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HomeMy WebLinkAbout1995/06/01 - Agenda Packet - Spec Adj (Budget)AGENDA JOINT MEETING OF THE RANCHO CUCAMONGA CITY COUNCIL RANCHO .REDEVELOPMENT AGENCY RANCHO CUCAMONGA FIRE PROTECTION DISTRICT Special Adjourned Meeting June 1, 1995 - 5:00 p.m. Tri Commtmities Room 10500 Civic Center Drive Rancho Cucamonga, California Pledge of Allegiance Roll Call: Alexander ,Biane A. CALL TO ORDER , Curatalo , Gutierrez , Willlares__ B. ITEM OF DISCUSSION DISCUSSION OF PROPOSED BUDGETS FOR 1995/96 FISCAL YEAR C. COMMUNICATIONS FROM THE PUBLIC This is the time and place for the general public to address the City Council, Redevelopment Agency and the Fire Protection District Board. State law prohibits the Council, Agency or Fire Board from addressing any issue not previously included on the Agenda. They may all receive testimony and set the matter for a subsequent meeting. Comments are to be limited to five minutes per individual. Joint Meeting of the Rancho Cucamonga City Council, Rancho Cucamonga Redevelopment Agency, and Rancho Cucamonga Fire Protection District Page 2 ,~ D. ADJOURNMENT THE CITY COUNCIL WILL ADJOURN TO JUNE 2, 1995, 7:30 A.M. FOR A MEETING WITH ASSEMBLYMAN FRED AGUIAR TO DISCUSS ISSUES OF CONCERN WHICH WILL BE HELD IN THE RAINS ROOM LOCATED AT 10500 CIVIC CENTER DRIVE, RANCHO CUCAMONGA, CALIFORNIA. I, Debra J. Adams, City Clerk of the City of Rancho Cucamonga, hereby certify that a true, accurate copy of the foregoing agenda was posted on May 25, 1995, seventy-two (72) hours prior to the meeting per Government Code 54954.2 at 10500 Civic Center Drive, Rancho Cucamonga, California. To: From: Date: Subject: Memorandum City Manager's Office Mayor and City Council Jack Lam, City Manager May 30, 1995 Utility User Fee Reduction Model BACKGROUND. The Utility User Fee Ordinance was adopted April 7, 1993, to provide a source of alternative local revenue alter several years of State take-away of other, traditional City revenues. These revenues taken away by the State, were used by the State to backfill its own fiscal deficits. These take-aways came on top of the debilitating revenue losses experienced locally as the result of the steep downturn in the economy. While the City took action to slash its budget the two years prior to ordinance adoption, it could not cope with the added results of the State take-aways. These dramatic losses meant that not only general services would be further slashed, but also public safety services would be negatively affected at a time when public safety services needed to be expanded. Population growth was still continuing, in spite of the economy. Especially difficult to deal with was the fact that the traditional revenues that were taken away by the State were revenues that grew each year to take care of the growth needs in the community. As such, a significant portion of the City's General Fund revenue base was taken away. Alter sustaining major losses in General Fund revenues, and alter slashing the budget, including the reduction of staffing by 21%, the City adopted the Utility User Fee Ordinance. The fee was established at 4.66% and the estimated revenue to be received for FY 94-95 was $ 5.6 million. During 1993, other extraordinary actions had to be taken, such as loaning the Fire District $1.4 million to sustain its operations in FY 93-94. In spite of the Utility User Fee revenue, additional budget cuts continued. Since the adoption of the ordinance, City staffing has been further reduced to a full 25% and the General Fund still remains less than it was in 1990. However, the population of the City has increased by 15,000 residents since that time. The budget has since been reshaped with every City department reorganized, downsized, and restructured to adapt to additional revenue declines. Eligible fund reimbursements were also utilized to shore up the General Fund until revenue from other General Fund sources, such as sales ta:~, increased to fill the gaps. These reimbursements have been used up in FY 1994-95. This means that the FY 1995-96 City General Fund must stand on its own without any further stopgaps, even in the face of whole scale tax reassessments that have further reduced property tax revenue. As the City plans for FY 1995-96, fiscal recovery plans have just attained the milestone of a General Fund that is balanced without any more one-time reimbursements. This was only accomplished by continued budget cuts. Nevertheless, the City Council has considered a goal to address the eventual elimination of the Utility User Fee, assuming that subsequent budget years remain stable. The original financial base taken by the State has not been returned. In addition, it is important to remember that a portion of the fees went to increased police services and a portion went to address a Federal mandate. To reduce the fee without damaging existing services, however, will require exacting budget discipline. Therefore, in order to reduce and eventually eliminate the Fee, a rational transition must be based upon the premise that a portion of any normal new net revenue growth in the future must go toward reducing the Fee. The following proposal is intended to accomplish this goal by establishing a logical, systematic, and sensible approach. Given the fact that additional budget cuts had to be made for FY 1995-96, and given that this fiscal year budget will be the first to sustain itself without any other reimbursements, the I~Y 1995-96 Budget year must be utilized as the baseyear for the model, otherwise, the model will be skewed by reimbursements contained in the FY 1994-95 budget and cause budget deficits. UTILITY USER FEE REDUCTION