City Manager’s Transmittal Letter
June 23, 2003
TO THE HONORABLE MAYOR AND CITY COUNCIL
It is my pleasure to present to you the Proposed Operating Budget for the City of Ontario, the Ontario Redevelopment Agency, and the Ontario Housing Authority for Fiscal Year 2003-04.The Operating Budget document is comprised of three separate volumes: the Operating Budget Summary, Operating Budget Detail, and Five-Year Capital Improvement Program. The Operating Budget Summary provides a high-level overview of each operational unit’s activities and programs included in the budget for the upcoming year. The Operating Budget Detail provides detailed information at the budget "expense" level to assist the City Council in making well-informed decisions regarding the allocation of City resources. The Capital Improvement Program is the City’s comprehensive capital spending plan for the forthcoming years.
Continued uncertainties about State budget progress and the possibility of a delay in budget adoption have prompted the City of Ontario to move forward in preparing its budget with the realistic expectation of future substantive changes as the State’s proposed impacts to local governments are defined. Impacts related to the State’s proposed actions have not been fully incorporated in this proposed budget since the amount that will be taken from local governments to help resolve the State’s budget problem has not yet been determined. This proposed budget was prepared using a “status quo” approach as compared to the prior fiscal year, pending resolution of these outstanding State financial issues. In the meantime, preliminary contingency plans are being developed for each City Agency that may modify this proposed budget depending upon the magnitude of the State budget cuts and any subsequent legislative action taken in this regard. The State’s budget gap is now estimated to be $38.2 billion, which is $3.6 billion larger than projected in January 2003. The Governor’s 2003-04 proposed budget attempts to resolve the State’s unprecedented fiscal crisis over multiple budget years through a combination of cost reductions, tax increases, inter-fund transfers, and loans.An integral part of the State’s budgetary gap is filled from funding sources that have been traditional local government revenues.
Despite the slow state and national economies and relatively flat local revenues, the City has developed a balanced budget that allows the City to maintain most services at their current high levels as well as promote continued economic growth. The proposed Operating Budget for Fiscal Year 2003-04 is fiscally balanced and does not commit to spending more than a conservative estimate of total revenues. The City’s budget was developed based on the 2002-03 Adopted Budget with adjustments for inflationary increases and contractual obligations for personnel-related costs. Sound fiscal management and prudent business practices have contributed to the City’s ability to fair well during the national and state economic downturns; however, during these uncertain economic times significant caution is recommended. While the City presently has a stable financial position with sales tax revenues projected to be flat over the next year, the State may propose significant shifts in revenues and costs to balance the State budget, altering City projections very quickly. For this reason, it is essential to understand the key assumptions in the budget as well as those issues that are beyond the control of the City which could fundamentally alter both the City's short- and long-term financial position.
The City of Ontario continues its watch on State issues and the potential impacts to local governments. With recently adopted legislation and the May Revision to the Governor’s 2003-2004 State Budget, Ontario’s risk of financial detriment appears to be significant with potential impacts to Ontario in the areas of vehicle license fees (VLF), police booking fees, library funds, and redevelopment. The Governor’s proposed State budget is partially balanced with a reliance on existing legislation to return the vehicle VLF rate to the 1998 levels, restoring revenues to cities and counties and discontinuing the back-fill from the State’s general fund. During times of State budget surpluses, the VLF rate was reduced; and the 1998 measure that reduced the VLF rate provides for an automatic increase in the rate if the state has insufficient funds to continue back-fill payments. The City’s Fiscal Year 2003-04 Proposed Operating Budget was prepared anticipating no net loss of VLF revenues. If, however, the planned rate increase is not triggered and the State fails to back-fill, the City may lose over $6.5 million.
