December 2, 2003

SUBJECT: Amendment to Salary Resolution: Category A (COA-Represented) and Category C (PSOA-Represented) and Budget Modification No. 17 - ADDENDUM

ADDENDUM TO RTC 03-423

This addendum discusses funding alternatives for the budgetary shortfall arising from the PSOA and COA salary adjustments.  The shortfall for FY 2003/2004 is $512,550.  On an on-going basis, the shortfall is $576,001.  A study session was held on November 24 to discuss potential funding options.  Staff and Council presented options at this study session.  Council directed staff to present all of the options for consideration on December 2.  Those options are as follows:

Space Issues Set-Aside – These funds were set aside on an on-going basis to address the City’s long-term space needs.  The Space Issues Set-Aside is budgeted at a flat amount of $250,000 annually.  Because this amount does not increase with inflation over the twenty-year planning period, the present value of this account is $180,143.

Fiscal Uncertainties – This expenditure line item represents the on-going latitude that is available to increase service levels, add new annual programs, or address unexpected fiscal pressures.  For FY 2003/2004 and FY 2005/2006, Fiscal Uncertainties was reduced to approximately $76,000 and $96,000 respectively, to accommodate the increases in election costs received from the County of Santa Clara.  By FY 2006/2007 this expenditure line item stabilizes at about $300,000 and increases with inflation throughout the rest of the planning period.  The balance available for FY 2003/2004 is $68,502.

Enhanced Emergency Medical Services (EMS) Program – Three new positions, one lieutenant and two Senior Community Services Officers, were added to the budget for FY 2003/2004 to provide enhancements to our emergency medical services.  While the lieutenant position has been filled, the two Senior Community Service Officers positions are currently vacant.  Not filling one of these positions would save $97,128.  A total of $205,256 has been budgeted for the two positions and associated purchased goods and services.  The two positions were for the Quality Assurance Program and Community Outreach/Public Education.  These programs would not be expanded if these positions remain vacant.  Elimination of one position would reduce Community Outreach/Public Education activities, thereby preserving the more critical Quality Assurance Program.

City Emergency Preparedness – In SDP 45302, City Emergency Preparedness, Council Member Fowler identified $193,000 as a potential funding source based on year to date and prior year expenditures. This $193,000 represents almost 50% of the total program budget.  Year to date (31.97% of the year), the total Program has spent 28.37% of its budget.  Although SDP 45302 has only spent 5.76% of its budget, SDP 45301, Community Emergency Preparedness Services, has spent 50.58% of its budget, resulting in the overall program being only 3.6% under budget.

There are two reason for this disparity between the two SDP’s.  First, the activities within the program are not budgeted appropriately.  Less money should be budgeted to SDP 45302 and more money should be budgeted to SDP 45301.  This difference is being corrected for the FY 2004/2005 budget.  The second reason associated with this disparity is the Emergency Management Operation drill and citywide training scheduled for this fiscal year has not occurred and is scheduled for March 2004.

Any funding reductions in this program would result in the elimination of a filled position.

Dental and Life Insurance Premium Savings – Vice Mayor Chu recommended the use of cost savings from the change of providers to be utilized before Fiscal Uncertainties for FY 2003/2004.  Savings will be realized for calendar year 2004, which is half of FY 2003/2004.  Net savings for FY 2003/2004 is estimated at $68,723.  On-going savings are not available because these expenditures are budgeted in the Employee Benefits Fund.  As a result, on-going savings will be reflected through reduced additive rates for all City funds.

Department of Public Safety Recruitment and Training – Another potential funding source considered by Council Member Fowler is the funds budgeted for the purposes of recruiting and training of new Public Safety Officers.  The Public Safety operating budget contains approximately $2.9 million for recruitment and training of 17 Public Safety Officers each year.  Because of a projected large increase in retirements, $4 million was budgeted into a special project in FY 2002/2003 to meet the increased recruitment and training needs for this time period.  Currently, the special project for recruitment, selection and training of Public Safety Officers has $2.36 million in funding remaining for this activity.  Based on the current level of expenditures, staff estimates the project will come in slightly under budget.  Initial estimates project approximately $160,000 in funds will remain in the project at the conclusion of the year.  These one-time savings would be available to fund the salary adjustment for FY 2003/2004.

One of the questions that was asked by Council Member Fowler was to consider if there was a possibility of reducing the number of Public Safety Officers hired and trained in a year by one, resulting in an annual savings. While there may be savings to be realized in this manner, recruitment and training is an integral part of the larger Public Safety operations and adjustments to these activities can impact other areas.  Staff is currently analyzing the total operations, including recruitment and training, as part of the current budget process for FY 2004/2005.  Staff recommends evaluating cost saving solutions as part of the budget process when potential adjustments can be reviewed within the context of total operations. 

Summary of Funding Options

RECOMMENDATION

Staff recommends amending the Salary Resolution to reflect the new pay rates, and approve Budget Modification No. 17.  As part of Budget Modification No. 17, staff requests direction on which funding sources to utilize to fund $512,550 for FY 2003/2004 and $576,001 on an on-going basis.