CONCEPT. When net General Fund Revenues from major General Fund indicators of the Current Fiscal Year exceed the same net General Fund Indicators of the Prior Fiscal Year plus the CPL a portion of this Net New General Fund Revenue increase shah be used to reduce the utility user fee. 2 HOW THE FORMULA WORKS: The Reduction formula utilizes five General Fund Revenue Indicators: sales tax, property tax, franchise fees, motor vehicle license fees, and any utility user fees in excess 6f the base year plus CPI. Property Tax is utilized as the Fire District General Fund Revenue Indicator since the District Budget is nearly totally supported by property tax and the need for the original transfer of funds was the result of property tax loss. These indicators were selected to represent the largest and the most stable General Fund revenue sources. These sources also tend to be growth-related. A calculation will be made after the base year (FY 1995-96) audit and after subsequent years' annual audits. Should there be a net increase in revenue indicators above the CPI, 25% of the increased amount will be used to reduce the utility user fee. (The Utility User's Fee represents over 19% of the City's General Fund). The calculation will be made annually, thereafter, until the utility user fee is reduced to zero. Therefore, the utility user fee, which was made necessary by severe revenue loss, will be reduced by a portion of net revenue increases as defined by the formula. This approach enables a systematic and non-disruptive method to transition away from the utility user fee. If there is no net revenue growth, there is no fee reduction. If there is new net revenue growth above the CPI, there will be fee reduction. The formula also accounts for the City General Fund transfer of $ 650,000 to the Fire District General, Fund and said contribution would be decreased by 25% of any net increase in property tax revenues until the $ 650,000 has been reduced to zero. Once the calculation is made each year, a proportion of any amount used to reduced the utility user fee will be utilized to also address the "cap". The original $ 50,000 cap was installed to place a maximum amount paid by large users of utilities. This cap saved some of these users many hundreds of thousands of dollars each year. Reducing the cap in a proportionate way to a threshold of $ 30,000 would enable the City to address the concems of a number of manufacturers while maintaining equity in fee reduction for the majority of users in the City. The Utility User Fee reduction formula represented, herein, enables a rational, systematic approach to Fee reduction which will enable the City to better maintain stable public services and provide gradual Fee reduction, as the revenue base is rebuilt through future economic growth. 3 Recommendation: Staff recommends that the Utility User Fee Reduction Model described, herein, be accepted and Staff and City Attorney be directed to prepare a resolution for approval. /- ' C * * · * · * ° * ° * '11 · _~ o ~ ~ -"s _. -n~,>. m 'O0 ~CO 0 C) 0 -n -. >'-n~"om "n ~--- 0 < (1 (D II II II II II II II - o'-, pq. ~ >...,>>z-<m ~'~ '"ocO Groom"'0 9q- <~.~c -- :::;O -- "' -c 5=0 o ~8' m B~""" m m~m < "~ c · -no,-,-c'n:;l]~ n "', m m ~ -, O ~'~ _~ n ! m "n ~oc Qm cc c ~-~'-~ o® o 8~ ®'o ,-- .s' s'a:"n® ~" 8 s'~ ® ,,, - s' < m _a=.m x ®"" ®" ~ ~' o " -n 8' ®~. c -,"n ~ ®-n ~-~'® ~ o ~ -. o8 Z m o~ ~ ~ GOc~m G z ~ .. m'0 ~ - G X G C -., ~a, CO=B ~O G') m ~m ~ma-_m8m ~ = O m ,< C~8= -, n. = O-0 0 (1) · ~ -~ O -- All revenue utilized in definitions to exclude revenues that are dedicated to debt service or pledged to any public/private economic development agreement. 3.5% is the proportion Gf revenue paid by those with fee caps relative to all other utility user fee payers* 96.5% is the proportion of revenue paid by all those without fee caps* Cap Reduction is done straight across the board for those payers falling into the cap category The proportionate cap percentage is to be recalculated each year and applied to formula After the cap is reduced to $30,000, all revenue for utility user fee reduction in subsequent years goes toward reduction of Utility User Fee percentage rate. Adjustments to Utility User Fee done automatically after each year's official audit beginning with FY 1995-96 as the "Prior fiscal year" (base year) and FY 1996-97 as the "current fiscal year". No further cuts will be made by the State "Pdor Year", will be FY 1995-96 The calculation for the first reduction will be made after the formula defined "Current Year" (FY 1996-97) Calculations will be made 30 days after receipt of the completed independent financial audits. City Council Action on any reduction 30 days thereafter Utilities will be given 90 days notice to enact any new rates * These percentage rates shall be recalculated each year to reflect actual proportion Utility User Fee Reduction Model: · FRcy - [iFRpy (1 + CP!) ] = FR = Net Rev. Growth For Fire District General Fund · If FRs < 0 Then there is no reduction of City General Fund Contribution to Fire District General Fund If FRs > 0 Then: FRs / 4 = GF. (Amount of reduction of City General Fund Contribution to Fire Distdct General Fund) CRcy - [CRpy (1 + CPI)] = CRs = Net Revenue Growth For City General Fund [CRs 14 ] + GFR = UTR = Amount of revenue available for utility user fee reduction If UT. < 0 Then there is no utility user fee reduction If UT. > 0 Then: · UT. = [ C. + R. ] Where: C. = [UT.X 3.5%] = $ for Cap Reduction · RR ' JUTR X 96.5%] = $ for Rate Reduction P = R. / [Utility User Fee collected "current year] X 100 P = Percent Revenue Growth Relative To Utility User Fee 4.66% - [ 4.66% X P ] = New Utility User Fee Rate