Second, the City Council must adopt the FY 2002/2003 Budget by June 30. This has traditionally been done by resolution. It is recommended that Council adopt the budget as presented at the June 4^th public hearing, along with amendments as prescribed by Council at the public hearing. These amendments are discussed in detail in the Summary of Recommended Budget section below and incorporated as part of Alternative 1. The Budget Resolution, as well as exhibits depicting the appropriations by fund, fund transfers and reserve increases and decreases necessary for implementation of the budget as recommended in this report, is presented as Attachment B.

A separate action on each item is not necessary, unless the City Council wishes to change any recommendation. It is recommended that the budget be approved as described in Alternative 1, with Council’s desired changes being dealt with as amendments to Alternative 1.

Third, the City Council must adopt, by resolution, the FY 2002/2003 Appropriations Limitation. The calculations and the detailed supporting information is contained in Attachment C. A discussion concerning each of the three actions required by Council is described below.

The Public Hearing on the proposed fee changes was held as part of the Public Hearing for the recommended FY 2002/2003 Budget on June 4^th 2002. At that hearing, Council was provided with all recommended fees. Most fees have been increased approximately 3% to assure recovery of the cost of services. The recommended schedule of fees is Exhibit A of Attachment A of this report.

Article XIIIB of the California Constitution established an appropriations limitation on government agencies within California. Attachment C provides information on the appropriations limitation, which is a calculation of how much the City is allowed to spend. Calculations for FY 2002/2003 indicate that the City will be below the appropriations limitation by approximately $29 million based on the recommended FY 2002/2003 Budget. State legislation requires that the City annually adopt an appropriations limitation for the coming year. Also, Council must select one factor from each component below by which to calculate the limit. The options available are as follows:

Inflation Factors

1)California per capita income

2)Increase in non-residential assessed valuation due to new construction

Population Factors

3) City population growth

4) County population growth

Staff recommends that Council select the combination of factors that yields the most favorable amount under the appropriations limitation. Those factors for FY 2002/2003 are the California per capita income and the County population growth. Based on this selection, the appropriations limitation for FY 2002/2003 is calculated to be $116,277,153. In future years, the factors may be changed by a vote of the City Council.

Although the City is well below the limitation, it is beneficial in the long run to select the growth-rate option that maximizes the amount under the appropriations limitation.

As presented in the recommended budget, the total revenue for FY 2002/2003 is approximately $195 million, and total expenditures are approximately $215 million. The total recommended budget for operating expenditures is approximately $178 million. The total project and equipment budget is approximately $30 million. Debt Service totals approximately $7 million. Details of the revenues and expenditures are contained in the recommended FY 2002/2003 Budget and Resource Allocation Plan, distributed on May 7, 2002. If the budget is adopted with the amendments set forth in Alternative 1, the operating expenditures will increase by $5,000 and the project budget will increase by approximately $1.1 million so that total expenditures will total just over $216 million.

As discussed at the Budget Workshop, the recommended budget does not reflect the potentially significant negative effects of the State Budget. If the proposed reductions in the Governor’s May Revision are adopted, staff suggests that the General Fund’s Fiscal Uncertainties be used to cover the loss for FY 2002/2003. Further analysis would be required if the reductions are for more than one year.

On June 4, 2002, the City Council held a Public Hearing on the recommended FY 2002/2003 Budget. The hearing was formally closed on that date. Four people spoke at the public hearing:

• A representative from Sunnyvale Community Services spoke in support of the additional funds budgeted for the Fee Waiver Program in the Parks and Recreation Department.
• A representative from Social Advocates for Youth thanked Council for the funding provided to the organization for FY 2002/2003 and spoke in favor of the two-year outside group funding process.
• A representative of Junior Achievement of Santa Clara County requested a $10,000 grant from the City because the organization was unable to apply for funding since the upcoming fiscal year is the second year of the two-year outside group funding process.
• A representative from Friends of Fremont Pool requested additional funds to subsidize a youth rate fee at the Fremont Pool.
• Upon close of the public hearing, Council directed staff on the following items:

• The addition of $4,000 to the budget for Cupertino Community Services, earmarked for the Rotating Shelter Program, directing staff to identify a source of funds. Staff recommends appropriating the funds from the Non-Recurring Events Reserve.
• The addition of $10,000 to the budget for Junior Achievement with a matching funds requirement, directing staff to identify a source of funds. Staff recommends appropriating the funds from the Fiscal Uncertainties Expenditure item.
• The appropriation of $1.6 million for the Lawrence Expressway/Wildwood Avenue Intersection Project from the funding sources detailed in the Public Hearing Report to Council.
• Additional funding to be budgeted for one year for Council travel related to increased representative responsibilities.
• Request for further clarification of the City subsidy for the Fremont Pool operations. Presented under Attachment D is staff’s memo regarding a subsidized youth rate at the Fremont Pool and the 20-year financial plan for the Community Recreation Fund with the City subsidy for the Fremont Pool calculated for each year at the bottom of the page. These items were previously distributed to Council. The City subsidy ranges from $55,995 to $134,366 over the planned 20-year budget. The estimated subsidy for FY 2002/2003 is $88,002. It is important to note that the 20-year Resource Allocation Plan Reserve balance of the Community Recreation Fund for FY 2002/2003 is $21,897. An additional subsidy for the youth rate above this amount would require defunding other community recreation activities or increasing the General Fund subsidy to this fund.

Based upon these items, Alternative 1 includes four recommended changes for the FY 2002/2003 Adopted Budget. Staff requests direction regarding the subsidized youth rate for Fremont Pool with an amendment to Alternative 1, if necessary.

Alternative 1, as recommended by staff, has four changes from the recommended FY 2002/2003 Budget. The chart below outlines the four recommended changes, their fiscal impact and the recommended source of funds for each change.

City boards and commissions have been provided the budget for their review. Additionally, public contact has been accomplished through publication and posting of the Council agenda. Further, Reports to Council are available in the Library and on the City’s web page. Finally, the entire budget has been posted on the City’s web page.

b. Appropriate funding in the amount of $10,000 for Junior Achievement,

c. Appropriate funding in the amount of $1,600,000 for the Lawrence Expressway/Wildwood Avenue Intersection project, 

d. Appropriate funding in the amount of $5,000 for Council travel.