To: Robert LaSala

From: "TimRisch@attbi.com".SMTP.SUN1; Kim, Grace

Date: 6/15/03 1:39PM

Re: Analysis of Budget Proposal by Councilman Fowler

Bob,

I have been reviewing the budget proposal by Councilman Fowler and have
several questions that I would like to have answered prior to the public
hearing. These are:

1) Elimination of OES Lieutenant ($173 k) - What is the status of this cut? I know we heard a presentation two weeks ago regarding this item and I believe that the recommendation from your office was to accept the replacement of the current Lieutenant with a non-sworn position. Is this correct? Is the $173K the correct cost savings? Assuming Council accepts this recommendation, can this cost savings be immediately incorporated into the budget? How long if this change is accepted by the Council will it take to staff the new position and make changes? In short, is this level of saving actually achievable over the 20 years if approved by Council?

2) What would the effect be of not restructuring the top Command in PS. Are there other alternatives?

3) I assume you can address the effect of the proposed HR and OE changes?

4) I would like some assistance in verifying some statistics I have collected regarding the use of the fiscal uncertainties set aside.

    a) Sheet "Cash Flow" in the attached Excel spreadsheet calculates the uniform annual cash flow for the fiscal uncertainties set aside given the nonuniform payment schedule listed in the budget.  Assuming 4% interest rate (is that close), I calculate a present value of just over $5M and a uniform cash flow of about $375,000 per year. Is that close to being correct?
    b) Councilmember Fowler seeks to substitute the reserve level with a $1M reserve allocated over 4 years. Based on the above numbers this suggest a reduction by a factor of 5 in the current fiscal uncertainty reserve level (e.g. $1M from $5M). Is this your interpretation? 
    c) Neglecting the restructuring of the payments from 20 to only 4 years (which only changes the flow but not the equivalent total amount of reserves), the proposed reduction would in effect reduce the yearly fiscal uncertainty cash flow based on 20 years of uniform payments from $375K to $75K (a factor of five). Is that correct? 
    d) Sheet "Budget Modifications" in the attached spreadsheet is a list of all the actual or proposed budget modifications I could identify over the last 4 years that affected the fiscal uncertainties line item. These were identified by searching through all the staff reports and minutes for meetings in the last four years searching for "budget modification" and "fiscal uncertainties". Do you have a fairly quick way of verifying these and can you identify any that I have missed? What I did not include were modifications that may have been included when the budgets were formulated. Are any missing that you know of?
    e) The analysis suggests that over the last 4 years Council has funded approximately $538K per year of projects using funds from the fiscal uncertainties account (actually more if you count ones that were removed in the latest budget cuts).  Does this seem correct? 
    f) Therefore, it appears to me that reducing the fiscal uncertainties set aside to only $75K per year would seriously under fund the fiscal uncertainties account BASED ON PRIOR COUNCIL HISTORY. Does that seem reasonable?
5) In the memo entitled "Recommended Reductions to City Services and Levels of Service Report" written by R. LaSala and dated April 18, 2003, Section D. indicates: 

"We are recommending using some of the funding included in these two set asides to address the budget crisis.  The fiscal uncertainties set aside for FY 2003/2004 contains $929,322; this set aside growth by the rate of inflation throughout the plan.  The public facilities space issues set aside contains $1,154,073 for FY 2003/2004, and decreases throughout the financial plan to $743,145 in FY 2021/2022.  We are recommending that $500,000 in fiscal uncertainties and $750,000 in public facilities space issues be used in addressing this budget crisis."

Is this still accurate? Based on my calculations, it appears that the fiscal uncertainties set aside has been cut by at least $500K (actually slightly more $554,378 = $929,322 - $374,944). I am not worried about the extra $54K, but it appears to me that the above statement is indeed correct and I wanted to verify its accuracy. 
6) Other comments:
    a) Eliminating accounts for the preparation of performance reports and shifting the work to the City Manager and Directors does not reflect an actual cost savings. In fact, it could even result in a cost increase if the work that was formerly performed by lower level staff will in the future be performed by higher paid senior management. Assuming that we believe that our top management is fully staffed, the only way to achieve a true cost savings is to completely eliminate these tasks.
    b) Likewise, eliminating the ongoing budget for surveys and shifting this to a special project represents no real cost savings unless the intent of the Council is to eliminate the surveys altogether for all but the following year.

Looking forward to the answers to these questions.

Regards,

Tim

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