The Governor’s May Revision makes no changes to the January proposal to eliminate booking fee reimbursements.Historically, Ontario had received more than $400,000 each year from the State as reimbursement for fees assessed each time City police officers book inmates into the county detention center.Consistent with last year, the City’s proposed 2003-04 budget does not include this revenue. With regard to library funds, the City has reduced its revenue projections for Fiscal Year 2003-04 by 50% to $50,000 due to the questionable stability of these funds. Also questionable in the upcoming year is the status of redevelopment agencies. The Governor’s May Revision offered no new proposals, and the January budget proposal included a significant shifting of property tax increment revenues from local redevelopment agencies in order to reduce the State’s obligations to schools. Ontario’s estimated impact is between $2.6 and $3.3 million annually, and this shift is proposed to increase each year for the next 15 years. The funding shifts, if implemented as proposed, represent a substantial cut in redevelopment funding in the short-term and would result in the eventual phase out of redevelopment funding as a community revitalization tool.
Consistent with conservative fiscal policies, the City Council authorized the establishment of the Reserve for Economic Uncertainties in the First Quarter Budget Report for Fiscal Year 2002-2003. The Reserve, set up to allow the City to even out minor economic ups and downs without significant impacts to service levels, had a balance of $10,746,212 at the end of Fiscal Year 2002-03. To date, the recognized potential budget reductions for the City are estimated to be up to $12 million annually, with the variance due to uncertainty at the State-level as to the approach in balancing the State’s 2003-2004 budget. Accordingly, the reserve allocation may not fully address the effects of the upcoming State actions. And although the City of Ontario has been, and continues to be, independently strong financially the proposed State budgetary actions to transfer to local governments the responsibility for addressing the State’s fiscal crisis will have an adverse impact on Ontario. To provide increased flexibility in reacting to the State’s potential actions, the Fiscal Year 2003-04 Budget includes the use of approximately $3.3 million of the Reserve for Economic Uncertainties to (1) payoff the balance of a 15-year loan between Ontario Redevelopment Agency and Toyota Motor Sales and substitute the City as the loan holder for the remainder of the loan, and (2) retire, in advance, an outstanding loan between the City and Southern California Edison. The net General Fund savings for these two transactions is estimated to be $630,000 annually which will be allocated to this year’s maintenance and operations costs for the new Police Headquarters building and De Anza Teen Center. Additionally, funds from budget deferrals in prior fiscal years are being used toward the re-roof project at City Hall, the SCAG MagLev high-speed train project, and necessary capital improvements at the Ontario Convention Center.
Foundation for the Budget
The City of Ontario’s Mission Statement and the City Council’s goals and objectives are implemented through the Proposed Operating Budget for Fiscal Year 2003-04. The Operating Budget reflects an emphasis on continuing to build a strong community and improving the quality of life for Ontario residents, businesses, and visitors.
City Council’s Mission Statement
Founded as a model colony, based on innovation, planned development, community services and family values, the City of Ontario has become the economic heart of the region. The City Council is committed to maintaining Ontario’s leadership role in the Inland Empire, by continuing to invest in the growth and evolution of the area’s economy while providing a balance of jobs, housing, and educational and recreational opportunities for our residents in a safe, well-maintained community.
—Adopted January 20, 1998
The mission statement is the foundation for the City’s strategic plan, which guides the City’s use of resources. The City’s strategic plan for budget allocations is based upon the City Council’s goals:
- Invest in the Growth and Evolution of the City's Economy
- Operate in a Businesslike Manner
- Increase Involvement in Inter-Governmental Affairs
- Focus Resuorces in Ontario's Commercial and Residential Neighborhoods
- Invest in the City's Infrastructure (Water, Streets, Sewers, Parks, Storm Drains, and Public Facilities).
- Maintain the Current High Level of Public Safety
- Provide Enhanced Recreational, Educational and Cultural Activities
The Proposed Operating Budget for Fiscal Year 2003-04 is $281,739,345 for the City of Ontario (this amount includes $108,409,706 in the General Fund and $173,329,639 in the other fund types such as Special Revenue, Capital Project, Enterprise Operations, and Internal Service). The Proposed Operating Budget for Fiscal Year 2003-04 is $46,739,816 for the Ontario Redevelopment Agency and $5,552,750 for the Ontario Housing Authority. The total overall budget is $334,031,911.
