Bonds (-$2.8 million) ? The elimination of the one-time transfer from the General Fund to the Bayfront/TCI project area (-$2.5 million) to undo March 2011 actions found to be inconsistent with the legislation eliminating redevelopment agencies ? Decreases in transfers out to other funds totaling a net reduction of $1.2 million ? reductions in transfers out to the Public Liability Trust Fund, CEC Loan Repayment Fund, and Residential Construction Tax Fund are based on current year revenues and expenditures. These funds are expected to end the current year with sufficient fund balance such that a reduction in the transfer out from the General Fund is recommended. Personnel Services ? This category reflects an increase of $3.0 million. This increase is largely attributable to the following: ? Higher flex/insurance costs ($1.2 million) due to increases in insurance premiums ? MOU salary increases for POA and IAFF ($1.4 million) ? Elimination of CVEA furlough ($0.4 million) íè ? A net increase of 7.1 positions budgeted in the General Fund, this includes transfers from other funds and new positions proposed as part of the fiscal year 2012-13 budget These increases were partially offset by the reinstatement of salary savings for normal attrition and for pending retirements and the full implementation of the employees contributing towards retirement costs CIP Project Expenditures ? This category reflects an increase of $2.9 when compared to the prior year. The fiscal year 2011-12 amended budget reflects the elimination of two projects that were funded via tax allocation bonds from the RDA. These budget appropriations were made in March 2011 but subsequently found to be inconsistent with the legislation eliminating redevelopment agencies. This change resulted in a negative budget during fiscal year 2011-12. The fiscal year 2012-13 budget includes the following revenue offset projects: ? Citywide Park Improvements SDGE ROW ? Loma Verde Recreation Center ? Third Avenue Streetscape During fiscal year 2011-12, Council approved an appropriation for the Bonita/Long Canyon repair CIP that was funded from reserves. The fiscal year 2012-13 proposed budget includes an additional $514,000 for this project, which will also be funded through the use of General Fund reserves. (Operating) Capital Expenditures ? This category reflects a decrease of $0.3 million when compared to the prior year. This decrease reflects the elimination of one-time computer equipment purchases included in the fiscal year 2011-12 budget. íç General Fund Expenditures by Category Fiscal Year 2012-13 Ñª»®¬·³»ìòéû Ø»¿´¬¸Þ»²»º·¬ Ø±«®´§É¿¹»ïòéû èòìû Î»¬·®»³»²¬ Þ»²»º·¬ïìòçû Ñ¬¸»®Ð»®±²²»´ Û¨°»²»íòêû Ò±²Ý×ÐÐ®±¶»½¬ Ô»¬¸¿²ðòïû Ý¿°·¬¿´ðòïû Í¿´¿®·»ìéòïû Ñ¬¸»®Û¨°»²» ðòìû Ý×ÐÐ®±¶»½¬ðòçû Ë¬·´·¬·»íòçû Ü»¾¬Íª½ñÌ®¿²º»® Ñ«¬ìòîû Í«°°´·»úÍ»®ª·½» ïðòïû General Fund Expenditures by Department Fiscal Year 2012-13 Ð±´·½»íëòïû Þ±¿®¼ñÝ±³³··±² ðòðû Ý·¬§Ý´»®µðòéû Ý·¬§Ý±«²½·´ïòðû ß¼³·²·¬®¿¬·±²ïòëû Ø«³¿²Î»±«®½»ïòéû Ý·¬§ß¬¬±®²»§ïòèû Ù»²»®¿´Í»®ª·½»ïòçû Ü»ª»´±°³»²¬Íª½îòîû Ñ¬¸»®îïòîû ×ÌÍîòíû Ô·¾®¿®§îòêû Ú·²¿²½»îòêû Ð«¾´·½É±®µïçòîûÎ»½®»¿¬·±²îòèû Ò±²Ü»°¿®¬³»²¬¿´ êòïû Ú·®»ïèòíû Note: The chart above does not reflect net cost of each department, only their expenditure allocations. ìð PSEPB ERSONNEL ERVICES XPENDITURES AS A ERCENT OF UDGET Personnel Services expenditures (employee salaries and benefits) are the largest component of General Fund expenditures. At the beginning of fiscal year 2006-07, personnel services represented 81.4% of the overall general fund budget, compared to the fiscal year 2012-13 proposed level of 80.4%. The reductions in fiscal years 2009 to 2012 are reflective of the major staffing reductions the City has implemented since fiscal year 2006-07 in an effort to keep expenditures in line with declining revenues. Personnel and Non-Personnel Services Costs Council Adopted Budget üïèð üïêð üïìð üïîð üïðð üèð üêð üìð üîð üð ÚÇðêðéÚÇðéðèÚÇðèðçÚÇðçïðÚÇïðïïÚÇïïïîÚÇïîïí Ð»®±²²»´Í»®ª·½»Ò±²Ð»®±²²»´ SL TAFFING EVELS Despite the City?s population growing at an average rate of 1.5% over the past 5 years, the number of permanent, benefited employees is 26.5% lower than it was during the fiscal year 2006-07, which represents the peak for staffing. The following table summarizes the staffing changes by service category from fiscal year 2006-07 to fiscal year 2012-13. During this period, positions have been eliminated throughout the City including: Community Services (66.6% decrease), Development and Maintenance Services (34.2% decrease), and Legislative and Administrative departments (30.8% decrease). In Public Safety, positions were eliminated from the Fire Department primarily due to the transition to contractual fire dispatch services (10.6% decrease), and from the Police Department (9.7% decrease). ìï Staffing Level FY 2006-07 to FY 2012-13 FY 07 Council Adopted BudgetFY 06-07FY 07-08FY 08-09FY 09-10FY 10-11FY 11-12FY 12-13 ?FY 13 Legislative and Administrative144.50 140.00 128.50 100.50 104.75 100.50 100.00 -44.50 Development and Maintenance472.75 458.25 398.25 357.75 351.75 308.75 311.25 -161.50 Public Safety532.50 540.50 493.50 480.50 482.50 477.50 479.50 -53.00 Community Services114.00 109.75 89.25 66.25 65.75 38.00 38.10 -75.90 Total City Staff1,263.75 1,248.50 1,109.50 1,005.00 1,004.75 924.75 928.85 -334.90 Budget constraints necessitated the net elimination of 334.9 full time equivalent (FTE) positions from the City?s peak employment of 1,263.75 FTEs during fiscal year 2006-07. Due to these cuts, the FTE per thousand residents has decreased from 5.5 employees per thousand residents in fiscal year 2006-07 to an estimated 3.7 employees per thousand residents in fiscal year 2012-13. From January 2007 to January 2012, the city has seen an increase of 3,570 housing units and 17,785 residents. The City has also added 28 parkland acres, 42 center lane miles of streets and 34 miles of sewer capacity during the same period of time. City of Chula Vista Staffing (FTEs) Compared to FTE?s per Thousand Residents 1,4006.0 1,200 5.0 1,000 4.0 800 3.0 600 2.0 400 1.0 200 00.0 FY 2006-07FY 2007-08FY 2008-09FY 2009-10FY 2010-11FY 2011-122012-13 Total FTE'sFTE's/1000 ìî SA ALARY DJUSTMENTS Over the last several years, the City?s bargaining groups worked with City management to reach new agreements that reduced personnel costs by making adjustments to employee compensation that included wage concessions and pension reform. The fiscal year 2012-13 budget, reflects the full implementation of employee pension reform by all City bargaining groups. IAFF and POA will receive MOU salary increases as listed in the table below. Summary of Cost of Living Adjustment (COLA) and Pension Contributions by Bargaining Group FISCAL YEAR 1 FY 10-11FY 11-12 FY 12-13 MOU Bargaining Unit11-Jan11-Jul12-Jan12-Jul13-Jan Agreement COLA Increase1.00%1.00%1.50%1.50%1.00% Police Officers Association Pension 2 (POA) 3.00%4.50%6.75%9.00%9.00% Contribution COLA Increase0.00%0.00%0.00%2.00%2.50% International Assoc. of Pension Firefighters (IAFF) 9.00%9.00%9.00%9.00%9.00% Contribution COLA Increase0.00%0.00%0.00%---- Chula Vista Employees Pension Assoc. (CVEA) 3 2.00%4.00%6.00%8.00% 8.00% Contribution COLA Increase0.00%0.00%0.00%---- Western Council of Pension Engineers (WCE) 4.00%8.00%8.00%8.00%8.00% Contribution COLA Increase0.00%0.00%0.00%---- Executives (Exec) Pension 8.00%8.00%8.00%8.00%8.00% Contribution COLA Increase0.00%0.00%0.00%---- Senior Managers (SM) Pension 8.00%8.00%8.00%8.00%8.00% Contribution COLA Increase0.00%0.00%0.00%---- Mid Managers/Professional (MM/PROF) Pension 8.00%8.00%8.00%8.00%8.00% Contribution COLA Increase0.00%0.00%0.00%---- Confidential (CONF) Pension 8.00%8.00%8.00%8.00%8.00% Contribution Notes: 1 The current contracts with CVEA, CVMM/PROFA, and WCE expire on 6/30/2012. The contracts with IAFF and POA expire on 6/30/2013. 2 As part of the most recent side letter, POA is scheduled to receive longevity pay beginning July 1, 2012. Employees shall receive longevity pay in the form of a 3% increase in their base pay when they have served fifteen or more complete years of full time service. ìí 3 CVEA 8.00% pension contribution effective 6/30/12 4 The City Council also began contributing 8% towards their pension costs in January 2011. Per the City Charter, Council compensation is based on the salary of a Judge of the Superior Court of the State of California. RRC ISING ETIREMENT OSTS The increase in CalPERS costs is a significant budgetary challenge facing the City. The two key factors driving the increased costs were the significant investment losses experienced by CalPERs and enhanced benefits during the same time period. The payments made to the retirement system equal 16.2% of the City?s General Fund for fiscal year 2012-13. Prior to fiscal year 2005-06, the CalPERS investment pool assumed a rate of return of 8.25% and any market gains (or losses) less than that amount could significantly affect the City?s overall contribution rate. In fiscal year 2005-06, CalPERS adjusted their investment return assumption to 7.75% and have since adopted an asset smoothing method whereby any losses are spread out over a 15 year period to reduce the City?s exposure to market volatility. At the March 14, 2012 meeting, the CalPERS Board of Administration approved a recommendation to lower the rate investment return assumption from 7.75% to 7.5%. This will increase public agency employer rates in fiscal year 2013-14. It is unknown at this time what the employer rate increase will be for Chula Vista but they are expected to be significant. The following graph shows the actual market rates of return for the CalPERS investment portfolio relative to the assumed rate of return. CalPERS Historical Market Value Rates of Return Relative to Assumed Investment Return of 7.5% 30.0% 22.5% 15.0% 7.5% 0.0% -7.5% -15.0% -22.5% -30.0% 19981999200020012002200320042005200620072008200920102011 ìì The budgetary impacts caused by the increased employer contribution rates have been significant. It should be noted that the overall decrease in PERS costs in fiscal years 2008, 2009, and 2010 is a direct result of positions being eliminated from the budget; CalPERS rates have increased during this same period. CalPERS rates are expected to continue to increase over the next several years due to the significant investment losses experienced in 2008 and 2009, the various early retirement incentive programs the City has offered over the last few years in order to minimize layoffs, and the reduction of the assumed rate of investment return. The impact of these increases will be partially offset as a result of negotiations with city bargaining groups that resulted in the implementation of pension reform. Under the negotiated pension reform, employees have agreed to pay their share of pension costs thereby reducing the impact of pension cost increases to the City?s budget. Miscellaneous employees contribute 8% of their salary and public safety employees contribute 9% of their salary towards pension costs. CalPERS Rates Fiscal Years 1987-88 to 2012-13 Notes: 1. Misc. Employee ? the 8% employee share is paid by the City as negotiated with individual employee bargaining group. As of January 2011, all miscellaneous employee groups agreed to pay their portion of the employee retirement contribution. 2. Safety Employee ? the 9% employee share was paid by the employee from 87/88 through 93/94. In 94/95 both police and fire paid 7% and the City paid 2%. In 95/96 police and fire paid 7% and 4% respectively with the City picking up 2% and 5% respectively as negotiated. For 96/97 and 97/98 police paid 7% and the City paid 2% and the City paid the entire 9% for fire. From 98/99 to 09/10 the City has paid the entire 9% as negotiated with Police and Fire. As of January 2011, all safety employee groups agreed to pay their portion (9%) of the employee retirement contribution. 3. The City?s employer contribution rates rose from 0% for public safety and 0% for miscellaneous in fiscal year 2001-02, during a time the City was ?super funded?, to 20.02% to 14.78% respectively in fiscal year 2003-04. ìë HCC EALTH ARE OSTS 1 Kaiser and PacifiCare/AETNA insurance premiums have increased an average of 7.8% per year since the beginning of fiscal year 2006-07. Taking into account the compounding effect of these increases over time, Kaiser premiums have increased 42.0% during this time while PacifiCare/AETNA premiums have increased 40.1% over the same period. The annual budget for flexible spending accounts has increased from $11.5 million in fiscal year 2006-07 to $12.4 million in fiscal year 2012-13. This marks a notable increase as the City?s workforce has been significantly reduced over the same period of time. Recent discussions with health care professionals indicate these high trends in health care costs are likely to continue for the foreseeable future, with an estimated averaged increase of 9.6% effective January 2012. The anticipated increase in health care costs is included in the fiscal year 2012-13 budget. Premium Increases by Health Care Provider (FY 2006-07 to FY 2011-12) PacifiCare/ 1 Date of Premium IncreaseKaiserAETNA Average January 20078.5%16.4%12.5% January 20085.0%-2.8%1.1% January 20098.9%4.0%6.5% January 20105.6%15.3%10.5% January 20115.3%8.0%6.7% January 201212.1%7.0%9.6% Annual Average Premium Increase7.6%8.0%7.8% Effective January 2009, the City switched from PacifiCare to AETNA ï ìê ÙÛÒÛÎßÔÚËÒÜÎÛÊÛÒËÛÍËÓÓßÎÇ The proposed operating budget for fiscal year 2012-13 totals $123.6 million. The estimated reimbursement revenue for Capital Improvement Projects (CIP) totals $0.6 million. Combined, estimated General Fund revenues for fiscal year 2012-13 General Fund total $124.1 million. This reflects a decrease of $0.9 million (0.7%) when compared to the estimated revenues for FY 2011- 12 and a $4.6 million (3.6%) decrease when compared to the fiscal year 2010-11 actual revenues. Current economic reports indicate that the nation is slowly showing signs of recovery with positive but weak growth. The estimated revenues for Chula Vista reflect mixed indicators - sales tax revenues are anticipated to increase moderately in the coming fiscal year while property tax revenues are expected to decrease slightly. The fiscal year 2011-12 budget included the one-time use of $3.0 million from the Economic Contingency Fund, this revenue has been eliminated. The changes in all other revenue categories were not sufficient to fully make up the loss of this revenue but there are some positive signs that local revenues are beginning to stabilize. The following table compares the fiscal year 2012-13 estimated revenues to projected revenues for fiscal year 2011-12. ìé General Fund Revenues In Thousands (000) Major revenue increases are reflected in the following categories: Sales Tax ? This category reflects an increase of $1.0 million based on the most recent information provided by the City?s sales tax consultants and the trend for the current fiscal year. Staff will continue to evaluate the projected revenues for the coming fiscal year based on the most recent sales tax trends. Other Agency Revenue ? This category reflects an increase of $0.7 million. This increase reflects the agreement with American Medical Response (AMR) to reimburse the City for the ìè costs to provide basic life support (BLS) services (0.6 million). Other increases in this category reflect additional state grant revenue ($0.1 million). Fines, Forfeitures & Penalties ? This category reflects an increase of $0.7 million. This change reflects increases in Negligent Vehicle Impound Processing Fees, Code Enforcement Violations, Ordinance Violation Fines, Parking Citations, and Library Fines. Interfund Reimbursements ? This category reflects an increase of $0.2 million. This increase reflects increases in PFDIF staff time reimbursements from prior years. These revenue increases are offset by the decreases in the following revenue categories: Other Revenues ? This category reflects a decrease of $3.2 million. This decrease reflects the elimination of the use of Economic Contingency Reserves ($3.0 million). These reserves were used to balance the fiscal year 2011-12 budget. Reductions in accounts receivables, donations, and miscellaneous revenues ($0.2 million) account for the balance of the decrease in this category. Development Revenue ? This category reflects a decrease of $0.4 million. This decrease reflects a conservative base for development related revenues. Transfers From Other Funds ? This category reflects a decrease of $0.2 million. The decrease reflects the elimination of the transfer in from the SW/TCII/Otay Valley Merged Project Area as well as a smaller transfer in from Other Transportation Programs. Charges for Services ? This category reflects a decrease of $0.2 million. The decrease reflects the elimination of Abandoned Vehicle Abatement Reimbursement revenue due to the sunset of state law allowing for collection of this revenue. The following charts provide a summary view of the major General Fund revenue sources. ìç General Fund Revenues by Category Fiscal Year 2012-13 CIP Related Motor Vehicle License 0.4% Interfund Reimb. Use of Money & Property 13.0% 8.0% 1.9% Utility Users Tax Sales Tax 2.8% 22.4% Licenses and Permits 0.7% Fines, Forfeitures, Penalties Development 1.5% 0.8% Police Grants Property Taxes 1.0% 19.9% Charges for Svcs. 5.3% Other Local Taxes Transient Occupancy 1.6% Taxes Other Revenue Transfers In Franchise1.7% Other Agencies1.2% 9.6% 6.4% 1.7% Historical and Estimated General Fund Revenue Sources Ú·½¿´Ç»¿®îððêðé¬¸®±«¹¸îðïîïí $180 $160 $140 $120 $100 $80 $60 $40 $20 $0 FY 07 ActualFY 08 ActualFY 09 ActualFY 10 ActualFY 11 ActualFY 12FY 13 ProjectedEstimated Sales TaxProperty TaxesMotor Vehicle LicensesDevelopment Rev. Interfund Reimb.Transfers InFranchise FeesUtility Users Taxes TOTCharges for ServicesOther Local TaxesOther Revenue Licenses & PermitsFines Forfeitures & PenaltiesUse of Money & PropertyPolice Grants Other Agency Revenue ëð Following is a description of the City?s major revenue sources along with a brief discussion of the trends impacting these revenues for the fiscal year 2012-13. ST ALES AX Prior to fiscal year 2004-05, the City received 1% of sales tax revenue applied to all taxable retail sales occurring within the City limits. Beginning in fiscal year 2004-05, the State reduced the local allocation by 0.25% and applied these funds as security for the State?s Economic Recovery Bonds. The State committed to replacing the 0.25% sales tax revenues dollar?for-dollar in local property taxes from the County Educational Revenue Augmentation Fund (ERAF). For forecasting and comparison purposes, sales tax revenues are projected at the full 1% rate. Sales tax revenues are collected by the State at a rate of 8.75% for the San Diego County region. The sales tax revenues are then allocated based on the following rates: State 7.00% State Fiscal Recovery Fund (Economic Recovery Bonds) 0.25% Local Jurisdiction (City or County of place of sale/use) 0.75% Local Transportation Fund (County of place of sale/use) 0.25% Local San Diego County Transnet Funding 0.50% *Total Sales Tax Rate ? Chula Vista 8.75% *Total sales tax rates will vary by City due to local sales tax initiatives. For example, National City?s sales tax rate is 9.75% due to voter approved increase of 1% funding public services. Sales tax revenue is highly sensitive to economic conditions, and reflects the factors that drive taxable sales, including the levels of unemployment, consumer confidence, per-capita income, and business investment. Sales tax revenue is the City?s largest discretionary revenue source, accounting for 22.4% of total revenue for the General Fund in fiscal year 2012-13. Due to the economic recession consumer spending has decreased significantly nationwide. Recent trends show that sales tax revenues are beginning to improve due to modestly improved economic indicators. The positive trend is expected to continue in fiscal year 2012-13 and is reflected in the projections with an increase of 3.9% or approximately $1.0 million from the fiscal year 2011-12 projection. Chula Vista continues to be challenged in the generation of taxable sales per capita when compared to other County cities. As noted on the following chart, taxable sales per capita for the City is only $2,762 while Del Mar has the highest taxable sales per capita at a rate of $6,262. This comparison indicates that the City?s residents spend a high percentage of their retail dollars elsewhere. It seems clear that the City must continue to place a high priority on developing the ëï retail business base by focusing on projects such as the expansion of the auto park and the Millenia project in order to improve the City?s long-term fiscal health. Taxable Sales Per Capita $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $0 Autos & Trans.Building & Constr.Business & Industry Food & DrugsFuel & Svc StationsGeneral Foods Restrnts & HotelsOther * th Chula Vista Ranks 15 out of 18 cities in San Diego County. The chart above does not represent all 18 cities. In partnership with the Chula Vista Chamber of Commerce, the City created the Shop/Dine Chula Vista public awareness campaign designed to encourage residents to spend money in their own city. In conjunction with the campaign, a shopping and dining guide is available to the public that provides listings of local shopping centers and restaurants. Dollars for Dining coupons offer discounts at participating restaurants. By spending money locally, residents support local retailers and restaurants and invest in the community. PT ROPERTY AX Property tax revenues have continued to fall throughout this economic recession with Chula Vista being one of the hardest hit areas. The large number of foreclosures has depressed housing values, and the significant drop in home resale prices has dramatically reduced supplemental property tax revenues. Supplemental property taxes are calculated based on the difference between the current value of a property and the resale value of the property. Typically, property ëî values increase as a property is resold. Historically, since 1995 Chula Vista kept pace or exceeded the County average assessed valuation growth as result of new development and increasing property values. More recently however, the current housing crisis has caused most home resale values to drop resulting in a large reduction in supplemental property tax revenue. This history is depicted in the following graph. Historical Change in Assessed Value City of Chula Vista and Countywide Comparison 25% 20% 15% 10% 5% 0% 1995199619971998199920002001200220032004200520062007200820092010201120122013 -5% -10% -15% Chula VistaCounty Overall Source: County of San Diego Assessors Office. The 2013 assessed value change is a preliminary estimate. Property tax revenues comprise the City?s second largest discretionary revenue source and accounts for 19.9% of the total revenue for the General Fund. This revenue source is estimated at $24.8 million for fiscal year 2011-12 and is projected to decrease slightly to $24.7 million in fiscal year 2012-13. Revenues are based on a 1.0% levy on the assessed value of all real property. Under the terms of Proposition 13, which was passed in California in 1978, annual increases in the assessed value are capped at a maximum of 2% per year unless there is a change in ownership or new construction. Annual increases in assessed value are limited by either the California Consumer Price Index (CPI) or the 2% cap, whichever is less. In fiscal year 2009-10 assessed values decreased by 10.4% and fell an additional 3.8% in fiscal year 2010-11. Fiscal year 2010-11 marked the first year since the passage of Proposition 13 that a positive adjustment based on an increase in the CPI was not applied to the assessment roll by the County Assessor?s Office. This increase was not applied as result of a decrease in the CPI for 2010. This decrease in the CPI precluded the County Assessor from applying the normal increase of up to 2% to the assessment roll as permitted under the terms of Proposition 13. Fiscal year 2011-12 assessed values remained relatively flat with a decrease of 0.1%. Based on the most ëí current data from the County of San Diego Assessors Office, a decrease of 1.0% in assessed valuation is assumed for fiscal year 2012-13. Historical Changes in Assessed Value vs Changes in the Calif. CPI 15% Assessed Valuation Increase Calif. CPI 10% 5% 0% -5% FISCAL YEAR FF RANCHISE EES Franchise fee revenues are generated from public utility sources such as San Diego Gas & Electric (2% on gas and 1.25% on electricity), trash collection franchises (9.05% fee), and cable franchises (5% fee) conducting business within City limits. SDG&E is the single largest generator of franchise fees and accounts for approximately 33% of the total franchise revenues. SDG&E collects the franchise fee from Chula Vista customers which can vary due to usage trends. Trash franchise fees and cable fees are more predictable due to the fixed rates charged and the monthly and quarterly receipt of the revenues respectively. Revenue growth is projected based on population and inflation factors. The following illustrates the historic and projected revenue trends for the City?s Franchise Fee revenue. As shown in the following chart, a decrease of 5.6% is projected for fiscal year 2011-12 when compared to fiscal year 2010-11 actual franchise fee revenues. This decrease reflects the ëì closure of the power plant. The fiscal year 2012-13 budget assumes that franchise fee revenues will increase by 1.9% when compared to fiscal year 2011-12 estimated revenues based on recent trends. Franchise Fee Revenues üçòð üèòð üéòð üêòð üëòð üìòð üíòð üîòð üïòð ü îððîîððíîððìîððëîððêîððéîððèîððçîðïðîðïïîðïîîðïíîðïìîðïëîðïêîðïé Ì®¿¸ñÝ¿¾´»Û²»®¹§ MVLF OTOR EHICLE ICENSE EES The Vehicle License Fee (VLF) was initially established in 1948 and directed to local government. The State originally assessed a 2% of value on car registrants on behalf of local governments. In May 2004, in an attempt to assist with the State?s fiscal crisis, the State dropped the VLF fee from 2% to 0.65%. Until fiscal year 2011-12, the State back-filled this fee reduction with other State funds, with the exception for the first three months of fiscal year 2004-05. In fiscal year 2011-12, the State eliminated the backfill. This resulted in the loss of approximately $687,000 annually for the City of Chula Vista. Beginning in fiscal year 2004-05, the local government share of VLF has narrowed. Cities continue to receive .65% portion of the fee directly from the State, but this amount is now net of County realignment and administrative reductions. The City?s VLF revenues now fluctuate along with assessed values that are driven by changes in the real estate market. These fluctuations had a negative impact in the fiscal year 2010-11 budget due to the continued decline in the housing market. Fiscal year 2011-12 estimated revenues project an additional drop. The fiscal year 2012- 13 budget assumes a 1% decrease in VLF revenues due to the projected reduction in assessed values. ëë UUT TILITYSERS AX The City adopted its Utility Users Tax (UUT) in 1970. The City of Chula Vista imposes a UUT on the use of telecom at a rate of 5% of gross receipts, natural gas services at a rate of $0.00919 per therm and $0.00250 per kilowatt on electricity services, which equates to approximately a 1% tax. Fiscal year 2012-13 energy related UUT is budgeted at $3.5 million. TOT(TOT) RANSIENT CCUPANCY AX The City of Chula Vista imposes a Transient Occupancy Tax (TOT) upon all hotel stays within the City boundaries. The TOT tax rate in the City is 10%. The potential for significant revenue growth is feasible provided additional hotels are built capturing the market created by the growth in the eastern section of the City. Several potential new hotel developments are being proposed in the City primarily in the Millenia project (formerly known as the Eastern Urban Center project), and the Bayfront. During the economic recession, TOT revenue dropped due to the lack of discretionary spending by consumers. According to industry experts, 2011 saw positive growth nationwide. The San Diego Convention and Visitors Bureau Monthly Tourism Industry Report dated April 2012 reports that in California, ?The overall, first quarter statewide hotel occupancy was up 3.7 percent and average room rates were up 4.6 percent ? both on par with growth in the U.S. as a whole.? For the San Diego region, it reports, ?2011 ended with a surge of visitors to San Diego. Visits in the fourth quarter grew 8.8% which pushed total visits for the year up 4.3%, past 31 million visitors and helped produce record setting room demand for San Diego hotels. Beyond 2012, an improved economic outlook will help drive visitor growth higher through 2014 before tempering again in 2015.? As part of the City?s economic development strategy, adding hotels in Chula Vista would position the City to capture tourism dollars. For the fiscal year 2012-13 budget, TOT revenue is projected to show slight gains of just under 1.0%. The following chart shows the percentage change in TOT revenues compared to prior year. ëê TOT Revenues Percent Change Year by Year 15.0% 10.0% 5.0% 0.0% -5.0% -10.0% -15.0% -20.0% 200220032004200520062007200820092010201120122013 OR THER EVENUE Revenue projections are continually reviewed and updated by City staff. As described above, major general revenues, such as property taxes, sales taxes, franchise fees, utility users tax, transient occupancy tax and motor vehicle license fees, are projected by the Finance Department based on prior history, growth and inflation projections, and economic climate. Additional assistance in the projection of revenues is provided by subject-matter experts such as the City?s sales and property tax consultants, the County Assessor and by reviewing regional and local economic forecasts provided by the UCLA Anderson Forecast and the University of San Diego?s Index of Leading Economic Indicators for San Diego County, respectively. A $2.5 million decrease in other revenues is reflected in the fiscal year 2012-13 proposed budget. As previously discussed, the decrease largely reflects the elimination of the use of $3.0 million from the Economic Contingency Reserve offset by increases in reimbursement revenues as well as increases associated with the Phase III update of the Master Fee Schedule. ëé ëè ÙÛÒÛÎßÔÚËÒÜÜÛÐßÎÌÓÛÒÌÍËÓÓßÎÇ The General Fund budget funds the day-to-day operations of most City services. For fiscal year 2012-13 the General Fund operating budget (excludes capital improvement projects) totals $123.6 million. This funds the following departments: Mayor and City Council Non-Departmental Boards and Commissions Animal Care Facility City Clerk Planning and Building City Attorney Police Administration Fire Information and Technology Services Public Works Human Resources Recreation Finance Library To follow is a series of summary reports that reflect the anticipated revenues, expenditures, and staffing information for each of the General Fund departments. ëç êð êï êî êí êì êë êê êé êè êç éð éï éî éí éì éë éê ÐÎÑÐÑÍÛÜ ÞËÜÙÛÌ ÜÛÊÛÔÑÐÓÛÒÌ ÍÛÎÊ×ÝÛÍ ÚËÒÜ éé éè ÜÛÊÛÔÑÐÓÛÒÌÍÛÎÊ×ÝÛÍÚËÒÜ The Development Services fund accounts for revenues and expenditures related to the processing of development plans and permits. The fund is comprised of three divisions, Planning, Building, and Engineering, which provide direct services to property owners, developers, and the City as required for the entitlement and/or improvement of property. The services provided encompass most development activities, including land use entitlements; public infrastructure, open space, and landscape planning; public infrastructure construction and grading permits and building permits. Historically, all development processing revenues were reflected in the City?s General Fund along with development services staffing and associated expenditures. Beginning in fiscal year 2008-09, all development funded staff was budgeted directly in the Development Services Fund, with all processing revenues assigned to this fund as well. Consolidating all development service cost centers in a single fund clearly delineates development related costs and revenues from General Fund supported services; thereby making the nexus between development related activities, costs, fees, and revenues more transparent. This also allows operating expenses to be adjusted to coincide with changes in demand for development services. This adjustment of operating expenses aids in avoiding impacts to the General Fund reserves when revenue fluctuations occur as result of changes in development activity. Beginning in fiscal year 2011-12, the Development Services fund is being accounted for as an enterprise fund. The proposed fiscal year 2012-13 budget reflects the continued effort of balancing development related resources with development related services demand. In an effort to budget development revenues conservatively, the fiscal year 2012-13 budget reflects an overall increase of 2% in projected revenues. These projected revenues are not sufficient to support projected expenditures. éç However, there is sufficient fund balance available in this fund. The actual impact to reserves will depend on actual revenues and expenditures. R EVENUES Development related revenues consist of two categories: development processing fee revenues and deposit based revenues. Development processing fee revenues include building permits, planning fees, other building department fees, and engineering fees. Deposit based revenues are generated through staff time reimbursements related to specific projects. The table below provides a comparison of the projected revenues for fiscal year 2011-12 compared to the proposed fiscal year 2012-13 revenues. The City is anticipating that the following major projects will continue to move forward in fiscal year 2012-13: Bayfront Redevelopment Project Millenia Project University Land Entitlement Projects Development Services Fund Revenues Fiscal Years 2011 to 2013 Category FY11 Actuals FY12 Projected FY13 Proposed Change % Change Licenses and Permits $ 1,776,686 $ 1,189,143 $ 1,404,143 $ 215,000 18% Charges for Services $ 3,041,877 $ 3,620,898 $ 3,789,501 $ 168,603 5% Other Revenue $ 1,034,058 $ 847,470 $ 762,515 $ (84,955) -10% Transfers In $ 484,669 $ 493,533 $ 298,137 $ (195,396)-40% Total Revenues $ 6,337,290 $ 6,151,044 $ 6,254,296 $ 103,252 2% A summary of the notable changes by category are listed below: Licenses and Permits ? The increase in this category ($215,000) reflects the update of the Master Fee Schedule that included an update of development related fees and increased development activity. This revenue category includes revenue from building, plumbing, electrical, and utility permits. Charges for Services ? The increase in this category ($168,600) also reflects the update of the Master Fee Schedule that included an update of development related fees and èð increased development activity. This category includes staff time reimbursements from deposit accounts. Other Revenue ? The fiscal year 2012-13 budget reflects a decrease ($85,000) from the fiscal year 2011-12 projected revenue. This decrease is due to elimination of redevelopment agency revenues. Transfers In ? The fiscal year 2012-13 budget reflects a decrease ($195,000) in projected transfers from the General Fund. The Transfers-In from the General Fund is intended to compensate for plumbing, mechanical, electrical and photovoltaic permits that are subsidized by the General Fund and for staff work that is completed on behalf of projects benefiting the City?s General Fund. E XPENDITURES T he fiscal year 2012-13 proposed budget includes funding for 41.5 positions in the Development Services Fund. This reflects a net increase of 1.5 positions when compared to the fiscal year 2011- 12 Council adopted budget. These changes are a result of the following: The transfer of 1.0 Development Services Counter Manager and 1.0 Senior Secretary from the General Fund to the Development Services Fund. In fiscal year 2011-12, these positions were funded by a transfer from the Development Services Fund to the General Fund. This transitions the positions to their actual funding source. The elimination of a vacant 0.5 Landscape Architect. As illustrated in the following table, expenditures in the Development Services fund are weighted toward staffing, much the same as the City?s overall budget. The transfers out expenditure category reimburses the General Fund for citywide and departmental overhead. Reimbursed citywide overhead includes support costs associated with Finance, Human Resources, Information Technology Services, Custodial Services, and City Attorney. èï Development Services Fund Expenditures Fiscal Years 2011 to 2013 Category FY11 Actuals FY12 Projected FY13 Proposed Change % Change Personnel Services $ 4,615,735 $ 4,622,716 $ 4,898,692 $ 275,976 6% Supplies and Services $ 78,666 $ 265,201 $ 230,441 $ (34,760)-13% Other Expenses $ 25,749 $ 23,500 $ 23,500 $ - 0% Transfers Out $ 1,073,702 $ 1,224,416 $ 1,175,724 $ (48,692)-4% Utilities $ 13,026 $ 15,213 $ 16,080 $ 867 6% Total Expenditures $ 5,806,878 $ 6,151,046 $ 6,344,437 $ 193,391 3% A summary of the notable changes between the fiscal year 2011-12 projected expenditures to the fiscal year 2012-13 proposed budget by category are listed as follows: Personnel Services ? The proposed budget reflects an increase of $276,000 in this category. This increase largely reflects the transfer of the Development Services Counter Manager and Senior Secretary from the General Fund, and the addition of hourly support. These changes were somewhat offset by the elimination of the vacant Landscape Architecture position. Supplies and Services ? This proposed budget reflects a decrease of $35,000 in this category. This decrease reflects a reduction in other contractual services and a realignment in various other objects in this category. Transfers Out ? The transfers out expenditure category reflects a net decrease of $49,000 when compared to the prior year. This transfer reflects the reimbursement amount from the Development Services Fund to the General Fund for department and citywide overhead costs. In fiscal year 2012-13, the citywide overhead costs allocated to the Development Services Fund increased. This increase was offset by a decrease in the reimbursement for departmental overhead due to the transfer of the two positions previously budgeted in the General Fund. Utilities ? The utilities category reflects the projected amounts necessary for fiscal year 2012-13 projected utility expenses and is $900 more than the projected amount for fiscal year 2011-12. èî èí èì èë èê ÐÎÑÐÑÍÛÜ ÞËÜÙÛÌ ÎÛÜÛÊÛÔÑÐÓÛÒÌô ÍËÝÝÛÍÍÑÎ ßÙÛÒÝÇô ßÒÜ ØÑËÍ×ÒÙ ÚËÒÜÍ Í«½½»±® ß¹»²½§ ¿²¼ Î»¼»ª»´±°³»²¬ ß¹»²½§ Ú«²¼ Ø±«·²¹ ß«¬¸±®·¬§ Ú«²¼ èé èè ÎÛÜÛÊÛÔÑÐÓÛÒÌßÙÛÒÝÇÚËÒÜÍßÒÜ ÍËÝÝÛÍÍÑÎßÙÛÒÝÇÚËÒÜÍ On December 29, 2011, the California Supreme Court upheld AB x1 26 dissolving California redevelopment agencies. Effective February 1, 2012, all redevelopment agencies were dissolved and the City of Chula Vista assumed the role of Successor Agency (resolution 2011-164). The Successor Agency is responsible for the wind down of the former Redevelopment Agency activities and obligations. The act of winding down the former Redevelopment Agency is significant. The Successor Agency will continue to oversee and implement all legally obligated contracted work, projects and programs as well as dispose of the former Redevelopment Agency assets. Since approximately 68% of the former Redevelopment Agency-owned land (24 acres of 35.24 acres) is contaminated there are clean up requirements as well as remediation that will be necessary to dispose of these properties. Significant administrative obligations will continue to exist in the preparation of budgets and documentation to be submitted to and reviewed by the Successor Agency, Oversight Board, County of San Diego and the State Department of Finance. As required by AB x1 26, an Oversight Board, composed of affected taxing entities within the City, was created. The primary responsibility of the Oversight Board is reviewing and approving the Recognized Obligation Payment Schedule and serving in a fiduciary role to the taxing entities that the Oversight Board represents. Some historical information follows regarding the former Redevelopment Agency. The Chula Vista Redevelopment Agency was created on October 24, 1972 by City Council Ordinance. The goals of the former Redevelopment Agency were to reduce blight and to encourage new development, reconstruction, and rehabilitation of residential, commercial, industrial, and retail uses. Since the Agency?s creation, the City had adopted and amended six project areas to encompass a total of approximately 3,563 acres of City territory. Land uses within these areas are mostly èç commercial and industrial, but also includes some residential and public uses (e.g., governmental administrative centers, corporation yards, streets, etc.). In 1979 and 2000, the City financially merged the various project areas into two primary configurations: (1) the Merged Bayfront/Town Centre I Redevelopment Project Area (1979) and (2) the Merged Chula Vista Redevelopment Project Area (2000). The merger of project areas enabled the Agency to pool tax increment revenues generated in different project areas and leverage them appropriately to create benefit for the entire merged project area. The Agency received tax increment revenues resulting from increases in the assessed valuation within the redevelopment project areas over the base year assessed valuation. FD UND ESCRIPTIONS The Successor Agency budget is organized into Redevelopment Obligation Retirement Fund (RORF) and debt service funds. The RORF accounts for the staffing and other expenditures required in winding down activities of the former Redevelopment Agency. The Debt Service funds are used to pay for the former Redevelopment Agency?s debt service on its outstanding Tax Allocation Bonds, loans and other debt of the former Redevelopment Agency. Several funds were eliminated as a result of the dissolution of the Redevelopment Agency. The eliminated funds are former operating funds 317, 611, 651 and pass-through funds 671-675. In addition the debt service funds listed below replace funds 693-697. Operating Funds Fund 318 Redevelopment Obligation Retirement Fund The RORF will serve as the primary operating funds in the winding down of the former Redevelopment Agency. This fund will be used to pay the documented enforceable obligations of the former redevelopment agency that have been approved by the Successor Agency Oversight Board and the State Department of Finance. Fund 319 Successor Agency Housing Fund The City?s Housing Authority became the Successor Housing Agency. This fund accounts for all assets (everything but fund balance) originally held by the Low and Moderate Income Housing fund and will account for activities similar to the Low and Moderate Income Housing çð program. The fund revenues are not discretionary and must be used for the production of affordable housing. Debt Service Funds The Debt Service funds are used to pay for former Redevelopment Agency debt service on its outstanding Tax Allocation Bonds, loans and other debt of the former Redevelopment Agency. Fund 691 ? Long Term Advances Debt Service Fund ? Redevelopment Agency This fund was established to account for Redevelopment Agency interfund loans. Fund 661 ? 