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AYOR Miquel A PUkdO MAYOR RRC TEM Michele Martinez Ward 2 COUNCILMEMBERS P. David Bprmvides Ward 4 ViceNe Sarmiento Ward I ml�aaul_,,uxu Jose sobi io Wa�d 3 Sal I inajero Ward 6 Juan Villegas Ward 5 M I I Gats @ u 14Lg June .5, 2018 Honorable Mayor and City Council: I am pleased to present the proposed budget for file City of Santa Ana for Fiscal Year 18-19, "I'llis budget document provides the foundation for our work plan, and more importantly our commitments to the residents and constituents of the community, As, a document, the budget calls out the anticipated expenditures and revenue assumptions for the next year of service, During my short tenure as your City Manager, one of nay toga priorities was to analyze the current fiscal position of the organization and to provide ctarity moving forward. These observations became the basis f()t- the development of this budget, Q-bti-qj:yii—tions-A Eisil Ke. a litics The first observation is that there is a lack ofclarity as to the City's current financial position. This, in part, is due to changes in administration and varied budget philosophies, A fundamental value and budget principle is transparency and clear C0111ITILinication, We can do better and we will do better; that is my commitment to You, It is for this reason that I have instituted a directive that the City's over-riding budget principle be "Truth in Budgeting". City government has a responsibility to not only make financial information accessible, but also transparent so that any interested party can review, ask questions, and understand the budget, The second observation is that the problerns we are experiencing are actualty years in the making. Santa Ana is a community with many oppoitunitics, but also many needs. We have one of the youngest populations; as an older city, we have increased infrastructure needs; and according to industry benchmarks, we are under -staffed in our police department. In short, we are operating with a "service deficit" in relation to the needs of our C0111111LInity. I believe that these pressures, in pail, led to the decisions that contributed to as trend Where expenditures increased at as rate of 4%, while revenues only increased at a rate of 2%. 'File result is a Stl-UCtUral deficit of $93M for our current FY 17-18 budget, and a projected $17.1M deficit for I'Y 1 8-R Clearly, this is not sustainable. As a result, untortunately, we are left in a very vulnerable position, potentially unable to weather a downturn in the economy, While as core function of government is the delivery of services, a city must have solvency in order to deliver any services, The City's total general Fund reserve balance is S46, I M ($423M in general fund reserve and $3,8M in ain economic uncertainty fund). This is approximately 17.7% of the total proposed General Fund budget, At CITY ATTORNEY CITY MANAGER CLERK OF THE COUNCIL Sonia R. Cawalho RaO Godinez 11 Maria D. Huizar 20 CIVIC CENTER PLAZA - P.0 BOX 1988, M31 SANTA ANA, CAUFOnNIA 92702 TFLEPHONF (!'i Ftp 647 6900 - FAX (714)y 647-6954 -- www.saWa-ana,org