FY 2018-19 and 2019-20 Adopted Operating and CIP Budget

one full-time equivalent (FTE), and non-benefitted part-time positions including meeting the State minimum wage increase requirement. For FY 19-20, salaries and benefits increased 4% or $0.9 million compared to the FY 18-19 recommended amount primarily due to the aforementioned reasons, but without the new FTE. The non-personnel budget for the General Fund in the Recommended Biennial Budget decreased 3% or $0.6 million for FY 18-19 compared to the FY 17 -18 year end projection mainly due to the absence of one-time funding items. The non-personnel budget for FY 19-20 decreased by just 2% or $0.3 million from FY 18-19 also mainly due to one- time funding items, partially offset by an overall cost inflation factor. General Fund Reserves As the General Fund Reserves have accumulated to a healthy level as a result of prior Council actions and better than expected revenue growth in the past few years, it is prudent to continue the Council’s tradition of using excess reserves to invest in the community. The FY 18-20 Biennial Budget recommends the use of General Fund reserves to increase the FY 19-20 General Fund investment for street improvement projects from $250,000 to $1,000,000 consistent with FY 18-19 funding. In addition, to ensure the future financial stability of the City operations, the Budget calls for a continued expedited repayment schedule of Silicon Valley Regional Interoperability Authority (SVRIA) costs for the infrastructure, consoles, and radios for the Fire and Police Departments. The initial cost of approximately $1,300,000, was funded by an advance from the Equipment Replacement fund. The costs should be fully repaid by FY 19-20. Increased funding to the OPEB Trust by an additional $100,000 annually is included in the Recommended Biennial Budget. With the proposed funding schedule, the City is estimated to have fully funded the OPEB liability in the 10-year forecast. Furthermore, the Recommended Biennial Budget includes additional funding of approximately $250,000 annually to the Building Replacement Fund for all City buildings and facilities to address unanticipated repairs and safeguard the City’s assets, and additional funding of $150,000 annually to the Park Maintenance Fund to partially address the expected reduction in Measure S voluntary payments from developers. With the aforementioned use of resources, the General Fund Reserve is projected to remain above Council’s reserve policy during the next nine years, but is projected to dip below the reserve policy in FY 27-28. It is worth noting that the projected General Fund Reserve level includes the continuing policy of employees sharing in the employer share of the PERS cost increases. It is assumed that this increase will continue, and approximately 14% of Safety employee salaries and 7% of Miscellaneous employee salaries will be paid by employees by FY 24-25, to cover their portion of the shared increase in PERS costs.

RECOMMENDED BUDGET MESSAGE 19