2005 Taxable Revenue Bonds Series A ? CRA/ERAF Loan Program In April 2005, the Agency entered into a Loan Agreement with the California Statewide Communities Development Authority to borrow the amount of $765,000. This amount was used to pay the Agency?s portion of the 2005 Educational Revenue Augmentation Fund (ERAF) to the County of San Diego pursuant to Section 33681.12 of the California Health and Safety Code. Fund 662 ? 2006 Taxable Revenue Bonds Series A ? CRA/ERAF Loan Program In April 2006, the Agency entered into a Loan Agreement with the California Statewide Communities Development Authority to borrow the amount of $930,000. This amount was used to pay the Agency?s portion of the 2006 Educational Revenue Augmentation Fund (ERAF) to the County of San Diego pursuant to Section 33681.12 of the California Health and Safety Code. Fund 663 ? 2006 Senior Tax Allocation Refunding Bonds, Series A In July 2006, the Redevelopment Agency issued the 2006 Senior Tax Allocation Bonds, Series A in the amount of $13,435,000 to refinance the Agency?s outstanding Bayfront/Town Centre Redevelopment Project 1994 Senior Tax Allocation Refunding Bonds Series A (the ?1994 A Bonds). The original bonds were issued to finance improvements in the Bayfront/Town Centre Project Areas. The Annual Debt Service is paid from property tax increment generated in the project areas. The term of the bonds runs through 2027. Fund 664 ? 2006 Subordinate Tax Allocation Refunding Bonds, Series B In July 2006, the Redevelopment Agency issued the 2006 Subordinate Tax Allocation Bonds, Series B in the amount of $12,325,000 to refinance the Agency?s outstanding çï Bayfront/Town Centre Redevelopment Project 1994 Senior Tax Allocation Refunding Bonds Series D (the ?1994 D Bonds) and the 1994 Subordinate Tax Allocation Refunding Bonds, Series C (the 1994 C Bonds) The original bonds were issued to finance improvements in the Bayfront/Town Centre Project Areas. The Annual Debt Service is paid from property tax increment generated in the project areas. The term of the bonds runs through 2021. Fund 665 ? RDA 2008 Tax Allocation Refunding Bonds (TARBs) This fund was established to account for the debt service payments for the refunding of the Redevelopment Agency 2000 Tax Allocation Bonds (Merged Redevelopment Project) in the amount of $21,625,000. The Merged Redevelopment Project was created on August 22, 2000, pursuant to an amendment to the redevelopment plans for three of the Agency?s four existing redevelopment projects, the Town Centre II Project Area, the Otay Valley Project Area and the Southwest Project Area. The Merged Project Area was amended in 2004 adding 494 acres. The Bonds were issued to provide funds for the repayment of certain obligations of the Merged Redevelopment Project and other interfund loans, and for general redevelopment purposes. The term of the bonds is through the year 2036. REVENUES The table below provides a comparison of the budgeted revenues for fiscal year 2011-12 to the estimated fiscal year 2012-13 revenues. The table does not reflect the revenue budget of the debt service funds which are reflected in the debt service section of the budget document. Redevelopment/Successor Agency Operating Fund Revenues Fiscal Years 2011 to 2013 Ú«²¼íïéñêïïñêìïñêëïÚ«²¼íïéñêïïñêìïñêëïÚ«²¼íïèñíïç ÚÇïðïïÚÇïïïîÚÇïîïí×²½®»¿»ñ ß½¬«¿´ß¼±°¬»¼Û¬·³¿¬»¼øÜ»½®»¿»÷ Ð®±°»®¬§Ì¿¨»ïíôèîîôçíèïìôïðéôíìèçôëêîôïïíøìôëìëôîíë÷ Ë»±ºÓ±²»§úÐ®±°»®¬§íëëôëìèíîôèèëïéôèèëøïëôððð÷ Î»ª»²«»º®±³Ñ¬¸»®ß¹»²½·»ìðôððð Ñ¬¸»®Î»ª»²«»çôëéèôéêçíîïôðïêøíîïôðïê÷ Ì®¿²º»®×²ìôêîïôîððëôíîïôìéðïôèëéôêéíøíôìêíôéçé÷ Ì±¬¿´Î»ª»²«»îèôìïèôìëëüüïçôéèîôéïçüïïôìíéôêéïüøèôíìëôðìè÷ çî A summary of the notable changes by category are listed below: Property Taxes ? The decrease in this category is due to the dissolution of the Redevelopment Agency. Property tax increment revenues are now received by the County of San Diego and will be distributed to the Successor Agency based on documented enforceable obligations that have been approved by both the Successor Agency Oversight Board and the State Department of Finance. Use of Money & Property ? The decrease represents a reduction in interest earnings due to the loss of property tax increment revenues. Transfers In ? The decrease is due to the Low and Moderate Income Housing Program no longer receiving property tax increment revenues due to the dissolution of the redevelopment agency. Other Revenue ? this revenue category decrease of $321,016 is due to decreased parking meter reimbursements for staff time charges as well as the elimination of staff time reimbursements related to Low and Moderate Income Housing Funds. EXPENDITURES The table below provides a comparison of the budgeted expenditures for fiscal year 2011-12 to the proposed fiscal year 2012-13 expenditures. The table does not reflect the debt service expenditure budget which is discussed in the debt service section of this document. All of the decreases to expenditures are due to the dissolution of the Redevelopment Agency and the Low and Moderate Income Housing Program. çí Redevelopment/Successor Agency Operating Fund Expenditures Fiscal Years 2011 to 2013 Ú«²¼íïéñêïïñêìïñêëïÚ«²¼íïéñêïïñêìïñêëïÚ«²¼íïèñíïç ÚÇïðïïÚÇïïïîÚÇïîïí×²½®»¿»ñ ß½¬«¿´ß¼±°¬»¼Ð®±°±»¼øÜ»½®»¿»÷ Ð»®±²²»´Í»®ª·½»ëéêôìîëëèìôçííîëêôìîîøíîèôëïï÷ Í«°°´·»úÍ»®ª·½»ìïïôïíëëïêôëëðïçìôêëíøíîïôèçé÷ Ñ¬¸»®Û¨°»²»îôêêçôîîíîôìëíôêêìïôïìëôêîçøïôíðèôðíë÷ Ý¿°·¬¿´ìôëîðêôðððïôëðêôðððïôëððôððð Ì®¿²º»®Ñ«¬îéôçéìôéïîïíôëìçôîðéèôïìçôîíêøëôíççôçéï÷ Ý×ÐÐ®±¶»½¬Û¨°»²¼·¬«®»íîðôîèé Ò±²Ý×ÐÐ®±¶»½¬Û¨°»²¼·¬«®»êôíððôðððìôðððôðððøîôíððôððð÷ Ë¬·´·¬·»ïôêîëïôçððîôïëðîëð Ì±¬¿´Û¨°»²¼·¬«®»íïôçëéôçîéüüîíôìïîôîëìüïëôîëìôðçðüøèôïëèôïêì÷ Expenditures proposed for fiscal year 2012-13 are for winding down the former Redevelopment Agency and Low and Moderate Income Housing activities and documented enforceable obligations. Personnel Services budget has been reduced from four positions to two positions that will be primarily responsible for winding down the activities of the former Redevelopment Agency. Two positions were transferred to the General Fund and will be partially offset by Successor Agency revenue. Services and Supplies have been reduced due to the staffing cutbacks and elimination of project related consultant services. Other Expenses budgeted in this category are for payments to Goodrich Aerostructures as required by the Cooperation and Remediation Agreement and staff time reimbursements for the development of the City?s Bayfront. Capital category increased by $1.5 million for the acquisition and rehabilitation of affordable housing as part of the requirements for the Neighborhood Stabilization Program. Transfers-out budget is to fund the debt services funds used to pay debt service related to the former Redevelopment Agency?s Tax Allocation Bonds, payment on the 2003 Certificates of Participation and loan repayments to the City as documented in existing contracts/agreements. Non-CIP Expenditures decreased by $2.3 million primarily due to the planned acquisition of a motel which did not move forward due to the demise of the redevelopment agency. Included in the fiscal year 2012-13 budget is $4.0 million loan related to the Landings II ? Affordable Housing project which had been anticipated in fiscal year 2011-12. çì çë çê çé çè çç ïðð ïðï ïðî ØÑËÍ×ÒÙßËÌØÑÎ×ÌÇÚËÒÜÍ TheHousing Authority was formed in 1993. A Housing Authority can provide tax-exempt bond financing, own and operate housing, and operate various housing programs. The Chula Vista Housing Authority does not own or operate housing, and the Section 8 rental assistance programs including Public Housing are operated in Chula Vista by the County of San Diego Housing Authority. The staff of the Housing Authority provides comprehensive housing services for the City. In addition, with the elimination of the City?s redevelopment agency, the Housing Authority will assume the housing functions of the former Redevelopment Agency, becoming a ?Successor Housing Agency?. The Chula Vista Housing Authority fund is the clearinghouse for all housing related staff activity. Included in this fund are personnel expenses which are reimbursed by various funding sources such as Federal Housing and Urban Development Grant Funds. The Housing Fund will receive $0.6 million in staff time reimbursements for administering the City?s Housing, CDBG, HOME and other grants and for monitoring of bond covenants for affordable housing bonds issued by the City?s Housing Authority. The Housing Authority focuses on the development of sustainable neighborhoods through a variety of investments such as: Production of affordable housing and home ownership opportunities Revive business districts and downtowns Clean-up of contaminated properties Neighborhood beautification such as upgrading facades and sidewalks ïðí FD UND ESCRIPTIONS Fund 313 - Chula Vista Housing Authority The Chula Vista Housing Authority Fund accounts for all housing related activities not considered eligible for reimbursement by the Low and Moderate Income Housing Fund. ïðì ïðë ïðê ÐÎÑÐÑÍÛÜ ÞËÜÙÛÌ ÍÛÉÛÎ ÚËÒÜÍ ïðé ïðè ÍÛÉÛÎÚËÒÜÍ The sewer enterprise funds account for SEWER FUNDS AT A GLANCE revenues and expenditures related to the Number of Billing Accounts: 46,969 City?s sewer programs, including Miles of Pipe Managed: 500 maintenance and expansion of the City?s Daily Treatment Rights (MGDs*): 20.8 conveyance system and payment of San Average Daily Treatment (MGDs*): 16.3 Annual Treatment Cost: $19.3 million Diego Metro wastewater treatment costs. *Million gallons per day The City of Chula Vista provides wastewater conveyance and treatment services to approximately 46,969 billing accounts, including residential and non- residential uses. The wastewater generated by Chula Vista customers is collected and sent to treatment facilities in the South Bay and Point Loma through the City?s extensive sewer collection system, Pictured above: Point Loma Treatment Facility which consists of 11 pump stations and over 500 miles of sewer pipe. The San Diego Metropolitan Wastewater System provides wastewater treatment services to the City of Chula Vista on a contract basis ($19.3 million in fiscal year 2012-13). The City is currently analyzing options to secure sufficient treatment capacity to see the City through build out. Per the 2005 Wastewater Master Plan, the City will need approximately 26.2 MGD at build out. This treatment capacity may be provided by either purchasing additional treatment capacity in the San Diego Metro Wastewater System or construction of a wastewater ïðç reclamation plant in Chula Vista. The following figure illustrates the City?s current trunk sewer network, which conveys flows to the San Diego Metro trunk sewer (shown in red). Main Street/Salt Creek Sewers Salt Creek Trunk Sewer Telegraph Canyon Trunk Sewer Poggi Canyon Trunk Sewer San Diego MWWD Spring Valley Trunk Sewer San Diego Otay MWWD City of Chula Vista Boundary The City continues to focus on its Annual Sewer Rehabilitation Program, which expends approximately $1.0 million to $2.0 million annually for the replacement and rehabilitation of sewer pipes, connections between sewer mains and laterals, access roads, and access covers. The City also utilizes standardized evaluation and ranking criteria in televising and evaluating the condition of sewers in order to ensure that the most critically impacted sewer infrastructure is replaced or rehabilitated first. Up to now, the funds collected from City?s rate payers have been sufficient to maintain and operate the City?s wastewater collection system as well as to pay for the treatment of the wastewater. In order to ensure the future adequacy of the sewer funds, the City is currently undergoing a sewer rate case study that will propose the sewer rates for the next five years. One of the issues that could significantly impact the sewer rates for the City is the Point Loma Treatment Plant (PLTP) Secondary Treatment Waiver. In 2010, the City of San Diego was successful in obtaining a five-year waiver that allowed the continued operation of the PLTP at an advance primary level of sewer treatment before discharging into the ocean. If San Diego is not successful in obtaining another waiver in 2015, the sewer rates for the City of Chula Vista will increase substantially. This increase will help pay for the upgrade to the PLTP to a secondary level of sewer treatment. In fiscal year 2007-08 the City transitioned its sewer funds from ?special revenue? funds to ?enterprise? funds. Enterprise funds may be used to report any activity for which a fee is charged to external users for goods or services, and are appropriate in situations wherein there is either a legal requirement or policy decision to recover costs of providing services for an activity. This change ïïð complies with the GFOA recommended accounting structure, should the City decide to issue bonds for capital improvements solely guaranteed by sewer fees and charges in the future. City staff expenditures incurred supporting wastewater system maintenance and operations are funded by the Sewer Service fund through a combination of direct expenditures and inter-fund transfers. Positions 100% funded by sewer funds (wastewater maintenance and wastewater engineering) are budgeted directly in the sewer fund ($4.2 million in fiscal year 2012-13). The remaining support staff is budgeted in either the General or Development Services funds. These positions are partially offset via inter-fund transfers ($3.1 million in fiscal year 2012-13). All supplies and services, capital, and utilities budgets associated with supporting the wastewater system is also budgeted in the sewer service fund ($1.56 million in fiscal year 2012-13). PP ROPOSED ROJECTS The second highest commitment of CIP funding is for the Wastewater Management System (WMS). The appropriation for Wastewater projects is $4,810,000, which represents 24% of the proposed CIP budget. The single project type within the WMS is Sewer. However, the discussion below is divided into the following two categories: Sewer Rehabilitation and Specific Sewer Improvements, and Sewer Pump Stations and Access Roads. Sewer Rehabilitation and Specific Sewer Improvements The annual Sewer Rehabilitation project for fiscal year 2012-13 commits $1.5 million for citywide work. In addition, upsizing of the sewer pipe on Industrial Boulevard between Main Street and Anita Street will be undertaken so that Growth Management Oversight Commission (GMOC) threshold standards are not exceeded. The GMOC threshold has been exceeded on East ?H? Street between I-805 and Del Rey Boulevard, which was not expected. Staff is undertaking a broader study of the area to determine if faulty meter reading was the cause, before committing to this major $1.5 million project. Sewer Pump Stations and Access Roads Pump stations at Corral Court, Hilltop Drive, and Max Field will be rehabilitated, at a cost of $450,000. Sewer access roads at various locations will be rehabilitated, at a cost of $400,000. The force main at the ?G? Street pump station on the Bayfront will be relined, at a cost of $300,000. ïïï FD UND ESCRIPTIONS Fund 411 ? Sewer Income Fund This fund is used to account for all revenues collected to recover the City?s costs incurred constructing the public wastewater system. The funds are collected from new properties receiving a permit to connect to the City?s wastewater collection system. The owner or person making the application for connection pays fees to the City as designated in the master fee schedule. All funds received may be used only for the acquisition, construction, reconstruction, maintenance and operation of sanitation or sewerage facilities, or to reimburse a subdivider or any person who has constructed sewer facilities benefiting other properties. The fund may also be used to reimburse the City for any expense incurred in connection with the construction and installation of any sewer facility including engineering work and acquisition of rights-of-way. Fund 412 ? Special Sewer Fund The Special Sewer Fund is used to account for the sale of the City?s excess Metropolitan Sewerage capacity. Fund 413 ? Trunk Sewer Capital Reserve Fund The Trunk Sewer Capital Reserve Fund is used to account for sewerage facility participation fees received from the owner or person applying for a permit to develop or modify the use of any residential, commercial, industrial or other property, which is projected to increase the volume of flow in the City?s sewer system, as determined by the City Engineer. All revenue derived from the sewerage facility participation fee shall be used solely for: 1. Paying the cost and expense to repair, replace or enlarge trunk sewer facilities of the City so as to enhance efficiency of utilization and/or adequacy of capacity to serve the needs of the City, or; 2. Paying the cost and expense to plan and/or evaluate any future proposals for area-wide sewage treatment and/or water reclamation systems or facilities. The City Council can appropriate the funds for another purpose, provided such purpose shall be for the planning, design, construction, maintenance or operations of sewage collection or treatment or water reclamation purposes. ïïî Fund 414 ? Sewer Service Revenue Fund The Sewer Service Revenue Fund is used to account for all monies collected from the monthly sewer service charge. Monies in this fund may be used for any and all sewer related activities. The primary use of these funds is the payment of the City?s annual San Diego Metropolitan Sewer Capacity and Maintenance fees and to pay the operational costs of the ?in-city? sewer collection system. Fund 428 ? Sewer Facility Replacement Fund A portion of the revenues derived from the monthly sewer service charge is deposited into the Sewerage Facilities Replacement Fund. Monies in this fund are used solely for the purpose of paying the cost of refurbishment and/or replacement of structurally deficient sewerage facilities including related evaluation, engineering, and utility modification costs. The City Council can appropriate the funds for another purpose provided such purpose is for the construction, maintenance, or operation of sewers or incidental thereto, including any charge for its collection. Funds 431, 432, 433 ? Sewer Development Impact Fee Funds These fees are levied against new development in specific areas of the City, based upon the sewer facility their project will impact. The monies collected are used to fund construction of public improvements designed to increase the capacity of the subject facilities, allowing the City to maintain service levels with increased demand. Included DIF programs are the Telegraph Canyon Sewer Basin DIF, the Poggi Canyon Sewer Basin DIF, and the Salt Creek Sewer Basin DIF. ïïí ïïì ïïë ïïê ïïé ïïè ÐÎÑÐÑÍÛÜ ÞËÜÙÛÌ ÌÎßÒÍ×Ì ÚËÒÜÍ ïïç ïîð ÌÎßÒÍ×ÌÚËÒÜ The MTS - Chula