Addressing the Structural Deficit
With General Fund revenues still less than expenses, the City has not yet regained the ground it lost, so the structural deficit continues to be an issue. To close the gap, City Council has approved a multi-year strategy that includes shifting the responsibility for paying the employee share of pension costs from the City to employees and putting money aside for long-term liability. During FY2012-13, nearly all employee groups began to pay the employee share of pension costs, providing a strong start to the strategy’s implementation. The Council’s direction to have the remaining groups fund the employee share of pension costs will be a critical part of the strategy’s success.
Because of staff’s diligence in controlling costs, some positive circumstances have allowed the City to maintain a high level of service. Those include carryover generated by spending less than was budgeted and an increase in revenue that was slightly higher than projected. As we look ahead, the retail sector is expected to remain strong, resulting in a projected increase in sales tax revenues while declines in property tax revenues have leveled out and are expected to rise. Based on the strength of the housing market, we should start seeing property tax revenues grow and accelerate in the next few years. However, increased expenses from pension costs, labor contracts, utility costs, and inflation will still outpace revenue increases in the near term, again highlighting the importance of eliminating the structural deficit.
The City is examining its cost recovery methods with a focus on fees and taxes. We continue to consider a variety of models to accomplish this. In April 2013, City Council approved a pricing policy for the Parks, Recreation and Libraries Department with this in mind. Another area that the Council has considered on an annual basis is development fees. Development activity that generates development impact fee revenues has been at its lowest level in recent history. In a gesture to encourage development and demonstrate we’re open for business and ready to welcome new development and business expansion, the City Council suspended scheduled inflationary increases on City controlled fees since 2008. With the improvement in the economy, particularly as it relates to the residential construction industry, it is an appropriate time to realign fees with the cost of providing the improvements or services.
On July 1, 2013 the City will reinstate the inflationary adjustments for City controlled impact fees to ensure that funding remains in alignment with the City’s public infrastructure construction obligations. In addition to the inflationary adjustments, the City will be completing comprehensive updates of the water and sewer connection fees as well as a review of the electric backbone fee.
With the creation of the Development Services Department, several divisions with multiple cost-recovery strategies have been consolidated. Staff will undertake a cost study to determine the cost of service for products delivered by Development Services. It will be the goal of this study to identify a uniform cost-recovery strategy that eliminates unfunded liabilities and creates value and predictability for our customers.
Efficiency of Workforce Operations
Efficiency and performance audits - The audit cycle that began in 2011 with yearlong citywide audits conducted by the Matrix Group and Citygate established baseline recommendations on operations, personnel, and processes in all the departments throughout the City. The four-year cycle approved by City Council in 2012 includes a rotational schedule of departmental audits to ensure efficiency and effectiveness on an ongoing basis and is underway in 2013 with the Electric and Environmental Utilities departments and in 2014 with Parks, Recreation & Libraries, Planning, Public Works and Development Services.
Employment models and training - After cutting more than 180 positions from the General Fund since 2007 (about 15 percent of the workforce), a variety of staffing models are being considered for the long-term. The City is determining how to balance providing services and responding to community needs with minimizing long-term costs. We continue to determine on a case-by-case basis whether a service requires a full-time regular position, a temporary position, or a contract position. Along with this, the City continues to evaluate and monitor the optimal mix of full-time and temporary labor to successfully provide various city services.
In addition, anticipated retirements will be accompanied by the loss of corporate history that the City has been working to capture through formal or informal mentoring programs. At the same time, the City is providing opportunities for the next generation of managers to learn necessary skills by providing numerous cycles of the 10-week Supervisors Academy. In FY 2012-13, the Management Assessment Center helped managers who want to take on broader roles in the organization to assess and cultivate leadership values. Mid-level managers are also encouraged to participate in high-profile presentations and projects.