DATE: March 5, 2012
TO: Honorable Mayor and FROM: Richard Miranda
Council Members City Manager
SUBJECT: Fiscal Year 2013 Budget
As we look ahead to Fiscal Year 2013, the City will move into a mode of cautious recovery. The difficult cost cutting decisions the Mayor and Council have had to make in recent years are paying off now, starting to put the City in a more stable financial position.
Since 2009, we have reduced our General Fund workforce by 22 percent (the equivalent of 900 full-time positions). We have had to cut services dramatically, our ability to respond to the needs of our customers has been severely diminished, and we have not had the resources to appropriately maintain our infrastructure and facilities. While we will not be able to bring back all City services to desired levels or address our many unmet needs over night, FY 2013 will mark the year we begin the process of incremental restoration.
Next fiscal year, for the first time since 2009, we will not have to cut City services and we will not have to cut our employees’ pay in order to balance the budget. This is welcome news to all of us, and is the result of the hard work done by the Mayor and Council and City staff over the past three years. We are not out of the woods yet, but if we continue to make prudent and conservative financial decisions, I am confident that in the coming years we will have the opportunity to rebuild our City service levels to those our community expects and deserves, and to those that our employees can be proud to deliver.
FY 2013 Financial Outlook
In preparing for this year’s budget discussions with the Mayor and Council, I have undertaken a line-item by line-item review of the City budget with each Department Director. This process has been painstaking yet useful in providing me with an understanding of the detailed work program of each department, and has aided in identifying new savings, efficiency, and funding opportunities.
One of the persistent challenges we face as a City is that our costs continue to increase to fund the same level of service, making it difficult to break even, let alone enhance the level of service we provide. Current projections show that next year’s revenues will be less than projected expenditures based on static service levels and fixed cost absorption, leaving a $15 million projected gap for FY 2013.
In past years, much time has been spent discussing how best to address this gap. Fortunately this year, the gap we are facing is more manageable than previous years (approximately 3% of the budget). I will be proposing to the Mayor and Council that the gap be addressed through 1) debt restructuring at the end of FY 2013 only if it is necessary, 2) use of a portion of the assigned fund balance from FY 2011 that was set aside specifically to help balance anticipated budget shortfalls, and 3) suspension of the Risk Management Fund surcharge to departments, maintaining level funding rather than reducing the deficit in the Risk Management Fund next year.
FY 2013 Budget Objectives
Beyond closing the FY 2013 projected budget gap, it is critical that next year’s budget further the policy goals and service objectives of the Mayor and Council, not just maintain the status quo. Despite our financial constraints, I believe we can achieve the following objectives in the FY 2013 Budget:
· Incrementally Restore Core Services - We have heard clearly from the community that core services (transportation, police, fire, and parks) are the highest priorities for the City. In particular, the dire condition of our roadways has been identified as of paramount importance by the Mayor and Council. I will be recommending that in FY 2013 we allocate additional funding to pay for road and median maintenance, residential street paving, and graffiti clean-up. Funding sources could include transit van purchase deferral, transit fare adjustments being recommended by the Transit Task Force, and an additional General Fund allocation. In terms of public safety, I am recommending that Police redeploy one squad of motor patrol to the streets beginning this fiscal year, and that Fire bring in a recruit class (33 employees) using federal grant funds. In addition, I will recommend the City fund the opening of two additional City pools this year using one time savings.
· Address Critical Infrastructure Needs Affecting Safety and Security – The amount of deferred needs the City faces in terms of facilities, infrastructure, and equipment is staggering. It is essential that we begin immediately to incrementally tackle these issues. I will be recommending that public safety impact fees be directed toward critical improvements at the
for the PCWIN project, which will improve communication capabilities for 911, Fire, Police, and public works departments. In addition, I will be recommending that one time debt service savings next year be directed toward some of our highest priority safety infrastructure needs including broken bleachers at the Tucson Convention Center, hazards and security (including electrical upgrades) at parks, and elections equipment necessary for the City to continue the integrity and efficiency of our electoral process. Price Service Center
· Invest in Employees and Customer Service – Our employees are the most valued resource we have as an organization. Good customer service begins and ends with our employees, and we must create an environment that supports them in their mission and shows we value their work. Toward this end, I will not be recommending employee furloughs this year and I will be recommending a 1 percent cost of living increase to all employees at a cost of $2.3 million. This will be paid for by holding a portion of currently vacant positions open through the end of this fiscal year and into part of next year. I will recommend we maintain the current employer/employee cost sharing of medical premiums to cover the 5 percent increase we will face next year. We will focus on filling front line authorized positions where services have been most impacted, and we will re-direct resources to focus on training and employee development to enhance our service delivery methods and abilities as an organization.
· Enhance Service Delivery through Efficiencies, Re-organization, New Funding Solutions, and In-Sourcing/OutSourcing – There is much opportunity in the organization to re-think how we do things in order to improve services without additional cost. In today’s economic climate we cannot afford not to do this. As we did last year, I will recommend we hire one additional Finance staff person to concentrate on the delinquent account collections and fund a modest amount of travel so our tax auditors can resume out-of-state tax audits to recover more revenue that is due to the City. We will look toward outsourcing in some areas including finance investment management and contracting for some IT services, where this will provide greater efficiency. We will continue to explore creative and private funding opportunities that can enhance services without added cost to taypayers, such as Bring Back the Splash private pool sponsorship and the partnership with the UA to manage Hi Corbett Field. We will reinvigorate the City’s volunteer program to make use of people’s interest and willingness to contribute to their City. I will be recommending that we maintain level funding for outside mandated services, however that we in-source some of the funding that has in the past gone to outside organizations and contractors. This can help improve service delivery in critical areas such as economic development, Tucson-Mexico trade, intergovernmental relations, and annexation – all areas that enhance the City’s financial position over time. We will look toward reorganization/consolidation in areas such as communications, where we I believe we can enhance our level of service without committing additional resources.
The information in this memorandum will be presented to the Executive Leadership Team and to the Labor Council later today and will be discussed in further detail with the Council at tomorrow’s Study Session.
I look forward to feedback from the Mayor and Council following tomorrow’s presentation and continued discussion in the coming weeks as we work to put forward a fair and balanced FY 2013 budget that stabilizes the City financially and furthers service restoration and recovery.