Vista Transit (CVT) is an independent municipal transit system with the Chula Vista City Council as its governing board. CVT forms part of the Metropolitan Transit System (MTS), which is a network of local and regional transit operators. The MTS provides a seamless transit system composed of local, regional, and ADA paratransit services. MTS coordinates fares, transfers, routes and information services to the region. Transit staff also works closely with the San Diego Association of Governments (SANDAG) ? the region?s transit funding, planning and policy setting agency. R EVENUES Chula Vista Transit operating funds come from a combination of State Transportation Development Act (TDA) funds (a ¼ of 1 percent of the State Sales Taxes) and passenger fares, which are used for operations and for capital programming. Prior to July 2001, the City received a direct allocation of its TDA funds, but in 2001 regional transit funds were consolidated under the Metropolitan Transit Development Board (MTDB), now the MTS. The funding consolidation allows the City to participate in available Federal Transit Administration (FTA) capital funds programs. The City has received significant capital project funding from MTS over the last few years, which has allowed Transit to purchase equipment, vehicles, and parts to keep the transit system operational. These funds have also been used to make improvements to transit centers and bus stops in order to keep both internal and external customers happy. ïîï Chula Vista Transit Revenues Transit?s goal is to maximize the effectiveness of transit funds while recognizing the revenue constraints facing the region. Since the funding consolidation, Transit staff actively participates in the SANDAG/MTS budget process. Along with the region?s other Transit agencies, City Transit staff presents its proposed operating budgets. Various budget meetings are held and budgets are adjusted according to the available funds and SANDAG/MTS Board funding policies. Fiscal year 2012-13 transit revenues reflect a net decrease of ($34,800) due to a projected decrease in transfer in revenue of ($87,100) from the equipment replacement fund that is projected for fiscal year 2011- 12 but is not included in the fiscal year 2012-13 budget. This revenue decrease is offset by a ($52,300) increase in state grant TDA revenue and bus fare revenues. E XPENSES CVT operations and capital programming contains no General Fund contribution. The CVT?s operating and capital programming costs are funded by SANDAG/MTS Consolidated TDA Article 4.0 funds and Federal Transit Administration 5307 funds. All City Staff costs are reimbursed by the SANDAG/MTS funds. Other than personnel and staff time reimbursements, the majority of CVT?s expenses are fleet maintenance costs, which includes fuel costs. ïîî Chula Vista Transit Expenditures The fiscal year 2012-13 budget includes funding for 1.0 position. The personnel services expenditure category has been amended to reflect necessary changes in staffing costs for fiscal year 2012-13. Overall, there is a net expenditure increase of ($25,000) in the budget. The major expenditure changes include an increase in supplies and services of ($56,600) for fleet maintenance charges. This increase is partially offset by a decrease in the transfers out category of ($27,800) resulting from a reduction in the fiscal year 2012-13 budget for ?transfers to other transit programs? expenses. S TATISTICS Operated by City of Chula Vista via MTS contract with private bus contractor Routes 7 Six local routes most within Chula Vista city limits, with some Serviceservice in unincorporated areas of the County (Bonita). One Sunday route operated by MTS from their South Bay Division Square Miles Served 50 fiscal year 2009-10 Total 3,400,609 Passengers 38 Buses (32) 40-foot, CNG New Flyers Fleet Size (6) 30-foot CNG El Dorado Nationals ïîí ïîì ïîë ïîê ÐÎÑÐÑÍÛÜ ÞËÜÙÛÌ ÚÔÛÛÌ ÚËÒÜ ïîé ïîè ÚÔÛÛÌÚËÒÜ The Fleet Fund is an internal service fund which like other internal service funds is used to finance and account for goods, special activities, and services performed by one City department for other City departments on a cost reimbursement basis. The Fleet Management fund consists of two functions, Central Garage Operations, and Equipment Replacement. Funds are collected on an annual basis through each affected department?s operating budget and deposited in the Fleet Management Fund. The Central Garage Operations function maintains the City?s fleet of vehicles, both through City equipment mechanics and through contracts with local vendors for more specialized maintenance work, such as major transmission and air conditioning repairs. All City vehicles are maintained by the Central Garage, these vehicles include those associated with safety services, streets and sewers, parks and open space, and the library. Services provided include maintenance of the vehicles, vehicle fuel, and other specialized services not directly related to any single vehicle. R EVENUES Revenues in the Fleet Fund come directly from affected departments within the City. There are two types of charges billed to City departments: 1. Vehicle Maintenance Charges: These charges are based on the actual vehicles that reside within a department and include costs ranging from routine (oil changes, preventive maintenance) to major (transmission repair) as well as fuel costs. 2. Vehicle Replacement Charges: Historically, the Fleet Fund charges each department replacement costs based on the average annual cost to replace each vehicle over the vehicles useful life. Most non-safety vehicles have a useful life from seven to ten years. However, due to the continued economic constraints vehicle replacement charges have not ïîç been assessed since fiscal year 2007-08. Instead, the City has been replacing vehicles on a pay as you go basis depending on the availability of grant and other eligible funding. Fleet Fund Revenues For fiscal year 2012-13, the proposed revenue budget for the Fleet Fund is $3.6 million. This represents a net $10,000 increase over the fiscal year 2011-12 year-end projected budget. The major revenue changes are as follows: A $20,000 increase in charges for current services for public natural gas purchases. A $214,000 decrease in other revenue other due to a decrease of $273,000 of department billing revenue. This decrease is partially offset by increases of $19,000 and $40,000 in damaged property recovery and Transit Fund reimbursement revenues respectively. E XPENDITURES The Fleet fund?s expenditures include costs to repair and replace equipment (motor vehicles, mowers, generators, equipment trailers, etc.) throughout the City. As discussed in the revenue summary above, these costs are then allocated back to the affected departments based on several factors such as the number of vehicles/equipment, repair history, and fuel usage. Fleet Fund Expenditures FY 2010-11 FY 2011-12 FY 2012-13 CategoryActualProjected Proposed Inc/Dec üïëôéîì Personnel Services844,014$ 777,064$ 792,788$ Supplies and Services2,818,176$ 2,869,886$ 2,828,741$ üøìïôïìë÷ ü Other Expenses474,277$ 400$ 400$ üëîçôçðð Capital30,000$ 172,200$ 702,100$ Utilities597$ 1,125$ 800$ üøíîë÷ üïïêôèëí Transfers Out895,079$ 87,147$ 204,000$ Total5,062,143$ 3,907,822$ 4,528,829$ 621,007$ ïíð The proposed budget for fiscal year 2012-13 for Fleet Management is $4.5 million. This amount includes funding for the necessary resources that will be required to sustain operations for service, repairs, and to fuel the City?s fleet in fiscal year 2012-13. The Personnel services category is increasing by $15,700 over the projected fiscal year 2011-12 year actual personnel services costs, and reflects changes to salary and benefit costs changes projected for fiscal year 2012-13. The supplies and services category is decreasing by net $41,000 over the projected fiscal year 2011-12 year actual supplies and services costs. Changes supplies and services costs for fiscal year 2012-13 include decreases to maintenance, contractual services and fuel and lubricant expenditure categories totaling $96,000. These decreases are offset by an increase in the budget for natural gas of $55,000. Capital expenditures are increasing by $529,000 to reflect the City?s decision to move forward with a modified approach with respect to vehicle replacement. Under this approach only critical need vehicles will be replaced. Such vehicles are categorized as follows: High Mileage o Have safety or mechanical/performance issues o Have exceeded their useful life expectancy o ïíï ïíî ïíí ïíì ÐÎÑÐÑÍÛÜ ÞËÜÙÛÌ ÝßÐ×ÌßÔ ÐÎÑÖÛÝÌ ÚËÒÜÍ ïíë ïíê ÝßÐ×ÌßÔÐÎÑÖÛÝÌÚËÒÜÍ Capital Projects Funds account for resources used for the acquisition and construction of capital facilities by the City, with the exception of those assets financed by proprietary funds. ADIF SSESSMENT ISTRICT MPROVEMENTUNDS These funds were established as depositories for monies received from issuance of bonds for various assessment districts. The monies are used to finance the construction of public works improvements in the related districts. Included in this group are funds 501 through 518. DIF EVELOPMENT MPACT EES These funds were established as depositories for various development impact fees. The fees are levied against all new development in the City in order to pay for the construction or improvement of public facilities as a result of City growth. Included in this group are the following funds: Funds 542 ? Telegraph Canyon Drainage Development Impact Fee This fee is levied against new development in specific areas of the City, based upon the drainage facility their project will generate an impact on. The monies collected are used to fund construction of public improvements designed to increase the capacity of the subject facilities, allowing the City to maintain service levels with increased demand. Funds 567-582 ? Public Facilities Development Impact Fees The Public Facilities Development Impact Fee (PFDIF) is levied against new development throughout the City to mitigate the impacts of growth on the City?s public services. The monies collected are used in the construction of new, and renovation of existing, public facilities. ïíé Fund 587 ? Otay Ranch Pedestrian Bridge DIF The Otay Ranch Pedestrian Bridge DIF is levied against all new development in Otay Ranch Villages 1, 2, 5, and 6 to fund the construction of pedestrian bridge improvements, as necessitated by growth in these villages. Fund 588 ? Otay Ranch Village 11 Pedestrian Bridge DIF The Otay Ranch Village 11 Pedestrian Bridge DIF is levied against all new development in Otay Ranch Village 11 to fund the construction of pedestrian bridge improvements, as necessitated by growth in this village. Fund 591 ? Transportation Development Impact Fee The Transportation Development Impact Fee (TDIF) is levied against all new development in the City east of I-805 to fund the construction of transportation improvements, as necessitated by growth in the eastern portion of the City. Fund 593 ? Western Transportation Development Impact Fee The Western Transportation Development Impact Fee (W-TDIF) is levied against all new development in the City west of I-805 to fund the construction of transportation improvements, as necessitated by growth in the western portion of the City. OTF THER RANSPORTATION UNDS Included as a part of this group are the following: Fund 723 ? Bicycle Facilities This fund is a depository for local Transportation Development Act funds, Article 3.0, received from the County for the purpose of bicycle related programs. Fund 735 ? Transportation Partnership This fund is a depository for the revenues received from the State and Local Transportation Partnership Program. Funds must be spent on street purposes. Fund 736 ? Other Transportation Programs This fund accounts for other miscellaneous Federal and State transportation grants received by the City. ïíè Fund 737 ? Transportation Equity Act 21 This fund is a depository for revenues received from the federal government under the Transportation Equity Act of the 21st Century. Funds must be spent on street purposes. Fund 739 ? Traffic Congestion Relief This fund is a depository for revenues allocated to the City under Streets and Highways Code Section 2182 and Revenue and Taxation Code Section 7104. Funds must be expended for maintenance or reconstruction of public streets and roads no later than the end of the fiscal year following the fiscal year in which the allocation is received. Any funds not expended within that period must be returned to the State Controller. Fund 741 ? Proposition 1B Highway Safety This fund is a depository for revenues received from the State government under Proposition 1B (The Highway Safety, Traffic Reduction, Air Quality, and Port Security Act), as approved by voters in the November 2006 general election. Funds must be spent on street purposes. MCIPF ISCELLANEOUS APITAL MPROVEMENT ROGRAM UNDS Included as part of this group are the following: Fund 714 ? Capital Improvement Project Fund The Capital Improvement Fund was established to set aside monies for capital improvement projects. This fund does not generate revenues from any source except by transfer from other funds and interest earned on monies in the funds. Monies transferred to the fund are expended for budgeted capital improvement projects and monies remaining after completion of a project are transferred back to the fund from which the project was originally financed. Fund 715 ? Park Acquisition and Development (East) This fund is a depository for fees collected from subdividers for the purpose of providing park and recreational facilities directly benefiting and serving the residents of the regulated subdivision east of the 805. These funds are collected pursuant to Chapter 17.10 of the Chula Vista Municipal Code, in accordance with authority granted by Section 66477 of the California Government Code. ïíç Fund 716 ? Park Acquisition and Development (West) This fund is a depository for fees collected from subdividers for the purpose of providing park and recreational facilities directly benefiting and serving the residents of the regulated subdivision west of the 805. These funds are collected pursuant to Chapter 17.10 of the Chula Vista Municipal Code, in accordance with authority granted by Section 66477 of the California Government Code. Fund 717 ? Residential Construction Tax This fund is a depository for fees levied for the construction, replacement, or conversion of all dwelling units within the City including hotels and motels, collected pursuant to Chapter 3.32 of the Chula Vista Municipal Code. Fund 725 - Industrial Development Authority The Industrial Development Authority (IDA) is a conduit-issuer of bonds, formed in February 1982 (Ordinance 1970) by the City of Chula Vista City Council. The IDA enables bonds to be issued with a tax-exempt status, but does not pledge City funds to repay the bond issues. The City is able to issue and sell bonds to provide financial assistance that has a public benefit for the acquisition, construction and installation of facilities for industrial, commercial, business or public utility purposes. ïìð ïìï ïìî ïìí ïìì ïìë ïìê ïìé ïìè ÐÎÑÐÑÍÛÜ ÞËÜÙÛÌ ÜÛÞÌ ÍÛÎÊ×ÝÛ ÚËÒÜÍ ïìç ïëð ÜÛÞÌÍÛÎÊ×ÝÛÚËÒÜÍ The debt service requirement for the City and the Successor Agency to the Redevelopment Agency is $14.5 million for fiscal year 2012-13. This represents a $2.7 million decrease in the amount of debt service when compared to the fiscal year 2011-12 obligation of $17.2 million. The $14.5 million is the required payments for the debt per the amortization schedules however, the amounts budgeted are usually less due to available fund balance as a result of interest earnings or excess cash in the various debt service funds that reduce the required cash outlay budgeted for the annual payment of the debt. Debt service payments are made from various City and Agency Funds in accordance with the legal documents governing each borrowing. Present debt is in the form of Certificates of Participation, Long Term Notes, Lease-Purchase Obligations, Tax Allocation Refunding Bonds, and Tax Allocation Bonds. Debt has been issued by the City to finance a wide variety of projects, including the construction of the new Public Works Center and the new Police Facility, parking facilities, refurbishment of the Chula Vista Shopping Mall, property acquisitions, building remodeling, and equipment and software acquisition. Annual debt service costs are funded by the General Fund, Public Facilities Development Impact Fee Fund, and property tax increment revenues from the Successor Agency to the Redevelopment Agency. Debt Service ? City Fund Debt Service for City Fund accounts for the activities of the City?s bonds (not issued by the CV Public Financing Authority), notes and capital leases. Debt service expenditures for the City Fund are approximately $2.7 million offset by revenues of $1.9 million, a net difference of -$0.8 million. This difference is due to a larger amount of expenditures budgeted in funds 451 and 453 than revenues. Fund 451 has $600,000 more in expenditures due to the accrual of interest expense on the City?s inter- ïëï fund loans. Fund 453 has more expenditures than revenues budgeted and will utilize fund balance to offset the difference in revenues. To follow is a brief description of the City Fund - debt service funds. Fund 442 ? CDBG Section 108 Loan In June of 2008, the City received a loan of $9.5 million from the U.S. Department of Housing and Urban Development (HUD), under the Section 108 program. These funds will be repaid with a portion of the City?s annual CDBG allocation, over the next 20 years. The funds will be used for the ?Castle Park Infrastructure Project?. The Section 108 loan is an ?advance? of future CDBG entitlement funds, and, as such, is repaid with a portion of the City?s annual entitlement. Fund 446 ? Notes Payable Adamo A January 1994 note payable for $370,000 to Mr. and Mrs. Adamo as part of the purchase price for property located adjacent to the Civic Center. The term of the note is twenty years. Fund 449 - San Diego County Regional Communication Systems On March 7, 2000, the Chula Vista City Council authorized the City to join the San Diego County Regional Communications Systems (RCS). The City?s portion of the infrastructure is $2,809,405 plus financing costs. This is payable over a period of 14 years commencing on January 1, 2001 through January 1, 2014. Fund 451 ? Long Term Advances DSF - City This fund was established to account for inter-fund loans. Fund 452 ? Capital Leases ? Fire Equipment This fund was established to account for the lease/purchase of the Fire Department?s defibrillator equipment. Fund 453 ? CEC Loan Repayment This fund accumulates payment of principal and interest on a loan obtained through the California Energy Commission to fund various energy conservation capital projects. ïëî Debt Service - Chula Vista Public Financing Authority The Chula Vista Public Financing Authority (PFA) formed in April 1995 to provide for financing of acquisition, construction and improvement of public capital improvements. The PFA has been used to issue Certificates of Participation on behalf of the City. Debt service expenditures for the PFA are approximately $10.1 million offset by revenues of $8.9 million a net difference of $-1.3 million. This difference is due to a larger amount of expenditures budgeted in fund 474 than revenues. The difference in revenues will be offset by fund balance that is available to augment budgeted revenues. To follow is a brief description of the Chula Vista PFA - debt service funds. Fund 450 ? 2002 Certificates of Participation ? Police Facility Project In June 2002, the Public Financing Authority issued the 2002 COP in the amount of $60,145,000 to finance the construction of the City?s new Police Headquarters. The source of repayment of the certificates is the lease payments to be made by the General Fund and PFDIF to the Public Financing Authority. The term of the certificates is through the year 2032. Fund 471 ? 2003 Refunding Certificates of Participation In August 2004, the Public Financing Authority issued the 2003 COP in the amount of $11,320,000 to prepay the outstanding $7,215,000 principal balance of the 1993 Refunding Certificates of Participation and the outstanding $2,140,000 principal balance of the 1993 Certifications of Participation. The source of repayment of the certificates is the lease payments to be made by the City to the Public Financing Authority and reimbursed by the Redevelopment Agency based on existing repayment agreements approved at the time of bond issuance. The term of the certificates is through the year 2013. Fund 472 ? 