75B - PH - 2012-2013 BUDGET AND MISC FEES SCEDULE

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Public Hearing - Fiscal Year 2012-13 City Budget June 4, 2012 Page 2 strategies which include the outsourcing of the Fire Department to the Orange County Fire Authority (OCFA), bargaining unit concessions, elimination of vacant funded positions, maintaining vacancies, and continued evaluation of all business practices to reduce organizational redundancies and improve efficiency. As a result of uncertainty at the State level, the global financial crisis and the current economic impact on local and state resources, developing strategies for long-term financial sustainability has become even more important. At the direction of City Council and the City Manager, staff has begun the process of reviewing all elements of its fiscal and budgetary position in order to identify and address any outstanding budgetary issues. As such, the recommended fiscal policy begins the process of developing comprehensive fiscal guidelines and objectives. In order to ensure long- term financial sustainability, it is imperative that the City adopt a reserve policy that not only protects operations from major economic events, but provides a financial foundation that allows for organizational growth. The recommended reserve policy is consistent with Government Finance Officers' Association (GFOA) recommended reserve levels of 15%. However, Staff is recommending a two-tier reserve structure that will help protect the City at two levels. The main reserve balance is meant to prevent the City from automatically depleting reserves to address structural gaps and maintains cash flow balances. The second tier identified as the reserve for Economic Uncertainty provides a basis to bridge sudden changes resulting from negative economic changes, legislative impacts, or unanticipated cost increases. The fiscal policy also provides budgetary guidelines that define a balanced budget, the use of one time funds and outlines a plan to consider new programs and personnel. It is the intent to continue expanding the policy through the development of reserve and operational guidelines for the remaining internal and enterprise fund operations. In addition, with the departure of the Fire Department, required reserve levels for liability and workers compensation related issues have been greatly reduced. Any remaining liability exposure to the City will continue to decline with OCFA now assuming responsibility. As such, staff is recommending that contributed balances made by the Fire Department be assigned to the Unassigned Reserve Balance Account of the General Fund. The transfer will immediately place the City on the road for attaining an appropriate reserve level and position the City to request a review of its downgraded rating related to the City Hall Expansion as well as petition OCFA in 2014 for the release of approximately $2.8M payment surety funds. The transfer does not negatively impact any of the actuarial reserve requirements needed for each of the Risk Management funds. In fact, each fund still maintains three months of operational reserves in addition to the actuarial requirements. With regard to workforce changes, a net total of 307 positions which are currently vacant will be deleted from the budget. The elimination of these positions is part of the City's budget reduction strategy which incorporates the outsourcing of Fire Services to OCFA. The proposed resolution amends prior resolutions by adding classification titles and 6-step and 15-step salary rate ranges, and the designation of several new classification titles, most of which also result from departmental reorganizations. 75B-2