The Proposed Operating Budget includes 1,016 full-time employees, which represents a net decrease of 5 positions when compared to the current authorized staffing level. To address the operational needs of the Public Works/Community Services Departments, the proposed budget includes the restructuring and/or elimination of some vacant position classifications which will assist in curtailing costs to absorb inflationary and contractual labor cost increases as well as providing additional contract services in such areas as the graffiti program. In addition to these changes, the Operating Budget allocates $26,000 for citywide training and staff development to promote responsive customer friendly service.
The General Fund Expenditure Budget of $108,409,706 is approximately $6,627,054 higher than the Adopted Budget for Fiscal Year 2002-03. This increase is primarily attributed to a rise in labor contracts (nearly $3.3 million), maintenance and operations costs at the new Police Headquarters facility (annual estimate is $860,000), and maintenance and operations costs for the new Teen Center at De Anza (annual estimate is $105,000).Also included in the General Fund is the funding of reserves (approximately $2.7 million) for retiree medical expenses (reducing the City’s deficit in this program from an initial amount of $32 million to approximately $21 million), and the third annual contribution to reserves for replacement of public safety equipment ($1.0 million).
The total budget of $77,674,590 is $12,180,309 higher than Adopted Budget for Fiscal Year 2002-03. The Enterprise Funds include operating and capital funds for water, sewer, and solid waste. The overall increase in the Enterprise Funds is primarily attributed to acquisition and construction of additional water reservoir and well sites, the construction of facility improvements such as a recycling and hazardous waste collection center and projects such as the Whispering Lakes Lift Station and Force Main Improvements.
Internal Service Funds
The total budget of $19,299,126 is $3,187,569 less than the Adopted Budget for Fiscal Year 2002-03. The Internal Service Funds include the Equipment Services Fund, Information Technology Fund, and Self-Insurance Fund. The decrease in the Internal Service Funds is primarily attributed to the prior acceleration of planned vehicle replacements causing a reduction this year as well as project completion in the Equipment Services and Informational Technology Funds.
Special Revenue Funds
The total budget of $46,178,178 is $13,380,262 higher than the Adopted Budget for Fiscal Year 2002-03. Special Revenue Funds include restricted funds such as the Quiet Home Program, CDBG, Gas Tax, Measure I, Park Development, State Grants, Facility Maintenance, Asset Seizure, and Storm Drain Maintenance.This increase is primarily attributed to additional funding and a higher expenditure budget in the Quiet Home Program. The expenditure budgets for Special Revenue Funds are funded from either increased revenues and/or use of residual fund balances.The Gas Tax and Measure I Funds have residual fund balances due to budget savings from prior years, and combined with current year proposed revenues will be used to fund street improvement projects throughout the City.These projects are needed to achieve the City’s minimum annual target in the street pavement management program.
Capital Project Funds
The Capital Project Funds account for capital expenditures that are primarily funded from the General Fund and/or other one-time monies. Due to restricted revenue sources, other capital expenditures are accounted for in the Special Revenue Funds, Enterprise Funds or Internal Service Funds.The total budget of $30,177,745 is $8,768,242 less than the Adopted Budget for Fiscal Year 2002-2003.The decrease in the Capital Project Funds is attributed to the completion of projects in support of the City Council’s campaign of investing in community facilities. The budgeted capital projects remaining within the Fund are carryover projects including the adaptive reuse of the former Fedco building for the new Police Headquarters, continued progress on the Grove Avenue Grade Separation project, and the rehabilitation and reconstruction of major portions of Riverside Drive, a major arterial street serving South Ontario.
Budget in Brief 03/04 [PDF]