2004 Certificates of Participation ? Civic Center Project ? Phase 1 In August 2004, the Public Financing Authority issued the 2004 COP in the amount of $37,240,000 to finance the construction and equipping of certain improvements to the Civic Center complex and to provide funds for infrastructure improvements in western Chula Vista. The source of repayment of the certificates is the lease payments to be made by the General Fund and PFDIF to the Public Financing Authority. The term of the certificates is through the year 2034. ïëí Fund 473 ? 2006 Certificates of Participation-Civic Center project Phase 2 In March 2006, the Public Financing Authority issued the 2006 COP in the amount of $20,325,000 to finance the construction and equipping of additional improvements to the Civic Center complex and for the renovation of the City?s Nature Center. Fund 474 ? 2010 COP Refinance (Corporation Yard and Civic Center Phase III) In February 2010, the Public Financing Authority issued the 2010 COP in the amount of $29,355,000 to prepay the outstanding $15,640,000 principal balance of the 2000 Certificate of Participation and to finance certain capital improvement projects. The source of repayment of the certificates is the lease payments to be made by the General Fund and PFDIF to the Public Financing Authority. The term of the certificates is through the year 2033. ïëì ïëë ïëê ÐÎÑÐÑÍÛÜ ÞËÜÙÛÌ ÑÌØÛÎ ÚËÒÜÍ ïëé ïëè ÑÌØÛÎÚËÒÜÍ The funds included in this section include miscellaneous Special Revenue and Internal Service funds. Special Revenue Funds are used to account for proceeds derived from specific revenue sources, which are legally restricted to expenditures for special purposes. Internal Service Funds are used to finance and account for goods, special activities, and services performed by one City department for other City departments on a cost reimbursement basis. Internal Service Funds account for the activities of worker?s compensation, insurance, and technology replacement. To follow is a brief description of special revenue funds. TF RANSPORTATION UNDS Included in this group are the following funds: Fund 221 ? Gas Tax This fund accounts for the receipt and expenditure of all monies received from the State under Street and Highway Code Sections 2106, 2107, 2107.5. The allocations must be spent for street maintenance or construction and a limited amount for engineering. Historically, these monies were deemed highly restrictive insofar as expenditure, but with adoption of AB1502 effective January 1, 1978 most of the money can be used for any street purpose. Fund 225 ? Traffic Signal Fee This fund accounts for the receipt and expenditure of fees collected from private developers for financing and / or installation of new traffic signals, as required by City of Chula Vista Council Policy 478-01 ïëç Fund 227 ? Transportation Sales Tax This fund was established to account for the receipt and disbursement of all transportation sales tax (TransNet) revenues for the City. In November 1987, San Diego County voters first approved the Transportation Program (TransNet). In November of 2004, voters approved a 40-year extension of the program, which funds transportation improvements throughout the region via a half-cent local sales tax. The City?s allocation of regional funds is based upon population and the number of local street and road miles maintained by the City. PF ARKING UNDS Included as part of this group are the following funds: Fund 241 ? Parking Meter Parking Meter Fund revenues are generated through two sources: coin deposits from parking meters located in the downtown area, and parking citation payments for expired meter violations. These funds pay for the coin collection and maintenance of the meters, the parking enforcement staff that monitors the downtown area, and general upkeep and signage of the downtown parking lots. Fund 243 - Town Centre I Parking This fund is used to account for revenues from an in-lieu parking fee. This in-lieu parking fee applies to any developer of a new commercial building or addition to an existing commercial building within the Downtown Parking District. Use of monies in this fund is restricted to the purchase or development of parking sites. PSF UBLIC AFETY UNDS Included in this group are the following funds: Fund 245 ? TrafficSafety This fund is a depository for all monies derived from vehicle code fines, excluding parking violations. The fines are collected through the County court system and remitted to the City monthly. These monies may be expended only for traffic control devices and equipment and maintenance thereof or for the maintenance, improvement or construction of public streets. ïêð Fund 251 ? Supplemental Law Enforcement Services This fund accounts for the Supplemental Law Enforcement grant funds awarded to the Police Department; these funds can be used to supplement general fund appropriations for Police related personnel, overtime, and equipment expenditures. Fund 252 ? Police Department Grants This fund includes the California Border Alliance Group (CBAG) and miscellaneous police grants. CBAG is funded with federal funds. While CBAG employees are technically City of Chula Vista employees they do not work in the City of Chula Vista nor do they provide direct services for the City of Chula Vista; the City serves only as a fiscal agent for CBAG. Fund 253 ? Inmate Welfare Fund This fund is a depository for monies collected from pay phones commissions and operation of a commissary, in accordance with the Sheriff?s Penal Code section 4025. Monies in this fund shall be expended for the benefit, education, and welfare of the inmates. Fund 254 ? Local Law Enforcement Block Grant Funds This fund accounts for federal Justice Assistance Grant funds awarded to the Police Department; these funds can be used to supplement general fund appropriations for Police related personnel, overtime, and equipment expenditures. Fund 256 ? Asset Seizure This fund is a depository for assets seized under Federal statutes through the process of ?equitable sharing? of drug money and real property. By law these funds may only be used for law enforcement purposes and are intended to supplement, not supplant, existing funds. L/CAF IBRARYULTURALRTS UNDS Included in this group are the following funds: Fund 261 ? California Library Service Act The California Library Services Act (CLSA) helps public libraries provide coordinated reference services and provides reimbursement for interlibrary loans of materials and loans to nonresident borrowers through the Transaction Based Reimbursement program, also known as the Direct Loan program. The Chula Vista Public Library participates in the Universal Borrowing provision of CLSA that reimburses the City for any over-the-counter loan service to ïêï the residents of all other California public library jurisdictions (Direct Loan). The Interlibrary Loan program reimburses the City for handling costs when books are lent to other California libraries. Fund 262 ? Public Library Foundation Fund The Public Library Foundation Act (PLF) is a funding formula under which the State contributes funding for basic local library services, under specified conditions, to assure the availability to every resident of the state an adequate level of public library service regardless of the taxable wealth of the local jurisdiction providing the service. The legislation provides that to every library jurisdiction which allocates to its public library at least as much local funding as it had the previous year, the state will award a dollar amount equal to the proportional share of the total amount allocated for the Public Library Foundation program based on the population of the library's service area as certified by the State Librarian for that fiscal year. The annual funding is dependent upon appropriations made by the legislature and the Governor. Fund 267 ? McCandliss Awards The Gayle McCandliss Fund was established in 1991 shortly after she passed away. Consistent with her wishes, it was established as a perpetual fund to recognize and provide monetary support or recognition to individuals or groups who make substantial contribution to the arts in the City of Chula Vista. SGF UNDRY RANT UNDS Included as part of this group are the following funds: Fund 268 ? State Recreation Grants This fund was established to account for the receipt and disbursement of all State Recreation Grants received by the City. Fund 272 ? Federal Grants Fund This fund was established to account for the receipt and disbursement of all Federal Grants received by the City. Fund 273 ? State Grants Fund This fund was established to account for the receipt and disbursement of all State Grants ïêî received by the City (excluding Recreation related grants). Fund 274 ? ARRA Fund This fund was established to account for the receipt and disbursement of federal grant funds received by the City, authorized by the American Recovery and Reinvestment Act of 2009. ESCF NVIRONMENTAL ERVICES AND ONSERVATION UNDS Included as part of this group are the following funds: Fund 281 - Waste Management and Recycling Revenue for the Waste Management fund is generated by a variety of grants which are used to implement, operate and educate the public on waste diversion, recycling, environmental actions and impacts. Current grant programs include litter reduction and bottle and can recycling programs; a regional used motor oil and oil filter recycling program; regional household hazardous waste program, regional universal waste program, and a regional needles and sharps disposal program. Fund 282 ? Environmental Services The Environmental Services fund is a depository for revenue that is generated primarily by a 5% surcharge (AB 939 fees) applied to the refuse rates for residential and commercial customers. The surcharge is authorized by the State to recover the costs of developing and implementing source reduction, recycling, and composting programs that are implemented to meet the State mandate to divert 50% of all waste generated annually in the City from landfills. The fund also includes two annual flat fees paid by the franchise hauler under the franchise agreement to cover litter container costs and to support the programs public education and enforcement service costs. Fund 285 ? Energy Conservation Fund Revenue for the Energy Conservation fund is generated by grants and inter-agency agreements for specific energy conservation projects. The energy conservation fund reflects the budget for the SDG&E energy conservation grant. This grant funds energy conservation programs for local residents, businesses, and City operations that reduce the amount of natural gas and electricity consumed. ïêí SDF TORMRAIN UND Fund 301 ? Storm Drain Revenue In accordance with Chapter 14.16 of the Chula Vista Municipal Code all proceeds of the storm drain fee are deposited into the Storm Drain Revenue Fund. Monies in this fund may only be used for storm drain purposes. The monthly storm drain service charge is included on the sewer bill. CDBGF OMMUNITY EVELOPMENT LOCKRANT UNDS These funds are depositories of grant entitlement monies received from the Department of Housing and Urban Development including funds 311, 314, 321, 325, and 333. The purpose of these monies is for community development projects; eligible activities include those that: Benefit low and moderate income people. - Eliminate slums and blight. - Alleviate conditions posing a serious health and/or safety hazard. - OSDF PEN PACE ISTRICT UNDS These funds are a depository for all monies received for all flat rate property tax assessments levied against benefiting property owners for all maintenance of open space areas. Included in this group are funds 342 through 389. The total assessment amount for each Open Space District is calculated each year based upon the cost of providing services within the district. This assessment rate is limited to the prior year?s amount, increased by the lesser of two local indexes. In recent years the indexed increases were not effectively keeping pace with the actual costs of providing these services to the property owners. In fiscal year 2007-08 staff went through the Proposition 218 process on seven districts/zones, in order to bring revenues in line with actual maintenance costs. Only one of the seven districts was approved for an increase in assessment. As a result a concentrated effort has been made to reduce expenditures to within available resources. ISF NTERNAL ERVICE UNDS Fund 231 and Fund 398 ? Workers Compensation This fund is a depository for contributions made from the General Fund to pay for annual costs related to workers? compensation liabilities including the provision of an appropriate reserve to pay uninsured claims costs. The City is self-insured for amounts up to $1.0 million per claim. The amount of the reserve and the required annual transfer is determined by the Director of Finance, ïêì based on experience and consultation with the Risk Manager. In fiscal year 2010-11 the Workers Compensation Fund was moved from Fund 231 to Fund 398, this change is necessary to change the fund type from General Fund to internal service. Fund 232 Flexible Spending Account This fund is used to account for employee health, medical and dependent care benefits. In fiscal year 2011-12 this fund was transitioned to a trust and agency type fund. Fund 234 ? Fire Equipment Lease Fund This fund accounts for the receipt of pass-through revenue from ambulance services to fund the yearly lease agreement for medical resuscitation equipment. Fund 341 Public Liability Trust Fund This fund is a depository for contributions made from the General Fund to provide an appropriate reserve level to pay for uninsured and deductibles for public liability losses. The City is self-insured for amounts up to $250,000 per claim. Fund 393 Technology Replacement Fund The Technology Replacement Fund is an internal service function that provides for the replacement of computers and related technology equipment. Funds from departments? operating budgets are transferred to the Technology Replacement Fund for future replacement of equipment included in the program. Due to economic reasons, the program has not been funded for several years. Computer replacement has been included in various funds based on available resources. ïêë ïêê ïêé ïêè ïêç ïéð ïéï ïéî ïéí ïéì ïéë ïéê ïéé ïéè ïéç ïèð ïèï ïèî ïèí ïèì ïèë ïèê ïèé ïèè ÐÎÑÐÑÍÛÜ ÞËÜÙÛÌ ÝßÐ×ÌßÔ ×ÓÐÎÑÊÛÓÛÒÌ ÐÎÑÙÎßÓ ïèç ïçð ÝßÐ×ÌßÔ×ÓÐÎÑÊÛÓÛÒÌÐÎÑÙÎßÓÍËÓÓßÎÇ To follow is a summary of the fiscal year 2012-13 Capital Improvement Program (CIP). The goal of the Capital Improvement Program is to provide for the sustainable preservation of City-owned assets at the lowest cost and leverage financial strategies to address infrastructure needs. More detailed project information is available in the Capital Improvement Program Proposed Budget for Fiscal Years 2013 to 2017 document. The 2013-2017 Capital Improvement Program (CIP) is a five-year expenditure plan that provides the City with a financial strategy for infrastructure improvements. The CIP includes funding for projects and programs in various geographic areas of the City. The Proposed Fiscal Year 2012- 13 capital expenditure budget is $20.0 million. The forecasted five-year program is estimated at $76.1 million. The 2013-2017 CIP program reflects the actions taken by Council and developed in accordance with Council adopted policies and guiding documents (such as and not limited to the City?s General Plan, Master Plans, Specific Plans and the Regional Transportation Plan) as well as generally accepted accounting principles. The $20.0 million is currently proposed to be lower than the fiscal year 2011-12 adopted CIP budget of $22.7 million, for the following reasons: Anticipated mid-year amendments for the second phase of City energy projects The transfer of minor CIP projects from the CIP to the Operating budget. An increased Federal match for the Heritage Road Bridge, which will be shown in future years, but with reduced City funding shown in this year?s budget. Construction funds for Willow Street Bridge shown in FY2013-14 The CIP budget also includes the reallocation of remaining funds after projects completed in the Southwestern CV Street Improvement Program such as Second Avenue Improvements for ïçï additional street improvements in the Castle Park area on Del Mar, Twin Oaks, and Alpine Avenues, via the formation of assessment districts. These are the remaining funds from the $9.5 million Section 108 Loan from the U.S. Department of Housing and Urban development (HUD) for street improvements in the Castle Park area. Additionally project balances remaining in completed projects such as the Chula Vista Library Roof and PIMA Institute facility at the Animal Care Facility have been reprogrammed to other projects such as the Loma Verde Recreation Complex. The proposed plan reaffirms the City?s commitment to identify resources to move us toward long- term sustainability of our City assets. ïçî ïçí ïçì ïçë ïçê ÐÎÑÐÑÍÛÜ ÞËÜÙÛÌ ÍËÓÓßÎÇ ÌßÞÔÛÍ Ú«²¼ ß°°®±°®·¿¬·±² ¾§ Ü»°¿®¬³»²¬ ¿²¼ Û¨°»²¼·¬«®» Ý¿¬»¹±®§ Í½¸»¼«´» ±º Î»ª»²«» Ú«²¼ Þ¿´¿²½» Ð®±¶»½¬·±² Í½¸»¼«´» ±º ×²¬»®º«²¼ Ì®¿²º»® ß«¬¸±®·¦»¼ Ð±·¬·±² ¾§ Ü»°¿®¬³»²¬ ïçé ïçè ÐÎÑÐÑÍÛÜ ÞËÜÙÛÌ Ú×ÍÝßÔ ÇÛßÎ îðïîóïí ÚËÒÜ ßÐÐÎÑÐÎ×ßÌ×ÑÒÍ ÞÇ ÜÛÐßÎÌÓÛÒÌ ßÒÜ ÛÈÐÛÒÜ×ÌËÎÛ ÝßÌÛÙÑÎÇ ïçç îðð îðï îðî îðí îðì ÐÎÑÐÑÍÛÜ ÞËÜÙÛÌ Ú×ÍÝßÔ ÇÛßÎ îðïîóïí ÍÝØÛÜËÔÛ ÑÚ ÎÛÊÛÒËÛÍ îðë îðê îðé îðè îðç îïð îïï îïî îïí îïì îïë îïê îïé îïè îïç îîð ÐÎÑÐÑÍÛÜ ÞËÜÙÛÌ Ú×ÍÝßÔ ÇÛßÎ îðïîóïí ÚËÒÜ ÞßÔßÒÝÛ ÐÎÑÖÛÝÌ×ÑÒÍ îîï îîî îîí îîì îîë îîê îîé îîè îîç îíð ÐÎÑÐÑÍÛÜ ÞËÜÙÛÌ Ú×ÍÝßÔ ÇÛßÎ îðïîóïí ÍÝØÛÜËÔÛ ÑÚ ×ÒÌÛÎÚËÒÜ ÌÎßÒÍÚÛÎÍ îíï îíî îíí îíì îíë îíê îíé îíè ÐÎÑÐÑÍÛÜ ÞËÜÙÛÌ Ú×ÍÝßÔ ÇÛßÎ îðïîóïí ßËÌØÑÎ×ÆÛÜ ÐÑÍ×Ì×ÑÒÍ ÞÇ ÜÛÐßÎÌÓÛÒÌ îíç îìð îìï îìî îìí îìì îìë îìê îìé îìè îìç îëð ÐÎÑÐÑÍÛÜ ÞËÜÙÛÌ ßÐÐÛÒÜ×È Ú·½¿´ Ð±´·½·» ×²ª»¬³»²¬ Ð±´·½·» Ü»¾¬ ß¼³·²·¬®¿¬·±² Ù¿²² ß°°®±°®·¿¬·±² Ô·³·¬ Ô»¹¿´ Ü»¾¬ Ó¿®¹·² ß½½±«²¬·²¹ Í§¬»³ ú Þ«¼¹»¬¿®§ Ý±²¬®±´ Ô·¬ ±º ß½®±²§³ Ù´±¿®§ Ý¸«´¿ Ê·¬¿ ¿¬ ¿ Ù´¿²½» îëï îëî Ú×ÍÝßÔÐÑÔ×Ý×ÛÍ This section of the budget document reiterates the fiscal policies that were reviewed and acknowledged by the City Council in January 2000. These policies form the overall framework within which the operating budget was formulated. The fiscal policies, most of which are already codified in one form or another, are not considered new or controversial, but are summarized here to assist you to better understand the basis for the resource allocation decisions that were made. A. General 1. The City?s financial assets will be managed in a sound and prudent manner in order to ensure the continued viability of the organization. 2. A comprehensive operating and capital budget for all City funds will be developed annually and presented to the City Council for approval. The purpose of the annual budget will be to: a. Identify community needs for essential services. b. Identify the programs and specific activities required to provide these essential services. c. Establish program policies and goals that define the nature and level of program services required. d. Identify alternatives for improving the delivery of program services. e. Identify the resources required to fund identified programs and activities, and enable accomplishment of program objectives. f. Set standards to facilitate the measurement and evaluation of program performance. 3. The City?s annual operating budget will be balanced whereby planned expenditures do not exceed anticipated revenues. îëí 4. Recurring revenues will fund recurring expenditures. One-time revenues will be used for capital, reserve augmentation, or other non-recurring expenditures. 5. Accounting systems will be maintained in accordance with Generally Accepted Accounting Principles. 6. Investment policy and practice will be in accordance with State statutes that emphasize safety and liquidity over yield, including quarterly status reports to the City Council. (Council Policy) 7. City operations will be managed and budgets prepared with the goal of maintaining an available fund balance in the General Fund of no less than eight percent of the General Fund operating budget. (Council Policy) 8. General Fund fiscal status reports reflecting comparisons of actual and projected performance with budget allocations for both revenues and expenditures will be presented to the City Council on a quarterly basis. (City Charter) B. Revenue 1. The City will endeavor to maintain a diversified and stable revenue base in order to minimize the impact to programs from short-term economic fluctuations. 2. Revenue projections will be maintained for the current year and four future fiscal years, and estimates will be based on a conservative, analytical, and objective process. 3. In order to maintain maximum flexibility, except as required by law or the funding source, the City will avoid earmarking any unrestricted revenues for a specific purpose or program. 4. User fees will be imposed when appropriate and set at a level to recover the full cost of services provided which are of a special benefit to easily identified individuals or groups. (Master Fee Schedule) 5. User fees will be reviewed and updated on an ongoing basis to ensure that program costs continue to be recovered and that the fees reflect changes in levels of service delivery. (Master Fee Schedule) 6. The City will recover the cost of new facilities and infrastructure necessitated by new îëì development consistent with State law and the City?s Growth Management Program. Development Impact Fees will be closely monitored and updated to ensure that they are maintained at a level adequate to recover costs. (GMOC Ordinance) 7. When considering new development alternatives, the City will attempt to determine the fiscal impact of proposed projects, annexations, etc. and ensure that mechanisms are put in place to provide funding for any projected negative impacts on City operations. (GMOC Ordinance) C. Expenditures 1. Budgetary control will be exercised at the Department/category level, meaning that each department is authorized to spend up to the total amount appropriated for that department within the expenditure categories of Personnel Costs, Supplies & Services, Other Charges, Utilities, and Capital. Transfers of appropriations between expenditure categories of up to $15,000 may be approved by the City Manager. Transfers of appropriations between expenditure categories in excess of $15,000, or between departments require City Council approval.(City Charter & Council Policy) 2. Appropriations, other than for capital projects, remaining unspent at the end of any fiscal year will be cancelled and returned to Available Fund Balance with the exception of any appropriations encumbered as the result of a valid purchase order or as approved for a specific project or purpose by the City Council or the City Manager. Appropriations for capital projects will necessarily be carried over from year to year until the project is deemed to be complete.(Council Policy) 3. The City will establish and maintain equipment replacement and facility maintenance funds as deemed necessary to ensure that monies are set aside and available to fund ongoing replacement needs. 4. The City will attempt to compensate non-safety employees at rates above the middle of the labor market as measured by the median rate for similar jurisdictions. (Council Policy) îëë D. Capital Improvement Program (CIP 1. Major capital projects will be included in a CIP Budget reflecting a five-year period. The CIP budget will be updated annually and presented to City Council for approval. Resources will be formally appropriated (budgeted) for the various projects on an annual basis in accordance with the five-year plan. E. Capital Financing & Debt Management 1. The City will consider the use of debt financing only for one-time capital improvement projects when the project?s useful life will exceed the term of the financing and when resources are identified sufficient to fund the debt service requirements. The only exception to this limitation is the issuance of short-term instruments such as tax and revenue anticipation notes, which will only be considered in order to meet legitimate cash flow needs occurring within a fiscal year. 2. The City will attempt to limit the total amount of annual debt service payments guaranteed by the General Fund to no more than ten percent of estimated General Fund revenues. 3. The City will consider requests from developers for the use of debt financing secured by property based assessments or special taxes in order to provide for necessary infrastructure for new development only under strict guidelines adopted by Council, which may include minimum value-to-lien ratios and maximum tax burdens. (Community Facility District Ordinance) 4. The City will strive to minimize borrowing costs by: a. Seeking the highest credit rating possible. b. Procuring credit enhancement such as letters of credit or insurance, when cost effective. c. Maintaining good communications with credit rating agencies regarding the City?s fiscal condition. 5. The City will diligently monitor its compliance with bond legal covenants, including adherence to continuing disclosure requirements and federal arbitrage regulations. 6. In addition to externally financed debt, the City utilizes inter-fund loans whenever possible to reduce borrowing costs or provide for shorter term loans. When interest is charged on internal loans, it is done at the same rate the City earns from its investments. îëê ×ÒÊÛÍÌÓÛÒÌÐÑÔ×Ý×ÛÍ 1.0 Purpose: This ?Investment Policy and Guidelines? (the ?Investment Policy?) Policy is intended to provide guidelines for the prudent investment of the City of Chula Vista's (the ?City?) cash balances, and outline policies to assist in maximizing the efficiency of the City's cash management system, while meeting the daily cash flow demands of the City. 2.0 Policy: The investment practices and policies of the City of Chula Vista are based upon state law and prudent money management. The primary goals of these practices are: A. To ensure compliance with all Federal, State, and local laws governing the investment of public funds under the control of the Director of Finance/Treasurer. B. To protect the principal monies entrusted to the City?s Finance Department. C. To provide sufficient liquidity such that funds are available as needed to meet those immediate and/or future operating requirements of the City, including but not limited to payroll, accounts payable, capital projects, debt service and any other payments. D. Achieve a reasonable rate of return within the parameters of prudent risk management while minimizing the potential for capital losses arising from market changes or issuer default. 3.0 Scope: This Investment Policy applies to all financial assets of the City of Chula Vista, as indicated in 3.1 below. These funds are accounted for in the City's Comprehensive Annual Financial Report. îëé 3.1 Funds: The Director of Finance/Treasurer is responsible for investing the unexpended cash in the City Treasury for all funds, except for the employee's retirement funds, which are administered separately, and those funds which are managed separately by trustees appointed under indenture agreements. The Director of Finance/Treasurer will strive to maintain the level of investment of this cash as close as possible to 100%. These funds are described in the City's annual financial report and include: General Fund Special Revenue Funds Capital Project Funds Enterprise Funds Trust and Agency Funds Any new fund created by the legislative body, unless specifically exempted This Investment Policy applies to all transactions involving the financial assets and related activity of the foregoing funds. 4.0 Prudence: The standard of prudence to be used by the Director of Finance/Treasurer shall be the "prudent investorstandard?. This shall be applied in the context of managing an overall portfolio. The "prudent investor standard" is applied to local agencies, pursuant to California Government Code Section 53600.3 which provides, in pertinent part: ? ? all governing bodies of local agencies or persons authorized to make investment decisions on behalf of those local agencies investing public funds pursuant to this chapter are trustees and therefore fiduciaries subject to the prudent investor standard. When investing, reinvesting, purchasing, acquiring, exchanging, selling, or managing public funds, a trustee shall act with care, skill, prudence, and diligence under the circumstances then prevailing, including, but not limited to, the general economic conditions and the anticipated needs of the agency, that a prudent person acting in a like capacity and familiarity with those matters would use in the conduct of funds of a like character and with like aims, to safeguard the principal and maintain the liquidity needs of the agency. ?? 4.1 Personal Responsibility: îëè The Director of Finance/Treasurer, Assistant Director of Finance, Treasury Manager and Associate Accountant as investment officers acting in accordance with written procedures and the Investment Policy and exercising due diligence, shall be relieved of personal responsibility for an individual security's credit risk or market price changes, provided deviations from expectations are reported to the City Council in a timely fashion and appropriate action is taken to control adverse developments. 5.0 Objective: Consistent with this aim, investments are made under the terms and conditions of California Government Code Section 53600, et seq. Criteria for selecting investments and the absolute order of priority are: 5.1 Safety: Safety of principal is the foremost objective of the investment program. Investments of the City of Chula Vista shall be undertaken in a manner that seeks to ensure the preservation of capital in the overall portfolio. To attain this objective, diversification is required in order that potential losses on individual securities do not exceed the income generated from the remainder of the portfolio. 5.2 Liquidity: The City of Chula Vista's investment portfolio will remain sufficiently liquid to enable the City to meet all operating requirements which might be reasonably anticipated and to maintain compliance with any indenture agreement, as applicable. Liquidity is essential to the safety of principal. 5.3 Return on Investments: The City of Chula Vista's investment portfolio shall be designed with the objective of attaining a market-average rate of return throughout budgetary and economic cycles (market interest rates), within the City?s Investment Policy's risk parameters and the City?s cash flow needs. See also Section 16.1. 6.0 Delegation of Authority: The Director of Finance/Treasurer shall be responsible for all transactions undertaken and shall establish a system of controls and written procedures to regulate the activities of subordinate officials. The responsibility for the day-to-day investment of City funds will be delegated to the Associate Accountant under the general direction of the Assistant Director of Finance. îëç 7.0 Ethics and Conflicts of Interest: In addition to state and local statutes relating to conflicts of interest, all persons involved in the investment process shall refrain from personal business activity that could conflict with proper execution of the investment program, or which could impair their ability to make impartial investment decisions. Employees and investment officers are required to file annual disclosure statements as required for "public officials who manage public investments" [as defined and required by the Political Reform Act and related regulations, including Government Code Sections 81000, et seq., and the rules, regulations and guidelines promulgated by California?s Fair Political Practices Commission (FFPC)]. 8.0 Authorized Financial Dealers and Institutions: The City?s Director of Finance/Treasurer will maintain a list of the financial institutions and brokers/dealers authorized to provide investment and depository services and will perform an annual review of the financial condition and registrations of qualified bidders and require annual audited financial statements to be on file for each company. The City will utilize Moody's Securities or other such services to determine financially sound institutions with which to do business. The City shall annually send a copy of the current Investment Policy to all financial institutions and brokers/dealers approved to do business with the City. As far as possible, all money belonging to, or in the custody of, a local agency, including money paid to the City?s Director of Finance/Treasurer or other official to pay the principal, interest, or penalties of bonds, shall be deposited for safekeeping in state or national banks, savings associations, federal associations, credit unions, or federally insured industrial loan companies in this state selected by the City?s Director of Finance/Treasurer; or may be invested in the investments set forth in Section 9.0. To be eligible to receive local agency money, a bank, savings association, federal association, or federally insured industrial loan company shall have received an overall rating of not less than "satisfactory" in its most recent evaluation by the appropriate federal financial supervisory agency of its record of meeting the credit needs of California's communities, including low- and moderate-income neighborhoods. To provide for the optimum yield in the investment of City funds, the City's investment procedures shall encourage competitive bidding on transactions from approved brokers/dealers. In order to be approved by the City, the dealer must meet the following criteria: (i) the dealer must be a "primary" dealer or regional dealer that qualifies under Securities and Exchange Commission Rule 15C3-1 (Uniform Net Capital Rule); (ii)the dealer?s institution must have an office in California; (iii)the dealer îêð must be experienced in institutional trading practices and familiar with the California Government Code as related to investments appropriate for the City; and (iv) all other applicable criteria, as may be established in the investment procedures. All brokers/dealers and financial institutions who desire to become qualified bidders for investment transactions must submit a "Broker/Dealer Application" and related documents relative to eligibility including a current audited annual financial statement, U4 form for the broker, proof of state registration, proof of National Association of Securities Dealers certification and a certification of having read and understood the City's Investment Policy and agreeing to comply with the Investment Policy. The City?s Director of Finance/Treasurer shall determine if they are adequately capitalized (i.e. minimum capital requirements of $10,000,000 and five years of operation). 9.0 Authorized & Suitable Investments: The City is authorized by California Government Code Section 53600, et. seq., to invest in specific types of securities. Investments not specifically listed below are deemed inappropriate and prohibited: A. BANKERS? ACCEPTANCES, maximum 25% of portfolio (up to 40% with Council approval). Maximum term 180 days. Banks must have a short term rating of at least Al/Pl and a long-term rating of A or higher as provided by Moody's Investors Service or Standard and Poor's Corp. No more than 30% of the agency's money may be invested in the bankers? acceptances of any one commercial bank pursuant to this section. B. NEGOTIABLE CERTIFICATES OF DEPOSIT, These are issued by commercial banks and thrift institutions against funds deposited for specified periods of time and earn specified or variable rates of interest. Negotiable certificates of deposit (NCD) differ from other certificates of deposit by their liquidity. NCD's are traded actively in secondary markets. In compliance with California Code 53601.8, all FDIC insured CD's, whether directly placed or placed through a private sector entity, will be classified as a Negotiable Certificate of Deposit. a. Maximum Maturity i. The maximum maturity of a NCD issue shall be 5 years. ii. The maximum maturity of any FDIC insured CD's, whether directly placed or placed through a private sector entity, shall be 13 months. b. Maximum Exposure of Portfolio - The maximum exposure to the Portfolio for this category shall be 30%. c. Maximum Exposure Per Issue - The maximum exposure to a single issue shall be îêï 2.5% of the Portfolio value. d. Maximum Exposure Per Issuer - The maximum exposure to a single issuer shall be 5% of the Portfolio value. e. Minimum Credit Requirement i. All NCD must have the following investment grade from one of these rating firms.If unrated by Standard & Poor's, security would need to be authorized by Standard & Poor's with a shadow rating prior to purchase. a. Standard & Poor's - A-1 or A (long-term when applicable) b. Moody's - P-1 or A (long-term when applicable) c. Fitch - F-1 or A (long-term when applicable) (For NCD's 1 year or less, use short-term rating) (For NCD's over 1 year, use long-term rating) ii. There is no minimum credit requirement for FDIC insured CD's, whether directly placed or placed through a private sector entity. C. COMMERCIAL PAPER, maximum 25% of portfolio. Maximum term 270 days. Commercial paper of prime quality of the highest ranking or of the highest letter and number rating as provided for by Moody's Investor Services, Standard & Poor's and Fitch Financial Services. The issuing corporation must be organized and operating within the United States, with total assets in excess of $500 million and shall issue debt, other than commercial paper, that is rated "A" or higher by Moody's, S&P and Fitch. Split ratings (i.e. A2/Pl) are not allowable. No more than 10% of the outstanding commercial paper of any single corporate issue may be purchased. D. BONDS ISSUED BY THE CITY OR ANY LOCAL AGENCY WITHIN THE STATE OF CALIFORNIA. Bonds must have an "A" rating or better from a nationally recognized authority on ratings. E. OBLIGATIONS OF THE UNITED STATES TREASURY United States Treasury Notes, bonds, bills or certificates of indebtedness, or those for which the faith and credit of the United States are pledged for the payment of principal and interest. There is no limit on the percentage of the portfolio that can be invested in this category. F. FEDERAL AGENCIES Debt instruments issued by agencies of the Federal government. Though not general obligations of the U.S. Treasury, such securities are sponsored by the government or related to the government and, therefore, have high safety ratings. The following are authorized Federal îêî Intermediate Credit Bank (FICB), Federal Land Bank (FLB), Federal Home Loan Bank (FHLB), Federal National Mortgage Association (FNMA), Federal Home Loan Mortgage Corporation (FHLMC), Government National Mortgage Association (GNMA), Tennessee Valley Authorities (TVA), Student Loan Marketing Association (SLMA) and Small Business Administration (SBA). There is no limit on the percentage of the portfolio that can be invested in this category. G. REPURCHASE AGREEMENT, maximum term 3 months. Investments in repurchase agreements may be made, on any investment authorized in this section, when the term of the agreement does not exceed 3 months. A Master Repurchase Agreement must be signed with the bank or broker/dealer who is selling the securities to the City. H. REVERSE-REPURCHASE AGREEMENTS (Requires Council approval for each transaction) Reverse repurchase agreements or securities lending agreements may be utilized only when all of the following conditions are met: a) The security to be sold on reverse repurchase agreement or securities lending agreement has been owned and fully paid for by the local agency for a minimum of 30 days prior to sale. b) The total of all reverse repurchase agreements and securities lending agreements on investments owned by the local agency does not exceed 20% of the base value of the portfolio. c) The agreement does not exceed a term of 92 days, unless the agreement includes a written codicil guaranteeing a minimum earning or spread for the entire period between the sale of a security using a reverse repurchase agreement or securities lending agreement and the final maturity date of the same security. d) Funds obtained or funds within the pool of an equivalent amount to that obtained from selling a security to a counter party by way of a reverse repurchase agreement or securities lending agreement, shall not be used to purchase another security with a maturity longer than 92 days from the initial settlement date of the reverse repurchase agreement or securities lending agreement, unless the reverse repurchase agreement or securities lending agreement includes a written codicil guaranteeing a minimum earning or spread for the entire period between the sale of a security using a reverse repurchase agreement or securities lending agreement and the final maturity date of the same security. Investments in reverse repurchase îêí agreements, securities lending agreements, or similar investments in which the local agency sells securities prior to purchase with a simultaneous agreement to repurchase the security shall only be made with primary dealers of the Federal Reserve Bank of New York or with a nationally or state-chartered bank that has or has had a significant banking relationship with a local agency. e) For purposes of this policy, "significant banking relationship" means any of the following activities of a bank: i. Involvement in the creation, sale, purchase, or retirement of a local agency's bonds, warrants, notes, or other evidence of indebtedness. ii. Financing of a local agency's activities. iii. Acceptance of a local agency's securities or funds as deposits. I. MEDIUM-TERM CORPORATE NOTES, maximum 20% of portfolio (30% with Council approval), with a maximum remaining maturity of five years or less. Notes eligible for investment shall be "A" rated or its equivalent or better as determined by a nationally recognized rating service. J. TIME DEPOSITS-CERTIFICATES OF DEPOSIT (non-negotiable certificates of deposit.) Maximum of 3 years. Deposits must be made with banks or savings & loan that have a short term rating of Al/Pl or a long term rating of at least a single A from a generally recognized authority on ratings. K. OBLIGATIONS OF THE STATE OF CALIFORNIA Obligations must be "A" rated or better from a nationally recognized authority on ratings. L. MONEY MARKET FUNDS, maximum 15% of portfolio. (Requires Council approval for each transaction) No more than 10% of the agency's surplus funds may be invested in shares of beneficial interest of any one Money Market fund. Local agencies may invest in "shares of beneficial interest" issued by diversified management companies which invest only in direct obligations in U.S. Treasury bills, notes and bonds, and repurchase agreements with a weighted average of 60 days or less. They must have the highest rating from two national rating agencies, must maintain a daily principal per share value of $1.00 per share and distribute interest monthly, and must have a minimum of $500 million in assets under management. The purchase price of the îêì shares may not include commission. M. THE LOCAL AGENCY INVESTMENT FUND (LAIF) LAIF is a special fund of the California State Treasury through which any local government may pool investments. The City may invest up to $50 million in this fund. Investments in LAIF are highly liquid and may be converted to cash within 24 hours. N. INVESTMENT TRUST OF CALIFORNIA (CALTRUST) The City may invest in shares of beneficial interest issued by the Investment Trust of California (CalTRUST), a local government investment pool established by local entities as a joint powers authority pursuant to California Government Code Sections 6509.7 and 53601(p), provided: CalTRUST investments are limited to the securities and obligations authorized for local agency investment pursuant to Subdivisions (a) to (n), inclusive, of California Government Code Section 53601; and CalTRUST shall have retained an investment adviser that: Is registered or exempt from registration with the Securities and Exchange o Commission; Has not less than five years experience investing in the securities and obligations o authorized for local agency investment pursuant to subdivisions (a) to (n), inclusive, of California Government Code Section 53601; and Has assets under management in excess of five hundred million dollars o ($500,000,000). 9.1 Investment Pools: The City?s Director of Finance/Treasurer or designee shall be required to investigate all local government investment pools and money market mutual funds prior to investing and performing at least a quarterly review thereafter while the City is invested in the pool or the money market fund. LAIF is authorized under provisions in Section 16429.1 of the California Government Code as an allowable investment for local agencies even though some of the individual investments of the pool are not allowed as a direct investment by a local agency. 10.0 Portfolio Adjustments: Should any investment listed in section 9.0 exceed a percentage-of-portfolio limitation due to an incident such as fluctuation in portfolio size, the affected securities may be held to maturity to avoid losses. When no loss is indicated, the Director of Finance/Treasurer shall consider reconstructing îêë the portfolio basing his or her decision on the expected length of time the portfolio will be unbalanced. If this occurs, the City Council shall be notified. 11.0 Collateralization: Under provisions of the California Government Code, California banks, and savings and loan associations are required to secure the City's deposits by pledging government securities with a value of 110 % of principal and accrued interest. California law also allows financial institutions to secure City deposits by pledging first trust deed mortgage notes having a value of 150% of the City's total deposits. Collateral will always be held by an independent third party. A clearly marked evidence of ownership (safekeeping receipt) must be supplied to the City and retained. The market value of securities that underlay a repurchase agreement shall be valued at 102% or greater of the funds borrowed against those securities and the value shall be adjusted no less than quarterly. Since the market value of the underlying securities is subject to daily market fluctuations, the investments in repurchase agreements shall be in compliance if the value of the underlying securities is brought back up to 102% no later than the next business day. The Director of Finance/Treasurer, at his or her discretion, may waive the collateral requirement for deposits that are fully insured up to $100,000 by the Federal Deposit Insurance Corporation. The right of collateral substitution is granted. 12.0 Safekeeping and Custody: All City investments shall identify the City of Chula Vista as the registered owner, and all interest and principal payments and withdrawals shall indicate the City of Chula Vista as the payee. All securities shall be safe kept with the City itself or with a qualified financial institution, contracted by the City as a third party. All agreements and statements will be subject to review annually by external auditors in conjunction with their audit. In the event that the City has a financial institution hold the securities, a separate custodial agreement shall be required. All securities shall be acquired by the safekeeping institution on a "Delivery-Vs-Payment" (DVP) basis. For Repurchase Agreements, the purchase may be delivered by book entry, physical delivery or by third-party custodial agreement consistent with the Government Code. The transfer of securities to the counter party bank's customer book entry account may be used for book entry delivery. 13.0 Diversification: The City's investment portfolio will be diversified to avoid incurring unreasonable and avoidable risks associated with concentrating investments in specific security types, maturity segment, or in individual financial institutions. With the exception of U.S. Treasury securities and authorized pools, îêê no more than 60% of the total investment portfolio will be invested in a single security type or with a single financial institution. In addition, no more than 10% of the investment portfolio shall be in securities of any one issuer except for U.S. Treasuries and U.S. Government Agency issues. A. Credit risk, defined as the risk of loss due to failure of the insurer of a security, shall be mitigated by investing in those securities with an "A" or above rating and approved in the Investment Policy and by diversifying the investment portfolio so that the failure of any one issuer would not unduly harm the City's cash flow. B. Market risk, defined as the risk of market value fluctuations due to overall changes in the general level of interest rates, shall be mitigated by structuring the portfolio so that securities mature at the same time that major cash outflows occur, thus eliminating the need to sell securities prior to their maturity. It is explicitly recognized herein, however, that in a diversified portfolio, occasional measured losses are inevitable and must be considered within the context of overall investment return. The City's investment portfolio will remain sufficiently liquid to enable the City to meet all operating requirements which might be reasonably anticipated. 14.0 Maximum Maturities: To the extent possible, the City will attempt to match its investments with anticipated cash flow requirements. Unless matched to a specific cash flow, the City will not directly invest in securities maturing more than five (5) years from the date of purchase, unless, the legislative body has granted express authority to make that investment either specifically, or as a part of an investment program approved by the City Council. 15.0 Internal Control: The Director of Finance/Treasurer shall establish a system of internal controls designed to prevent loss of public funds due to fraud, employee error, misrepresentation by third parties, or unanticipated market changes. No investment personnel may engage in an investment transaction except as provided for under the terms of this Investment Policy and the procedure established by the Director of Finance/Treasurer. The external auditors shall annually review the investments with respect to the Investment Policy. This review will provide internal control by assuring compliance with policies and procedures for the investments that are selected for testing. Additionally, account reconciliation and verification of general ledger balances relating to the purchasing or maturing of investments and allocation of investments to fund balances shall be performed by the Finance Department and approved by the îêé Director of Finance/Treasurer. To provide further protection of City funds, written procedures prohibit the wiring of any City funds without the authorization of at least two of the following five designated City staff: 1. Director of Finance/Treasurer 2. Assistant Director of Finance 3. Treasury Manager 4. Fiscal Operations Manager 5. Associate Accountant 16.0 Performance Standards: This Investment Policy shall be reviewed at least annually by the Director of Finance/Treasurer to ensure its consistency with the overall objective of preservation of principal, liquidity, and return, and its relevance to current law and financial and economic trends. All financial assets of all other funds shall be administered in accordance with the provisions of this Investment Policy. The monies entrusted to the Director of Finance/Treasurer will be held in a passively managed (?hold to maturity?) portfolio. However, the Director of Finance/Treasurer will use best efforts to observe, review, and react to changing conditions that affect the portfolio, and to do so in a manner that is consistent with this Investment Policy. 16.1 Market Yield (Benchmark): The investment portfolio shall be managed to attain a market-average rate of return throughout budgetary and economic cycles, taking into account the City's investment risk constraints and cash flow. Investment return becomes a consideration only after the basic requirements of investment safety and liquidity have been met. Because the investment portfolio is designed to operate on a 'hold-to-maturity' premise (or passive investment style) and because of the safety, liquidity, and yield priorities, the performance benchmark that will be used to determine whether market yields are being achieved shall be the average of the monthly LAIF rate and the 12-month rolling average 2 - Year Constant Maturity Treasury (CMT) rate. While the City will not make investments for the purpose of trading or speculation as the dominant criterion, the Director of Finance/Treasurer shall seek to enhance total portfolio return by means of ongoing portfolio and cash management. The prohibition of highly speculative investments precludes pursuit of gain or profit through unusual risk and precludes investments primarily directed at gains or profits from conjectural fluctuations in market prices. The Director of Finance/Treasurer will not directly pursue any investments that are leveraged or deemed derivative in nature. However, as long as the original investments can be îêè justified by their ordinary earning power, trading in response to changes in market value can be used as part of on-going portfolio management. 17.0 Reporting: The Director of Finance/Treasurer shall submit a quarterly investment report to the City Council and City Manager following the end of each quarter. This report will include the following elements: Type of investment Institutional Issuer Purchase Date Date of maturity Amount of deposit or cost of the investment Face value of the investment Current market value of securities and source of valuation Rate of interest Interest earnings Statement relating the report to its compliance with the Statement of Investment Policy or the manner in which the portfolio is not in compliance Statement on availability of funds to meet the next six month's obligations Monthly and Year-to-date Budget Amounts for Interest Income Percentage of Portfolio by Investment Type Days to Maturity for all Investments Comparative report on monthly investment balances & interest yields Monthly transactions Compare portfolio yield to the yield attained by the County of San Diego and the five largest cities in the county for the same period. In addition, a commentary on capital markets and economic conditions may be included with the report. 18.0 Investment Policy Adoption: Each fiscal year, the Finance Director shall provide a copy of the City?s current Investment Policy and Guidelines to the City Council. By virtue of a resolution of the City Council of the City of Chula Vista, the Council shall acknowledge the receipt of the Policy for the respective fiscal year. îêç îéð ÜÛÞÌßÜÓ×Ò×ÍÌÎßÌ×ÑÒ Based on the most recent audited financial statements, which were for the year ended June 30, 2011, the City and the former Redevelopment Agency (Agency) borrowed funds through several long-term debt issues and held other obligations which are to be funded over a period of time longer than one year, are categorized as follows: Principal Interest Total Debt Description Outstanding Tax Allocation Bonds $43,985,000 $25,814,364 $69,799,364 Pension Obligation Bonds 2,655,000 107,859 2,762,859 Certificates of Participation 136,060,000 87,888,506 223,948,506 Bond Premium 27,169 0 27,169 Bond Discount (1,774,742) 0 (1,774,742) Capital Leases 1,097,304 105,619 1,202,923 Notes/Loans Payable 1,818,615 254,150 2,072,765 CDBG Section 108 Loan 8,911,000 4,707,116 13,618,116 Miscellaneous Claims Payable 22,432,093 0 22,432,093 Compensated Absences (Employee Leave) 6,797,511 0 6,797,511 Subtotal $222,008,950 $118,877,614 $340,886,564 Advances from other Funds 63,013,268 0 63,013,268 Total Long Term Debt $285,022,218 $118,877,614 $403,899,832 The Long-Term Debt total reflects a decrease of $14.2 million when compared to the June 2010 amount. The decrease is attributed to the annual principal reductions of the long-term debt. îéï Tax Allocation Bonds ($44.0 million) Tax Allocation Bonds (TABS) are issued by the Agency and utilize tax increment revenue for debt service. The 2006 Senior TABS, Series A and 2006 Subordinate TABS, Series B were issued to refund the 1994 TABS Series A, C and D that were issued to refund prior obligations of the Bayfront and Town Center 1 project areas. In July 2008 the Agency issued the 2008 Tax Allocation Refunding Bonds to refund the 2000 TABS that were issued by the Southwest, Otay Valley and Town Center 2 project areas to finance certain redevelopment activities in those areas. Pension Obligation Bonds ($2.7 million) The Pension Obligation Bonds represent money borrowed in 1994 to allow the City to pay down the liability to the Public Employees? Retirement System that had accumulated over many years. This bond issuance was paid off in fiscal year 2011-12. Certificates of Participation ($136.1 million) As of June 30, 2010, the City currently has five outstanding Certificates of Participation. The Chula Vista Public Financing Authority (Authority) issued the 2002 COP to finance the cost of constructing the City?s Police Facility. In May 2003, the Authority issued the 2003 Refunding COP to defease the 1993 Series A & B COPs. The 2004 COP was issued to finance the Phase 1 reconstruction, renovation and equipping of the City?s Civic Center Complex. In March 2006, the Authority issued the 2006 COP to finance the Phase 2 construction and equipping of certain improvements to the Civic Center Complex of the City and other existing City Facilities. In February 2010, the Authority issued the 2010 COP to refund the 2000 COP and to provide funds for the construction, reconstruction, modernization and equipping of Phase 3 of the Civic Center Complex, reimburse the PFDIF funds, fund capitalized interest, fund a reserve fund, and pay the costs incurred in connection with the execution and delivery of the Certificates. Bond Premium ($27,169) This is the premium on the issuance of the 2004 COP Civic Center Phase 1. Original amount was $35,324. This amount is amortized over 30 years. îéî Bond Discount (-$1.8 million) This is the discount on the issuance of the 2006 Refunding TABS and the 2008 Refunding TABS. The original amounts were $505,884 and $579,161 respectively. These amounts are amortized over 20 years. Capital Leases ($1.1 million) The Capital Leases represent two long-term lease-purchase obligations for the San Diego County Regionalized Communications System and the 5-year lease purchase agreement for medical resuscitation equipment for use by the fire Department. Notes/Loans Payable ($1.8 million) The Redevelopment Agency participated in a Loan Agreement with the California Statewide Communities Development Authority to finance the 2005 and 2006 share of the Educational Revenue Augmentation Fund (ERAF) payments to the County Auditor ($765,000 and $930,000 respectively). In January 1994, the City entered into a note payable with a private party in order to purchase certain land for the ultimate purpose of constructing a three-level parking structure. In September 2007, the City Council authorized the City?s participation in the California Energy Commission and San Diego Gas and Electric On-Bill Financing program. The loans were to bridge the financial gap between energy conservation project capital costs and available rebates for energy conservation equipment. The original loan amount was $665,884 for the On-Bill Financing program. CDBG Section 108 Loan ($8.9 million) The City entered into a contract for Loan Guarantee Assistance with the U.S. Department of Housing and Urban Development (HUD) as part of the Section 108 Loan Program in the amount of $9,500,000 in June 2008. The Section 108 Loan is an ?advance? of future CDBG entitlement funds and as such is repaid with a portion of the City?s annual entitlement. Proceeds of the loan will be used to fund multiple capital improvement projects. Debt service payments will be made with future CDBG entitlements for the next 20 years. îéí Miscellaneous Claims Payable ($22.4 million) The Miscellaneous Claims Payable represents the probable amount of loss as estimated by legal counsel and risk management staff due to worker?s compensation and general liability claims filed against the City. Compensated Absences ($6.8 million) The obligation for Compensated Absences represents the current dollar value of accumulated leave balances, primarily vacation leave, for employees that would have to be paid off if all permanent employees were terminated as of June 30, 2011. Advances From Other Funds ($63.0 million) The Agency has entered into reimbursement agreements with the City to reimburse the City for certain lease payments made by the City under various lease agreements. The balance as of June 30, 2011, was $11,316,691. The City Council authorized loans to Public Facilities DIF for $12,681,273 and Western TDIF for $188,231. The Public Facilities DIF loan for $5,200,000 is due and payable in 13 years, at an interest rate of 3.80% based on the pooled investment rate. The Public Facilities DIF loan for $5,300,000 is due and payable in 13 years, at an interest rate of 0.56% based on the pooled investment rate. The Redevelopment Agency Capital Projects Fund advanced funds in the amount of $4,702,030 to Redevelopment Agency Debt Service Fund for capital improvement projects and operating expenses during its early years. The Redevelopment Agency Special Revenue Fund advanced $5,046,796 to pay the ERAF obligation. The terms of the advances are indefinite. The balance was $9,748,826 at June 30, 2011. The City Council authorized loans with indefinite terms from Trunk Sewer Fund to Salt Creek DIF for $16,519,894, Storm Drain Fund for $811,360, and $774,724 from Sewer Facility Fund for capital improvement projects. îéì General Fund Long-Term Debt for Fiscal Year 2012-13 The General Fund?s annual debt service ?commitment? in fiscal year 2012-13 is approximately $9.1 million, or 7.3% of the General Fund operating budget. However, it must be noted that although this amount is truly a General Fund commitment, only $4.1 million will actually be paid from General Fund resources, with the remaining $5.0 million paid from available development impact fees and residential construction tax. The $4.1 million represents approximately 3.3% of the General Fund operating budget, which would be considered more of an average debt burden for a local governmental entity. This is a reduction from fiscal year 2011-12 due to the final payment of the Pension Obligation Bonds. Annual Debt Service Obligation of the General Fund Fiscal Years 2005-06 through 2012-13 $14 $12 $10 $8 $6 $4 $2 $0 FY06FY07FY08FY09FY10FY11FY12FY13 Shopping Mall Parking CV Ctr/2003 Ref COPShopping Mall COP/2003 Ref COP Pension Obligation BondsFinancial Systems/2003 Ref COP Library System - Capital Lease800 Mhz Radio System/2003 Ref COP Corporation Yard - 2000 COP800 Mhz Equipment - 2000 COP Police Facility - 2002 COPCivic Center Expansion 2004 COP Civic Center Expansion 2006 COPCivic Center Expansion 2010 îéë îéê ÙßÒÒßÐÐÎÑÐÎ×ßÌ×ÑÒÍÔ×Ó×Ì Article XIIIB of the California Constitution, approved by the voters in 1979, imposed the concept of spending limits on local governments. This Constitutional provision and related implementing legislation specifies that annual increases in appropriations financed from "Proceeds of Taxes" are limited to a base year (1978-79) amount increased annually by an inflation factor comprised of the change in population of the City combined with the greater of the change in new non-residential construction or the change in the California per capita personal income. By definition, "Proceeds of Taxes" includes such revenues as property taxes, sales and use taxes, utility users taxes, transient occupancy taxes, and state subventions. Revenues from other sources like fees/charges and federal grants are considered "Non-Proceeds of Taxes" and are not subject to the annual spending limit. This calculation has always been perfunctory for the City of Chula Vista, since the proceeds of taxes for the City are far less than the statutory appropriations limit. The State Department of Finance and the San Diego County Assessor's Office are charged with providing the data necessary for local jurisdictions to establish their appropriations limit. According to these sources, for purposes of the fiscal year 2011-2012 calculation, the population increased 0.90% and new non-residential construction decreased by -5.62%. California per capita personal income increased by 2.51%; consequently, California per capita personal income was used in the formula to compute the limit since this increase is the greater of the two amounts. îéé The fiscal year 2011-12 Appropriations Limit has been calculated as follows: Fiscal Year 2010-11 Appropriations Limit $612,426,486 Increased by an inflation factor composed of the increases in population and CA per capita personal income X 0.9837 Fiscal Year 2011-12 Appropriations Limit $602,428,072 The "Proceeds of Taxes" as included in the fiscal year 2011-12 Proposed Budget that are subject to the appropriations limit are estimated to be $76,394,997. Therefore the City has what is referred to as an appropriation "gap" of $526,033,075 ($602,428,072 - $76,394,997). Simply stated, this means that the City could collect and spend up to $526,033,075 more in taxes during Fiscal Year 2011-2012 without exceeding the Constitutional limit. Proceeds of Taxes Compared to Legal Spending Limit $700 $600 $500 $400 $300 $200 $100 $0 FY 07-08FY 08-09FY 09-10FY 10-11FY 11-12 Proceeds of TaxesAppropriations Limit îéè ÔÛÙßÔÜÛÞÌÓßÎÙ×Ò Under State law, the City has a legal debt limitation not to exceed 15% of the total assessed valuation of taxable property within City boundaries. As of June 30, 2011 the City?s legal debt limit is $793,674,196. In accordance with California Government Code Section 43605, only the City?s general obligation bonds are subject to this limit. The City of Chula Vista has no outstanding General Obligation Bonds. The table below summarizes the City?s debt limit margin. The Government Code of the State of California provides for a legal debt limit of 15% of gross assessed valuation. However, this provision was enacted when assessed valuation was based upon 25% of market value. Effective with the 1981-82 fiscal year, each parcel is now assessed at 100% of market value (as of the most recent change in ownership for that parcel). The computations shown above reflect a conversion of assessed valuation data for each fiscal year from the current full valuation perspective to the 25% level that was in effect at the time that the legal debt margin was enacted by the State of California for local governments located within the State. îéç îèð ßÝÝÑËÒÌ×ÒÙÍÇÍÌÛÓÍßÒÜ ÞËÜÙÛÌßÎÇÝÑÒÌÎÑÔ The City of Chula Vista?s budget provides an overview of the fiscal and operational status of the City; highlighting policy issues, decisions and proposed changes in service levels. The budget is comprised of a series of funds used to account for revenues and expenditures. These funds are generally classified as governmental or proprietary funds. Governmental funds include activities associated with the operations of the City such as the provision of library, recreation, development and public safety services. Special revenue funds, capital project funds, debt service funds and the City?s general fund are different categories of governmental funds. Proprietary funds are used to account for activities often found in the private sector including enterprise funds and internal service funds. Operation of the City?s transit, development service and sewer systems are accounted for as enterprise funds. Examples of functions accounted for by internal service funds include fleet management and worker?s compensation. The budget document is organized around the following major funds ? General Fund, Redevelopment Retirement Obligation Fund and Successor Agency to the Redevelopment Agency Funds, Sewer Funds, Transit Funds, Fleet Service Funds, Capital Projects Funds, Debt Service Funds and Other Funds. Details about each of these funds can be found in the corresponding sections of the document. îèï City of Chula Vista Fund Structure Budgetary Funds Governmental Funds Proprietary Funds General Fund Enterprise Funds Internal Service Funds Debt Service Funds Sewer Funds Capital Projects Funds Transit Funds Special Revenue Funds Development Service Funds Redevelopment Retirement Obligation Fund and Successor Agency to the Redevelopment Agency Funds Each fund is considered an autonomous accounting entity. Funds are used to separate the various financial activities of the City and to demonstrate compliance with specific regulations, restrictions or limitations. This may include demonstrating that restricted revenues are spent only for allowed purposes. The City?s accounting records and budget are prepared and maintained using a modified accrual basis of accounting, which follows the accounting practices for governmental units as recommended by the Governmental Accounting Standards Board. Basic City operations are accounted for in the City?s General Fund, with other activities accounted for in separate funds as required by law or determined by management discretion. Generally, revenues are recorded when measurable and available, and liabilities are recorded when incurred. In administering the City?s accounting systems, primary consideration is given to the adequacy of internal accounting controls, which include an array of administrative procedures. These controls are designed to provide reasonable, but not absolute, assurance regarding the safeguarding of assets against loss from unauthorized use or disposition, as well as the reliability of financial records for accurate and fair presentation of financial reports. The concept of reasonable assurance recognizes that the cost of specific controls should not exceed the benefits likely to be îèî derived from exercising the controls, and that this evaluation necessarily involves estimates and judgments by management. It is believed that the City?s internal accounting controls adequately safeguard City assets and provide reasonable assurance of proper recording of financial transactions. The City Charter charges the Director of Finance with the responsibility to supervise and be responsible for the disbursement of all monies and have control over all expenditures to insure that budget appropriations are not exceeded. The level of budgetary control, that is the level at which expenditures are not to exceed Council approved appropriations, is established at the department and expenditure category level (e.g., personnel services, supplies and services, capital). Any budget modification that would result in an appropriation increase requires City Council approval. The City Manager and Finance Director are jointly authorized to transfer up to $15,000 of appropriations between expenditure categories within a departmental budget. Any appropriations transfers between departments require City Council approval. An encumbrance (commitment) accounting system is utilized as a technique to enhance budgetary control during the year. Appropriations encumbered (committed) at year-end may be carried forward with City Manager approval and are available to be used for those commitments during the subsequent year. Unspent and unencumbered appropriations lapse at year-end and become generally available for re-appropriation the following year. îèí îèì Ô×ÍÌÑÚßÝÎÑÒÇÓÍ ADA ? Americans with Disabilities Act ALS ? Advanced Life Support AMP ? Asset Management Plan ARRA ? American Recovery and Reinvestment Act BIG ? Business Improvement Grant BRT ? Bus Rapid Transit CAD ? Computer Aided Dispatch CalPERS ? California Public Employees Retirement System CALTRUST ? Investment Trust of California CAPPO ? California Association of Public Purchasing Officers CBAG ? California Border Alliance Group CDBG ? Community Development Block Grant CEC ? California Energy Commission CES ? Conservation Environmental Services CIP ? Capital Improvement Plan/Project/Program CLSA ? California Library Services Act CMP ? Corrugated Metal Pipe CMT ? Constant Maturity Treasury CONF - Confidential îèë COP ? Certificate of Participation CPI ? Consumer Price Index CVACF ? Chula Vista Animal Care Facility CVEA ? Chula Vista Employee?s Association CVPD ? Chula Vista Police Department CVT ? Chula Vista Transit DASH ? Dynamic After School Hours DIF ? Development Impact Fee DVP ? Delivery Versus Payment EEBG ? Energy Efficiency Block Grant EOC ? Emergency Operation Center ERAF ? Educational Revenue Augmentation Fund EUC ? Eastern Urban Center FDIC ? Federal Deposit Insurance Corporation FHLB ? Federal Home Loan Bank FHLMC ? Federal Home Loan Mortgage Corporation FICB ? Federal Intermediate Credit Bank FLB ? Federal Land Bank FLSA ? Fair Labor Standards Act FNMA ? Federal National Mortgage Association FPPC ? Fair Political Practices Commission FREBE ? Free Resource Energy Business Evaluation FTA ? Federal Transit Administration FTE ? Full-Time Equivalent FY ? Fiscal Year GAAP ? Generally Accepted Accounting Principles GDP ? Gross Domestic Product îèê GFOA ? Government Finance Officers of America GIS ? Geographic Information System GMOC ? Growth Management Oversight Committee GNMA ? Government National Mortgage Association HR ? Human Resources HSIP ? Highway Safety Improvement Program HUD ? Housing and Urban Development HVAC ? Heating\Ventilation\Air Conditioning IAFF ? International Association of Firefighters ITS ? Information and Technology Services LAIF ? Local Agency Investment Fund LAN ? Local Area Network MGD ? Million Gallons per Day MHZ ? Megahertz MIS ? Management and Information Systems\Services MLA ? Master Lease Agreement MOU ? Memorandum of Understanding MSCP ? Multiple Species Conservation Plan MTDB ? Metropolitan Transit Development Board MTS ? Metropolitan Transit System NCD ? Negotiable Certificate of Deposit NFPA ? National Fire Protection Association PACE ? Parcel Assessed Clean Energy PAD ? Park Acquisition and Development PCI ? Pavement Condition Index PFDIF ? Public Facilities Development Impact Fees PLF ? Public Library Foundation Act îèé PLTP ? Point Loma Treatment Plant POA ? Police Officer?s Association RCS ? Regional Communications System RCT ? Residential Construction Tax RDA ? Redevelopment Agency RFP ? Request for Proposals SANDAG ? San Diego Association of Governments SANDPIPA ? San Diego Pooled Insurance Policy Association SBA ? Small Business Association SHOPP ? State Highway Operations and Protection Program SLMA ? Student Loan Marketing Association SRO ? School Resource Officer STRETCH ? Safe Time For Recreation, Enrichment And Tutoring TABS ? Tax Allocation Bonds TARBS ? Tax Allocation Refunding Bonds TDA ? Transportation Development Act TDIF ? Transportation Development Impact Fee TOT ? Transient Occupancy Tax TVA ? Tennessee Valley Authorities UUT ? Utility Users Tax VLF ? Vehicle License Fee WCE ? Western Council of Engineers WMS ? Wastewater Management System W-TDIF ? Western Transportation Development Impact Fee îèè ÙÔÑÍÍßÎÇ Accrual Basis of Accounting ? The accounting basis used by the City by which transactions are recognized when they occur, regardless of the timing of cash receipts and disbursements. Accounting System ? The collective set of records and procedures used to record, classify, and report information on the financial status and operations of the City. Accounts Payable ? Amounts owed by the City to external entities for goods and services received. Accounts Receivable ? Amounts due to the City from external entities for goods and services furnished. Adopted Budget ? The title of the budget following its formal adoption by resolution of the City Council. Ad Valorem ? In proportion to value, a basis for levy of taxes on property. Amended Budget ? The title of the budget version that includes all amendments to the Adopted Budget approved by Council throughout the fiscal year. Appropriation ? A legislative act by the City Council authorizing the expenditure of a designated amount of public funds for a specific purpose. Audit ? An examination of City records and accounts by an external source to check their validity and accuracy. îèç Balanced Budget ? The amount of budgeted expenditures is equal to or less than the amount of budgeted revenues plus other available sources. Bond ? A certificate of debt issued by a government or corporation guaranteeing payment of the original investment plus interest by a specified future date. Budget ? A spending plan and policy guide comprised of an itemized summary of the City?s probable expenditures and revenues for a given fiscal year. Calendar Year (CY) ? The 12-month period from January through December. Capital Expenditures ? Expenditures related to the acquisition, replacement, or improvement of a section of Chula Vista?s infrastructure. Capital Improvement Program ? The long-range construction plan designed to foresee and address the City?s future need of physical improvements or additions of a fixed or permanent nature (e.g. a new fire station, replacement of a street signal) Capital Project ? Any major construction, acquisition, or renovation that increases the useful life of the City?s physical assets or adds to their value. Capital Project Funds ? Funds that are utilized to account for resources used for the acquisition and construction of capital facilities by the City, with the exception of those assets financed by proprietary funds. Community Development Block Grant (CDBG) Funds ? Funds received from the federal government and expenditures as prescribed under the Community Development Grant Program. Debt Service Funds? Funds used for payment of interest and principal to holders of the City?s various debt instruments. Deferred Maintenance ? A backlog of needed repairs to City facilities including facility maintenance, painting and structural repairs. îçð Depreciation ? The expense incurred with the expiration of a capital asset. Direct Costs ? Operational expenditures exclusive to a specific service or program. Discretionary Revenue ? Revenues that are generated by general or specific taxing authority such as Property or Sales Taxes. Encumbrance ? The designation or reserving of funds to buy an item or service. Enterprise Funds ? Funds established to account for specific services funded directly by fees and charges to users such as sewer services. These funds are intended to be self-supporting. Expenditure ? The actual outlay of monies set aside by appropriation for identified goods and services. Fiscal Year (FY) ? The twelve-month period beginning July 1st and ending June 30th of the subsequent calendar year. Fixed Assets ? An asset with a useful life greater than three years. Fringe Benefits ? This consists of the costs to provide employee benefits that include the flexible benefit program, insurance, and retirement. Full-time Equivalent Positions (FTE) ? The conversion of part-time, temporary, or volunteer positions to a decimal equivalent of a full-time position based on an annual amount of 2,080 hours worked. Fund ? A set of interrelated accounts to record revenues and expenditures. Fund Balance ? The excess of an entity?s assets over its liabilities. A negative fund balance is sometimes referred to as a deficit. Generally Accepted Accounting Principles ? A uniform set of minimum standards for external financial accounting and reporting. îçï Gann Appropriation Limit ? A State of California mandated appropriation limit imposed on local jurisdictions. General Fund ? The City?s main operating fund that is used to pay for City services. General Plan ? The fundamental policy document that guides the City?s future growth and development. General Revenue ? See Discretionary Revenues. Governmental Funds ? Funds that are typically used to account for tax-supported activities. These include the general fund, special revenue funds, debt service funds, and capital project funds. Grants ? A contribution by a government or other organization to provide funding for a specific project. Grants can either be classified as capital projects or programmatic, depending on the grant. Indirect Cost ? Costs that are essential to the operation of the City but not exclusive to any specific service or program. Indirect costs are primarily associated with support departments such as City Clerk, City Attorney, Administration, Management Information Systems (MIS), Human Resources, and Finance. Infrastructure ? Basic physical assets such as buildings, streets, sewers, and parks. Interest Expense ? Interest costs paid by Chula Vista on loans and bonds. Internal Service Funds? Funds that are used to finance and account for goods, special activities, and services performed by one City department for other City departments on a cost reimbursement basis. Levy ? To impose of collect a tax, special assessments, or charges for the support of City services. Liability ? Debt or other legal obligations arising out of past transactions that will be liquidated, renewed, or refunded at some future date. îçî Memorandum of Understanding ? A document detailing the outcomes of labor negotiations between the City and its various bargaining units. Municipal Code ? A collection of ordinances approved by City Council. Operating Budget ? Costs associated with the on-going municipal services. Ordinance ? A formal legislative enactment by the City Council. Other Expenditures ? All budgeted expenditures that do not fall into one of the three primary expenditure categories: Personnel, Supplies and Services, and Capital. Personnel Services Expenditures ? Expenses related to employee compensation including salaries, wages, and benefits. Program Revenue ? Revenues generated by a given activity. Proposed Budget ? The title of the budget prior to its formal adoption by resolution of the City Council. Proprietary Funds ? Funds used to account for a government?s business-type activities, which are supported, at least in part, by fees or charges. Reserves ? The portion of the General Fund balance set aside for contingencies. Resolution ? A special order of the City Council that requires less legal formality than an Ordinance. Revenue ? Funds received from various sources to finance expenditures. Sewer Funds? Funds that account for revenues and expenditures related to the City?s sewer programs, including maintenance and expansion of the City?s conveyance system and payment of Metro Sewer treatment costs. îçí Special Revenue Funds ? Funds that are used to account for proceeds derived from specific revenues sources, which are legally restricted to expenditures for special purposes. (e.g. Transportation Funds, parking Funds, Public Safety Funds) Spending Plan ? A preliminary budget approved by Council contingent upon subsequent adoption of appropriations. Supplies and Services Expenditures ? Expenditures for supplies required for the daily operation of the City and for contractual and professional services. Yield ? The rate of return earned on an investment based on the price paid. îçì îçë îçê